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E-CONTRACTS, ITS ENFORCEMENT AND JURISDICTIONAL ISSUES BY: SANIL JOSE
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E-CONTRACTS, ITS ENFORCEMENT AND JURISDICTIONAL
ISSUES
AUTHORED BY: SANIL JOSE
Introduction:
E-commerce
or Electronic-Commerce is nowadays globally widespread business. It is the kind of business where there is
selling and buying of goods and services virtually
i.e. through the online platform. Because of the tremendous development in the computer system and information
technology along with the increase in the innovations related
to the internet services (5G), the businesses of the E- commerce
flourishes since last decades. As E-commerce is the fastest, universal and easily accessible or executable kind
of business, it becomes popular among the people of today’s tech savvy and busy
generation. E-contract (Electronic- Contract) is an essential part of
E-commerce. E-contract is legally
recognized by Law, thus the trust of consumers
on E-commerce increases day by day. In
addition to the above developments in E-commerce, the COVID-19 pandemic situation
especially during the lockdown period some consumers
who were unaware and unwilling to enter into the
E-commerce and ultimately into the E- contract
because of the lack of faith in the online transactions, are forced to enter into E-contract. This situation further helps to grow the E-commerce and E- contracts. Even after the starting of unlock period, most of the consumers
now rely on E-commerce and enter into E-contract every day to buy their basic needs as
the faith on E-contract is growing. The
business communities also enter into E- contract
to transact their business deals as it is fastest and trustworthy way to do business
now a days.
E-contract is the execution of commercial transactions electronically or
digitally. The formation and validation of E-contracts requires
to fulfill the essential conditions similar to the traditional
contracts i.e. paper-based contracts, only the
difference is that it is created and executed electronically by using
the internet services. In India,
E-contract is governed by so many Laws, primarily under the Indian Contract Act, 1872; The Information Technology Act, 2000 and The Indian Evidence Act, 1872. The Indian Courts also recognized and give judgments
in the favor of E-contracts.
There are the issues arising in E-contracts regarding
Legal Validity and Jurisdiction
of E-contracts as it is created from
anywhere and anytime in the World.
Historical Background of E-Contracts
E-contract
is an essential part of E-commerce, so need to study the history of it before
knowing about the E-contract. E-commerce simply related to the selling
and purchasing of the goods and hiring of services over the internet.
With the advancement in digital
technology and networking increased the growth of E- commerce globally.
In
the 1960s businesses were using Electronic Data Interchange (EDI) to conduct e-transactions. In 1991, E-commerce was
widely accepted when the Internet had used
for commerce. With the invention of the World Wide Web in 1990, a large number of companies started to provide
their services through the website. For example,
Amazon and eBay which were among the earlier companies that transformed E-commerce.
In
India, the concept of E-commerce was first introduced in the late 1990’s through
Rediff. Indian Railway
Catering & Tourism
Corporation Limited (IRCTC) was the first company to generate
E-commerce portal in India. The United Nations Commission of International Trade Law (UNCITRAL) adopted
the Model Law on E-commerce in 1996. The General Assembly of UN in
January 1997 recommended that the
countries should consider this model
while enacting or revising
their laws.
Accordingly,
the Indian Parliament enacted the Information Technology Act in 2000, to legalize the E-commerce
transactions in India and to keep pace with the globalization of the trade and transactions with the development of computer technology. The Rules and Regulations governing the E-commerce
and ultimately the E-contract are provided under following International Conventions and Conferences. The Brussels Convention on Jurisdiction and Recognition of Enforcement
of Judgments in Civil and Commercial Matters, 19685; Convention On The Law Applicable To Contractual
Obligations, 19 June 1980 (known as “the Rome Convention”)6; the Hague Conference on Private International Law (HCPIL)7 30 June 2005 has issued
a Convention on Exclusive Choice
of Court Agreements concluded in Civil and Commercial Matters; and
United Nations Convention on the Use
of Electronic Communications in International Contracts (New York, 2005).
