Govt move to protect buyers against unfair contracts

NEW DELHI: In a move to safeguard the interest of home buyers and other consumers, who are often taken for a ride by private players citing certain conditions in the agreements, the consumer affairs department has proposed to bring them under the ambit of “unfair contracts”. This provision in the Consumer Protection law will enable consumers to file complaints against such players with local forums for their redressal.

According to the Cabinet proposal circulated to amend the Consumer Protection Act, all such agreements between consumers and private players will be treated “unfair” if these include one or more out of the five identified clauses.

Sources said any provision in the contract that allows disproportionate penalty on either party against the actual loss caused due to failure of the agreement will be enough to bring it under “unfair” category. “For example, if a real estate player fails to deliver a house in time, it pays little penalty as compensation to buyers. But, if a buyer fails to make the payment in time, he is made to pay huge fine. This is an unfair provision and needs to be eliminated from contract conditions,” a government official said.

In recent years, several such cases have landed in consumer forums and developers have been asked to pay higher penalty for failure on their part.

The Cabinet proposal also mentions that if the contract has the provision that allows either of the parties to replace it with a new player without consent of the other party, that provision also be termed as unfair. There have been several cases where developers have sold their projects to others without consulting consumers. In such cases the end users face the worst. The other conditions that have been identified to make a contract unfair are demand to make excessive “security deposit” and refusal to foreclose the loan even when the consumer is ready to pay the applicable penalty. “Even if a contract has a provision that entitles a party to terminate the agreement unilaterally without reasonable cause, it will be an unfair one,” an official said.

Sources said this provision is for protecting the consumers, who are placed in an “unequal” bargaining capacity.

Source: Times of India
Dated: 13th November 2014

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