On Unconscionable Bargains, All Around Us
"Contracts are the small print of our society, and like all small print, they are written by those who have the power to do so." - Richard Susskind
Sadly, there are a plethora of unconscionable bargains everywhere: shockingly unfair, morally unjust, blatantly oppressive, and exploitative. Look around you, and you may discover some yourself.
Unconscionability is a legal concept stemming from the equitable principle of fairness in legal relations, whether contractual or otherwise. A contract may be challenged by a party to the same on the grounds that the same is unconscionable, if (i) such a contract contains harsh, oppressive and, therefore, unconscionable terms; or where (ii) the manner in which or the circumstances under which the contract has been entered into or the term thereof has been arrived at by the parties, is one which has caused an unjust advantage to the other party, or a disadvantage to the challenging party. This concept has been recognised by the Law Commission of India, in its 199th Report on Unfair (Procedural & Substantive) Terms in Contract.
Indian employment journey
In many organisations, the employer coerces their employees (usually freshers anxious to secure their first formal job) to sign an employment bond that generally bars an employee from quitting the organisation, and/or joining some other organisation before she/he completes a certain period. These interns are expected to sign a bond of service. To set the record straight, In India, an employment bond is legal in so far as it prescribes a reasonable penalty in case of violation. More so, if the bond is not for an excessively long period and the amount of such reimbursement is not more than the actual amount spent by the employer on training the employee.
The irony and hypocrisy of HR is exposed: on one hand they administer such service bonds, rather than do the real work of building engagement and retention. These HR teams will suddenly jump into action, to prosecute these bonds, if there is high attrition that hurts them. Often, we observe HR folks trying to give an out of turn urgent increment to an employee who has resigned - all with hope that they will stay back. Don’t those employees deserve respect even before their resignation?
Let’s take the example of a person who signed a three-year bond with a leading hotel company, wherein the terms and conditions in the appointment letter, mentioned ‘you are required to work all necessary hours and to provide all such services necessary in order to meet the standards of quality and service desired’, a clause which covered all areas and 24x7 hours of work. Really?
Does an employee have the liberty to say no to a standard employment letter wordings? Do they even stand a chance to negotiate with the almighty HR who stands at the door of their employment opportunity? Even if HR were to take it up internally, would their compliance team allow for any flexibility or leeway? If none of them bother, what is the role of the CEO or the Board of Directors in such situations of them being the dominant side in an Unconscionable bargain? And yet, we see most firms proudly wear the badge of being one of the best employers or work locations etc. We also see many of those firms talk about Governance standards, when the basic one of their key stakeholders - the employees - is not respected. We espouse Stakeholder interest, but when it comes to crunch time, Shareholder interests win. How does one explain the massive layoffs, even while there are unprecedented hikes in CEO salaries?
Consumer rights and nays
Many of us have seen the awful plight of marginalized folks in our network of domestic services providers (drivers, domestic help, nanny, etc.) - who had availed a loan from a loan shark at an interest of 1% per week. Typically, those verbal loan agreements, usually ‘muscled-in’ with excessively high-interest rates and in addition other hidden fees traps a borrower in a cycle of debt. Well-known companies are no different: Credit card companies wish for their borrowers to only pay a minimal amount (which covers the interest costs, which are upwards of 36%). Many of known entities simply use jargons in small fonts to get away from these hidden charges and will claim that the consumer signed up for it. Some wish for youngsters to build a ‘worthy credit history’. So, what is a good behaviour expected of these corporate citizens and others, who have the upper hand in such situations? Do we persist with ‘caveat emptor’, the principle that the buyer alone is responsible for checking the quality and suitability of goods before a purchase is made.
In India, there are contracts for home repairs or renovations. The contractor may include a clause in the contract stating that the consumer agrees to waive their right to take legal action or file a complaint in case of dissatisfaction with the work or any defects in the workmanship. Or the repair shop could include a clause that says that the consumer agrees to waive their right to seek legal remedies if the phone is damaged or not repaired to their satisfaction. Most hospitals have a consent form that waives off legal remedies in case of any failure or dissatisfaction with the services. These unconscionable agreements can be particularly harmful to those who are more vulnerable to being taken advantage of by others with superior bargaining power, and we see this in exorbitant rates for student’s loans, employment contract with low wages, etc.
Then there are contracts between a large business and a small vendor that includes one-sided indemnification or liability provisions, making the vendor solely responsible for any issues or losses related to the agreement. It seems to be commonly adopted by popular e-commerce platforms too. Little do we know or care, as consumers, about the tough (and most probably unfair) clauses that our cottage industries go through, in serving our needs or wants. Yet we profoundly lecture many times on the fairness of life, and the need for equal opportunities.
The larger point is this: where do we even start with addressing or solving for these unconscionable bargains evident and commonplace in our daily lives? These contracts are one-sided, morally/ethically unacceptable, oppressive that no reasonable organisation should make it. When will we start?
Srinath Sridharan - Author (Time for Bharat), Executive Coach & Corporate Advisor
Twitter: @ssmumbai
Steve Correa - Executive Coach, OD Consultant & Author (The Indian Boss at Work)
Twitter: @SteveCorrea1122
