The Liability of Cab Aggregators in India vis-à-vis their Consumers

[By Suyash Tiwari and Prakul Khera]

Suyash is a student at the Hidayatullah National Law University, Raipur, and Prakul is a student at the Institute of Law Nirma University, Ahmedabad.

The reputation of ride-hailing platforms like Uber has been marred with a plethora of cases involving sexual assault and negligence of its drivers. The case in the Indian context is no less different. These platforms are operating under such a regulatory grey area that they easily evade liability for the acts of drivers.

The Motor Vehicles (Amendment) Act, 2019 introduced the term aggregator for these platforms which defines them as “digital intermediary or marketplace for a passenger to connect with a driver for the purpose of transportation”. This provision brought such platforms under the purview of the Motor Vehicles Act, 1988. However, the only body of law that governs the employment status of drivers engaged with these platforms is the terms and conditions of these aggregators.

These terms and conditions that a user agrees to avail the services of these platforms provide that the drivers are independent third-party contractors and not employees of the company. Since the principle of vicarious liability doesn’t apply to independent contractors,[i] such clauses exempt the liability of these aggregators in case of any mishap.

In the current article, the authors advocate for the liability of such aggregators for the acts of drivers.

 Control test obsolete in the modern economy

Under the control test, the employment status is determined not only through the control of the employer in directing what work is to be done but also through the control exercised over the manner of doing work. [ii]However, In Silver Jubilee Tailoring House v. Chief Inspector of Shops, the Supreme Court of India held that the control test can’t be treated as an exclusive one for distinguishing a ‘contract of service’ from ‘contract for service’ and it would be more reasonable to examine all the factors that constitute the case in hand. It was further opined that it would be unrealistic to apply the test of control in many skilled employments for determining the existence of a master-servant relationship.

Therefore this test can’t be treated as a precise one for ascertaining the employment status of the drivers.

A progressive test was propounded in Stevenson Jordan and Harrison Ltd. v. Macdonald and Evens. It was held that a person is under a contract of service when the work performed by him is an integral part of the business, whereas the person is under a contract for service when the work is ancillary to the main business.

The rationale for using this test is that the functions which constitute a contract of service are the sole source of revenue for a corporation. Since transportation is an integral part of the business and constitutes a major source of revenue, the drivers should be treated as employees of the aggregators

Position in other jurisdictions

In 2015 a United States District Court for the District of Columbia in Erik Search v. Uber, where the driver had stabbed a rider, made Uber liable to pay damages.

The court relied on the apparent agency theory which stems from the so-called duck test. According to this test, “if it walks like a duck, swims like a duck, and quacks like a duck, it’s a duck.” The rationale that stems from this test is that liability can be imputed to the principal if he, through his words whether written or spoken or any other conduct makes a third party believe that he has consented to the acts done on his behalf by the apparent agent. Hence the perception of a third party with respect to the agent’s authority is significant in determining the liability. Therefore, taking into account the way Uber functions, the court held that the riders were under a reasonable belief that the drivers were indeed the employees.

Similarly, in Doe v. Uber Techs., Inc., where the driver had raped a consumer, the District Court for the Northern District of California held that drivers were employees and Uber was vicariously liable for their conduct. While holding so, the Court relied on a set of the factual matrix. These include, inter alia, the fact that the drivers can’t negotiate the fares and the same are set by Uber without any input from the driver. Further Uber has the authority to alter the amount being charged from customers if the driver takes a circuitous route. Thirdly, control over customer contact information lies with Uber. The drivers have to accept all rides requests when logged into the application or else they have to face disciplinary actions. Lastly Uber retains the right to terminate drivers at will.

In Uber France v. M. A. X, the Court of Cassation (the highest court in France) classified the drivers as employees and not self-employed. The Court laid down a three-limb test to categorize a person as self-employed. Under this test, if the person can build his own client base, fix the tariff to be charged on his own, and set the terms and conditions for providing the service, only then, one can be classified as self-employed. Further, according to the Court, as the drivers were following orders from Uber, there was a relationship of subordination between the Company and the drivers.