E-Contracts
With
the fastest development in Information Technology, it becomes easy to enter into E-contract for business
transactions. It is feasible to enter into such contract instantly by the exchange of communication of offer and
acceptance between the parties by electronic mode. E-contract is one of the important
parts of E- commerce.
E-contracts designed to sale and transmit the products and services online to
the addressee.
Nowadays
we all enter into E-contract on a day
to day life, for example, to purchase grocery,
books, vegetables, garments,
travel booking, Airlines
and railway ticket, playing
games, watching online movies, hiring a cab etc. so, we are accustomed to the E-contract very easily every day. E-contract has a similar meaning
as traditional contract
(paper-based contract), i.e. “Contract as an agreement enforceable by law.” However,
the only difference is that it carried out through
online mode of communication without
the parties directly meeting face to face.
The
UNCITRAL Model Law on Electronic commerce stated that “a contract can be made by exchanging data messages and
when a data message is used in the formation
of a contract, the validity of such contract should not be denied.”10 The modern
law provides equal legal treatment
for the use of electronic communication and paper-based communication.
Types of E-contracts
Following are the
general types of E-contracts/Agreements-
a)
Click-wrap agreement- These agreements require the
user to give his consent to the
terms and conditions of the agreement by clicking “ I accept”, “Ok”, “Allow” or “I agree” button.
b)
Browse Wrap Agreements- These agreements do not require the user to give his consent to the agreement. It stated
that, automatic acceptance of the agreement
by using the website. In this agreements, terms or conditions of
service provided at the bottom of the website.
c)
Shrink-wrap agreements- These agreements are formed
when the user give his consent to a
printed agreement on software like CD-ROM by open in the shrink to fit plastic wrapper over the product.
The terms and conditions in such agreements are enforced
upon the user as he cannot
use it without opening the wrapper.
Essentials of E-Contract:-
E-contract may be formed either through
an e-mail, mobile apps, video conferencing
or other electronic media. To enter into the electronic contract, it requires the essential elements applicable
to the traditional contract. However, such
contracts executed through the online modes unlike personal meeting in the traditional contracts. The following
are the essentials to form E-contract-
1.
Offer- An offer
is also called as proposal. It is the first essential element for the formation of E-contract. An electronic offer can be made through
electronic modes like
e-mails etc. As per The Information Technology Act, 2000, the terms originator12 and addressee13 in E-contract
are used instead of the words proposer and
acceptor used in traditional contract. The originator is a person who send or create the electronic message i.e.
originate the electronic message and transmit
it to any other person. An
addressee is a person who receives the electronic record which is sent by the originator. Section 11 of the IT Act deals
with the attribution of electronic
records to the originator, if it was sent by originator himself or by authorised person or by information system programmed on behalf
of him. In such contracts, the addressee presumed
that the electronic record is originated from the originator itself. However,
in e-contract after sending the electronic record, the originator may not be
confirmed about the receipt of electronic record by the addressee. Therefore, it requires the acknowledgement of
the receipt of electronic record from the addressee.
2.
Acceptance of an electronic offer- The originator send his offer or proposal to the addressee
through the electronic modes, the addressee
if accepting it may
transmit his acceptance through any electronic modes or by clicking
on button ‘I agree’ or ‘I accept’
or ‘allow’ etc.
3.
Acknowledgement of receipt or communication of
acceptance- Section 12 of
the IT Act 2000 deals with the acknowledgement of the receipt. As per this section, there is no agreement about the
mode of acknowledgement sent by the addressee
between both the parties, the addressee may acknowledge the receipt of electronic records by any communication
modes to know the originator as to the receipt of it by
the addressee. Further, it provides
that an electronic record shall not be binding
until an acknowledgement of receipt of electronic record is received from the addressee. If the
addressee failed to acknowledge the receipt within
a reasonable time, the originator may give a notice to addressee that, he has not received an acknowledgement and
again provides reasonable time for receipt of the acknowledgement. Even after that, the addressee
failed to send the acknowledgement then the originator is
entitled to deny the sending of electronic record by him. Therefore, there is no enforceable electronic contract. In the case of Bhagavandas Kedia
vs. Girdharilal1, the Supreme Court of India on
the basis of judgement in Entores
vs. Miles Far East Corporation, has held that the contract is complete only at the end of the offeror
where he has received the acceptance to his
offer.
