Question

Which of the following is correct of a standard form contract?

• A. It is a valid contract;
• B. One party has no choice but to accept and sign the contract;
• C. Both (i) and (ii);
• D. The consent is not a free consent;

Hint:

Standard form contracts are valid but must comply with the principles of fairness and cannot be unconscionable.

Answer 1

The Correct Option is C

Step 1: Understanding Standard Form Contracts:
A standard form contract is a pre-drafted contract prepared by one party (usually the stronger party, such as a corporation, insurance company, or service provider) and offered to the other party on a ‘take-it-or-leave-it’ basis. The weaker party does not have any opportunity to negotiate or modify the terms.
Step 2: Legal Position and Nature:
Such contracts are valid in law as long as they are not unconscionable, fraudulent, or against public policy. However, they often raise concerns regarding free consent because one party has no bargaining power or real choice. The consent is legally valid but not truly “free” in the practical sense.
Step 3: Analysis of Options:
- (A) It is a valid contract – Correct, as standard form contracts are legally enforceable.
- (B) One party has no choice but to accept and sign the contract – Correct, as these contracts are usually offered on a non-negotiable basis.
- (C) Both (i) and (ii) – Correct, since both statements (A) and (B) are true.
- (D) The consent is not a free consent – Partially correct in practice, but legally consent is presumed valid unless undue influence or coercion is proved.
Step 4: Final Conclusion:
Hence, the correct answer is (C) Both (i) and (ii), because a standard form contract is valid but often leaves one party with no choice except to accept its terms.