Right to Cancel Contracts

The Consumer Protection Bill, 2015 has been introduced in the Lok Sabha to replace the existing 30-year-old law of the same name. It gives the right to a consumer to cancel a contract within 30 days of making it, at no cost and without furnishing any explanation or reason. A contract once made is final and binding on the parties. The courts and law are generally reluctant to interfere with this founding principle as it would lead to uncertainties in commercial and business life. This valuable protection to the consumers in India needs to be located in precedence in other jurisdictions and justified in the context of business practices in India. This will develop a foundation for proposed principle.

The European Union (EU) countries provide the right to the consumer of a “distance contract” to cancel the contract within 15 days of its making. A distance contract is one wherein the parties make a contract without being in the physical presence of each other, through some means of communication. The mail order was the first form of distance selling, which was well developed by the early 20th century (Coopy et al 2005). In the 1980s, distance selling vastly expanded with new means of communication, including telephones, fax and television but it also brought business malpractices in its wake. The EU is mandated to develop uniform consumer protection across the member states and took up the problem of consumers in distance contracts in the early 1990s (Commission of the European Communities 1992). By then, several of the member states had enacted laws to provide protection to consumers in distance contracts. The mail order had provided “money-back guarantee” to buyers and taking this practice as the basis, the laws of several of the member states gave the consumer the right to cancel a distance contract. The EU assimilated these in its draft law giving consumers the same right (Commission of the European Communities 1992).