The High Court of Australia in Hollis v. Vabu Pvt. Ltd. held that persons employed as bicycle couriers by Courier Company under a ‘contract for service’ who owned their bicycles and also bore the expenses of running them, were employees. The court relied on the fact that their uniforms bore the logo of the company which represented to the general public that they were employees.

As Lord Peace stated in Imperial Chemical Industries Ltd v Shatwell “the law of vicarious liability has evolved from social convenience and rough justice and not from any clear logical or legal principle.” Therefore, the Indian courts must take into consideration the principles evolved by the foreign courts as they reflect an approach that is in the interest of justice.

Standard form of contracts

While accepting the terms and conditions of ride-hailing services like Uber, the rider does not generally read the user agreement and in any case has no power to negotiate any terms but to accept them as it is. In such cases where actual bargaining does not happen and the weaker party has the only option to take or leave it, such contracts are known as adhesive contracts or standard forms of contracts. In the garb of such acceptance, these aggregators conveniently exclude all its liability while using its cab services. However, a free bargain is the prerequisite of a legally binding contract which stems from the equal bargaining power of the parties. The adherence to this unilaterally drafted agreement by these platforms who abuse the position raises the question of consensus ad idem in such agreements.

This negotiating imbalance has been scrutinized in legislation as well as judicial precedents in India, especially in cases of exclusion of liability. The Indian Supreme Court in Central Inland Water Transport Corporation v. Brojo Nath Ganguly held that unreasonable and unfair clauses in a contract are unenforceable when entered between parties with unequal bargaining power. Further, in Lloyd Bank v. Bundy, it was held that unfair clause such as the exclusion of liability clause should be held void because they stem from the inequality in bargaining capacity which has its genesis in the unequal economic strength of the contracting parties.

The UK, Australia, and New Zealand have implemented laws to regulate unfair terms. The Law Commission of India also proposed Unfair (Procedural and Substantive) Terms in Contract Bill, 2006, in which the fairness and reasonability test was included but the statute has not been enacted yet.

However, The Consumer Protection Act, 2019 (the Act) has defined the term unfair contract under Section 2(46) as a contract which includes such terms that impose unreasonable obligations or conditions which are disadvantageous to the consumer. The State and National Commission can declare these unfair terms in the contract as void under Section 47 and 58 of the Act respectively.

The user agreement of these aggregators completely excludes the company’s liability for its services. By virtue of this clause, the liability shifts on to the driver. However, the drivers are also a victim of this unequal bargain as they also don’t receive any employment benefits. In every transaction, the corporate giants earn maximum profit, whereas the risk and responsibility are being borne by the weaker parties to contract. Further, due to the monetary limitations of drivers, the consumers always remain undercompensated. Therefore, such terms are disadvantageous to the consumers and should be declared void.

Way forward

These aggregators are well acquainted with the possible risks that exist for their consumers during a ride. Therefore the usage of such clauses reflects a deliberate decision of the companies to distance themselves from potential liability.

These aggregators are primarily used because of their reputation and goodwill. Further in the words of Lord Lyndhurst L.C. “There ought to be a remedy against some person capable of paying damages to those injured”.[iii] Therefore providing impunity to these platforms who are not even operating gratis, leaves the victim uncompensated, and goes against the principles of equity and fairness.

The authors believe that the Indian government must come up with a specific and exhaustive framework to fill up this lacuna. In this framework, the legislature must include three factors for determining the employment status of the drivers. Firstly the reasonable belief of riders with respect to the existence of the agency, secondly capability of drivers to choose their client base, and lastly the activity being the sole contributor to the revenue. Further, this framework must provide for a strict due diligence exercise that should be conducted by the aggregators before recruiting the drivers. It must also include provisions which deal with the extent of the liabilities of these aggregators in case of any mishap and remedies available with the riders.

Endnotes:

  1. Morgan v. Incorporated Central Council (1936) AII E.R 404
  2. Performing Right Society Ltd. v. Mitchell, (1924) 1 KB 762
  3. Viscount Canterbury v. Att.-Gen. (1842) 1 Ph. 306

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