In
Quadricon Pvt. Ltd. vs. Bajarang Alloys Ltd.2,
the Bombay High Court held that the communication by Fax is similar to Telex. The contract would be completed
only
when
the
acceptance is
received by the
offeror. Other essentials like
free consent of the parties, competent to contract, lawful considerations and lawful object of the
Indian Contract Act discussed later in this paper in legal validity
of e-contract. Although the E-Contract is effectively addresses under the legal system in India,
some issues like validity of E-Contract and jurisdiction of court for E-contract has to be discussed here.
Legal Validity of E- Contract
To
enforce any contract it must be valid i.e. legally binding or accepted under
law. The provisions of the Indian Contract
Act, 1872 are generally applicable to validate the
E-contracts similar to the general contracts. An E-contract has to satisfy all the essentials of a valid
contract as specified under the
Section 10 of The Indian Contract
Act, 1872. In addition to it,
E-contract is validated and enforceable
under the Section 10-A of The Information Technology Act, 2000 and The Indian Evidence Act, 1872.
Essentials of Valid
E-contract
To
validate an E-contract it is precondition to satisfy the provision of the Sec.
10 of the Indian Contract
Act, 1872(ICA) as follows-
1.
Free consent,
2.
Competent to contract,
3.
Lawful consideration,
4.
Lawful object,
5.
Not expressly declared
to be void.
1. AIR 1966 SC 543
2. AIR 2008 Bom 88.
1. Free consent: -
The consent to
be
free
must
not
cause
by
coercion, undue influence, fraud, misrepresentation, or
mistake. In E-contract, face to face contact
is not possible so contract is made by just clicking the terms and
agreements in such contracts.
2. Competent to contract:-
Any person is competent to contract if he is a major, of sound mind and
not disqualified by law in
force to contract. In E-contract, the
verification of the competence of the
contracting parties is very difficult. For example, minor may enter into the contract by
misrepresentation. So, the online originators should take precautions by inserting the condition as to the capacity in the term of the offer.
Such terms must be confirmed first by the addressee to be true and then offer
can be accepted.
3. Lawful consideration:-
Consideration means something in return. The Indian Contract Act,
provides that “an agreement
without consideration is void.”
4. Lawful object:-
Object
of the contract must not be
fraudulent, immoral, or opposed to public policy etc.
5. Not expressly declared to be void:-
An
agreement must not have been declared
void by any law in force in India. This shows that, E-contracts are also valid like traditional
contracts if it follows the above essentials. The provisions of The Information Technology
Act, 2000 (IT Act) gives statutory
recognition to E-contracts under the Sec. 10-A. This section
provides the legal binding of E-contract. It stated that the communication, acceptance and revocation of proposals in
an electronic form or by electronic records are
enforceable. This
section is based
on the Article
11 (Formation and validity of contracts) of the UNCITRAL Model Law of E- Commerce,
1996.
Electronic Signature
A
digital signature is a mathematical technique to validate the authenticity of message software or electronic documents.
