A One-Sided Contract Cannot Bind Consumers: Supreme Court

The Supreme Court ruled that earnest money forfeited by homebuyers upon flat booking cancellation must be reasonable and not excessive, as outlined in Section 74 of the Contract Act, 1872.

The court criticized real-estate developers for unfair, one-sided forfeiture clauses in builder-buyer agreements.

In a case involving Godrej Projects, the court upheld a previous ruling allowing only a 10% forfeiture of the earnest money, deeming the original 20% excessive and arbitrary.

The decision references cases like Pioneer Urban Land and Infrastructure Limited  and Central Inland Water Transport Corporation Limited and Another v. Brojo Nath Ganguly and Another, emphasizing consumer protection against unfair trade practices.