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Many urban consumers are subscribers of one or the other online service, be it a content app such as Amazon Prime or Netflix, or a mobility solution such as Uber or a food service like Zomato Gold. Consumers sign up based on offers promising access to a new show or a 1+1 offer on food or 2+2 on drinks at a hip restaurant. Now imagine this—what if, after signing up, suddenly the consumer is informed that the very show she signed up for is only available to viewers who pay an additional Rs 100 per episode. Or the free dining option is only available for restaurants that are rated 2 stars or less. Frustrating isn’t it?
Yes, the benefits of using these app-based services possibly outweigh the inconveniences from such sudden, unfavourable changes. But does that make these one-sided and changes fair or even legal?
As illustration, here are two instances of terms allowing unilateral changes to be made by companies that bind users—Zomato and Amazon.in.
To be fair, such terms of service often stipulate that if a consumer continues to use the service after the change in terms, that will count as consent of the consumer to changed terms. But lawyers argue that often services don’t inform consumers of any change in terms and even if they do, offer no option to exit the service and seek refund of the subscription fee paid.
Such terms, which allow companies to unilaterally amend terms and conditions of services, aren't unique to any specific company, but they're all over the e-commerce ecosystem, in India and worldwide, GV Anand Bhushan, partner at law firm Shardul Amarchand Mangaldas, told BloombergQuint.
An argument can be made that the consumer had willingly signed up to these terms and if there is a change, the consumer had signed up for that as well. If she is dissatisfied, she can always opt out.
But it's not that simple. There are fundamental principles in the Indian Contract Act, 1872, and the Consumer Protection Act, 1986, that protect a contractual party that may be at an inherent disadvantage.
Contract Law Complexities
An important aspect of Indian contract law is ‘consensus ad idem’—the common understanding of each contracting party. This means that all parties must agree to the same thing in the same sense.
But, unilateral amendments to e-contracts seem to contradict this principle—how can a consumer agree to a set of terms that don't even exist yet?
"An amendment to an agreement is also an “agreement”; therefore the amendment itself must adhere to basic legal requirements under contract law for it to bind a company and its customer." - Amir Arsiwala, Advocate, Bombay High Court.
Unless a user is shown each amendment, prior to it coming into effect, and then the user signifies her agreement to the changes (either in writing or through performance, like continued use of website or app without protest), it can be argued that she's not bound by the unilateral amendment, Arsiwala said.
Arsiwala represented the drivers union in a Meru matter which dealt with unilateral amendments.
While there seem to be no precedents of unilateral amendments in the Indian e-commerce space, the U.S. federal courts have deliberated on this unique issue. In the Zappo case, albeit on the more complex issue of browse-wrap agreements and not click-wrap agreements, a Nevada district court noted that the advent of the internet hasn't changed the basic requirements of a contract.
"There is no agreement where there is no acceptance, no meeting of the minds, and no manifestation of assent." - In Re Zappos.com, Inc, United States District Court for the State of Nevada
It even went so far as to say that unilaterally changing terms at any times implies that there's no contract, and even if there was, it would be illusory and therefore unenforceable.
Bhushan explained that unilateral amendments have not been tested in India as extensively as they have in advanced economies like North America. There, the courts have interpreted the terms to include a notice option and an "opt out" option so that the user isn't trapped in an engagement with unfavourable terms though none of that has amounted to any big change in business practices. But under Indian context, this position remains untested and is instead likely to be addressed through amendments to consumer protection laws, he said.
Suneeth Katarki, founding partner of law firm IndusLaw, has a different view. He explained that in click-wrap contracts the user does not have any bargaining power and rarely goes through the terms before agreeing to them, any change in material terms may impact the user significantly. Given the unequal say, courts are likely to weigh this aspect considerably.
"Under different circumstances, courts have held that unilateral amendments cannot be extensive and arbitrary so as to change the entire meaning of the contract or of something that is material to the contract. This would violate the consensus ad idem rule." - Suneeth Katarki, Founding Partner, IndusLaw.
All lawyers BloombergQuint spoke to agreed that consumer protection laws are better suited in such circumstances.
While not in an e-commerce context, but previously the consumer fora have held that unilateral changes made an insurance provider amounted to "deficiency in service" and were invalid.
Similar rationale may be adopted in e-commerce or online services cases.
"In such circumstances, the question will be whether the unilateral amendment is unfair to the consumer. If it is against the interest of the consumers it may amount to ‘unfair trade practice’ under the Consumer Protection Act and may be struck down on that aspect. " - Suneeth Katarki, Founding Partner, IndusLaw.
But given the time, patience and legal costs involved, it's unlikely consumers will approach consumer fora for small claims in these circumstances.
Bhushan offered a different context on the necessity of permitting reasonable variance to contractual terms between e-commerce portals and its users.
According to him, it isn't uncommon for users to complain about a new set of conditions since they haven't accepted these expressly. However, what is equally fair and commonplace is that the service provider never promised the user a fixed set of terms and conditions (i.e. the terms and conditions were subject to change at the prerogative of the company or service provider).
"Most of these companies are startups and their business model keeps changing and evolving. So do their technologies. There is a need for this fluidity in the e-commerce context, for the companies to cater to their customers with flexibility. Naturally, when the model evolves and changes, the terms that attach to it must also change accordingly." - GV Anand Bhushan, Partner, Shardul Amarchand Mangaldas
The e-commerce sector is massive, its potential growth preposterous, its impact significant, economically and socially. In light of this, it becomes crucial to interpret and clarify the relevant legal principles that apply to underlying contracts, specially if they have a detrimental effect on a large section of the population—the consumers.
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