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[Landmark Judgement] Texco Marketing (P) Ltd. v/s TATA AIG General Insurance Co. Ltd. (2022)

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Landmark Judgment Law Insider (1)

Published on: 04 December 2022 at 18:21 IST

Court: Supreme Court of India

Citation: Texco Marketing (P) Ltd. v/s TATA AIG General Insurance Co. Ltd., (2022)

Hon’ble Supreme Court of India has defined Adhesionary Contract or Leonire Contract as Take It Or Leave It Contract. It is held that it is a standard-form contract prepared by one party, to be signed by the party in a weaker position, usually a consumer, who has little choice about the terms.

Para- 11

Adhesion contracts are otherwise called Standard-Form Contracts. Contracts of Insurance are one such category of contracts. These contracts are prepared by the insurer having a standard format upon which a consumer is made to sign. He has very little option or choice to negotiate the terms of the contract, except to sign on the dotted lines.

The insurer who, being the dominant party dictates its own terms, leaving it upon the consumer, either to take it or leave it. Such contracts are obviously one sided, grossly in favour of the insurer due to the weak bargaining power of the consumer.

Para – 12

The concept of freedom of contract loses some significance in a contract of insurance. Such contracts demand a very high degree of prudence, good faith, disclosure and notice on the part of the insurer, being different facets of the doctrine of fairness. Though, a contract of insurance is a voluntary act on the part of the consumer, the obvious intendment is to cover any contingency that might happen in future.

A premium is paid obviously for that purpose, as there is a legitimate expectation of reimbursement when an act of God happens. Therefore, an insurer is expected to keep that objective in mind, and that too from the point of view of the consumer, to cover the risk, as against a plausible repudiation.

Drafted By Abhijit Mishra

Key Words – Execution, Exclusion Clause, Unfair Trade Practice.