Tue Jun 15 00:00:00 EAT 2010
Consumer protection laws to curb rising exploitation
The world of trade and business can be unfair. Often, a bank or a trader or service provider takes advantage of a customer and gets away with it, simply because they are in a more superior bargaining position.
The world of trade and business can be unfair.
Often, a bank or a trader or service provider takes advantage of a customer and gets away with it, simply because they are in a more superior bargaining position.
This is because there are no consumer protection laws in Kenya.
I recently bought a film from a leading retailer. After leaving the supermarket, I realised that the film had long expired.
Naturally, I went back to the supermarket and requested for a replacement.
It turned out that all the films in stock had also expired.
A rude attendant also pointed out to me some small print at the bottom of the almost illegible receipt which stated “goods once sold are not returnable”!
Many consumers face this daily. The harsh reality is that the economically strong and sophisticated can force their hard-nosed terms and conditions on those with a weaker bargaining position.
Fortunately, the law sometimes, comes to the rescue of the exploited where it can be shown that the parties have entered into an unconscionable contract.
An unconscionable contract is one which is unusually harsh and shocking to the conscience.
It is one that defeats all sense of right and wrong or one which is so grossly inequitable that a court of law will disallow it.
The kind of contract which no reasonable person would willingly enter into.
When a contract is found to be unfair, the courts will step in and offer the weaker party a defence so that the contract is no longer enforceable against him and so that the perpetrator of the unfair terms or conduct does not benefit from it.
There are many instances where unfair contracts apply.
These include a situation where a party involved in complicated business transactions inserts “standard terms and conditions” in a form unlikely to be understood by the average person.
Such terms may include a disclaimer of warranties or exclusion or limitation of liability.
Typical scenarios include bank borrowing contracts and insurance policies.
One of the leading court decisions on this issue was made in the case of Lloyds Bank versus Bundy.
Bundy borrowed funds from Lloyds Bank and created a mortgage over his house to secure the loan.
He subsequently agreed to increase the amount secured by the mortgage over his house in order to secure a credit line that was being extended to his son’s business.
The bank had threatened to call in the son’s loan if Bundy had not agreed to the extension.
The English courts found that Bundy received no direct benefit from the agreement to increase the mortgage amount and that the bank had threatened to call in the son’s loan if Bundy had not agreed to the extension.
In addition, the amount of the loan was higher than the existing mortgage.
The court ruled that the transaction was unconscionable because only the bank benefited from the agreement.
The court decided that Bundy only had to repay the lower mortgage.
Unfortunately for the weaker parties, courts are with the passage of time becoming more reluctant to throw out unconscionable contracts.
Courts are upholding the principle of freedom of contract and arguing that if a party entered into a contract, he is bound by it no matter how unfair it may be.
In the case of Benson and Margaret Onyango versus Securicor Courier, Benson used the services of the courier company to transport two parcels —a Sony television and a micro-component.
The courier company failed to deliver the parcels to the rightful consignee.
Benson had at the time of procuring the services signed a Consignment Note and paid Sh980/- for the service.
Benson and Margaret sued the courier company for damages.
The plaintiffs argued that based on the written instructions given to the courier company, the parcels were to be collected by Margaret Onyango.
However, before the parcels could be handed over to Margaret, the courier company received a phone call from a man—Benson Onyango— who said he would instead send a Mr. John Abuto to collect the goods.
The caller gave the Identity Card Number of John to the courier company.
The consignment note that Benson had signed referred to terms and conditions which were set out at the back.
One of the conditions limited the courier company’s liability for loss or damage to goods at Sh1,000/= per consignment.
The court recognised that previously there was a legal doctrine known as “fundamental breach” of a contract.
Under that principle, if a party with superior bargaining power committed a breach of the contract which went to the root of the contract, he would not be permitted to rely on the exemption clause in the contract which absolved him from liability entirely.
That principle has now been reversed in several instances by English courts and overridden by statutes in England.
Courts have ruled that if a party signs contractual documents containing an exemption or limitation of liability clause, he is bound by it even though he has not read the terms, unless he signed the documents through fraud or misrepresentation.
The court in the Securicor Courier case found that a clause exempting a party from liability can be incorporated in a contract.
On this basis, the Court of Appeal proceeded to award the plaintiffs damages amounting to a mere Sh1,000 per package.
It would appear that the courts are becoming increasingly strict in their interpretation on contracts.
Whereas it is understandable in sophisticated jurisdictions why the need to protect the weaker party is progressively diminishing, it is questionable whether the same principles can be applied in the Kenyan context.
The government should protect the weaker parties.
In clear contrast to the developed world, the Kenyan consumer has almost nowhere to turn.
Kenyan courts argue that parties are bound by contracts they enter into no matter how blatantly unfair their terms may be.
Ms Kiunuhe is a Nairobi Advocate. E-mail: firstname.lastname@example.org