An electronic contract can be created by digital
signatures is recognized by the laws in India. In E-contract, it is imperative to know that the authenticity
of such contract, which is proved by ‘electronic signature’ recognized under
IT (Amendment) Act,
2008. In J.Pereira Fernandes
SA vs. Mehata3, the defendant a Director of the company sent an unsigned E-mail to the claimant to
stop the process of company. In this case the Court of Chancery held that offer sent through an unsigned E-mail is not sufficient. That
means to authenticate any E-contracts, it is necessary to have an electronic signature of the originator and
addressee. The IT Act provides legal recognition
to electronic signature under the Sec.5
of the Act. Wherein it is provided that any matter or document
shall be authenticated by affixing the handwritten signature or
any
mark
on
it
is
recognized as an electronic
signature. An E-contract subsequent to its execution is
recorded with the executing parties
in electronic form, i.e. in
electronic record. The IT Act define the term “electronic record” under sec.2(t)
as “data, record or data generated,
image or sound stored, received or sent in an electronic form or micro film or computer
generated micro fiche”.
The IT Act also provides
an authentication and legal
recognition of electronic records under the Sec.3 and 4 of this Act. The Indian Evidence Act, 1872
has provide legal recognition to the E- contract. Section
3 of this Act provides
that the term “electronic signature”, “electronic signature certificate”, “electronic record”,
“secure electronic record”, “secure
electronic signature” shall have the same meaning as provided under the IT Act respectively. Section 3 also defines the term “Evidence” that “all documents
including electronic records produced for the inspection of the court are called as documentary evidence.”
The Indian Evidence Act, provides admissibility of electronic record under section 65-B, any information contained in an electronic record, if printed or stored in CD is admissible in the court as
evidence without the further proof or production
of original in any proceedings. In Anvar P.V. vs. P.K. Basheer & Ors.4 the nature and manner of an admission of
electronic records is under consideration before
the Supreme Court of India. The Supreme Court held that an electronic record by way of secondary evidence shall
not be admissible as evidence unless the
requirements of Section 65-B are satisfied. Under Section 85-A of Indian Evidence Act, the court presumes that
every electronic agreement are concluded by
affixing the electronic signature of the parties. Section 85-B of this Act,
stated that court shall presume that
“the secure electronic record has not been altered since the specific point of
time to which the secure status
relates”; and also presume that “the secure digital signature is affixed by subscriber with the intention of signing or approving
the electronic record.” Hotmail
Corporation vs. Van $ Money Pie Inc.5
is the first case where U.S.
3. (2006) 2AB ER 891 (Ch D).
4. (2014) 10 SCC 473
5. 47 U.S.P.Q. 2d 1020
District
Court, California decided the
validity of a Click-wrap contract’s term of service through e-mail agreement. In Rudder v. Microsoft Corporation6, Ontario
Superior Court of Justice,
Canada, the issue was discussed about a clause which binds an individual to be upheld even if that clause is not seen and whether the
Click-wrap licenses are valid or not.
In this case, Rudder argued that the particular clause was not valid
as it was not adequately brought to the attention of the user. The provision was important that it required special
notice. The Court held that the Clause was enforceable
and Click-wrap agreements “afforded the sanctity that must be given to any agreement
in writing.”
The
validity of E-contract is also recognized by the Indian courts in various
cases. In case of Trimex
International FZE Ltd., Dubai vs. Vedanta Aluminium Ltd.7, the Supreme Court of India held that “the contract
between the parties was unconditionally
accepted through e-mails was a valid contract which satisfied the requirements of the ICA.” Hence, the E-contract is valid and enforceable according to the provisions given under
the Indian Contract Act; The Information Technology Act and
The Indian Evidence Act like the traditional contracts.
JURISDICTION OF THE COURTS UNDER E-CONTRACT
Jurisdiction
is an extent of the power of the court to hear a case i.e. to take cognizance of the case and to make legal
decisions and judgments. It is the legal authority of the court to resolve
the dispute. E-contract involves instant communication of offer and acceptance wherein
the contract is complete at the end of originator where acceptance is received.
The
Supreme Court of India in case of Bhagwandas Goverdhandas Kedia vs. Girdhari
Lal Parshottamdas & Co (supra)
held that “at the
place of proposer where the
acceptance is received shall have the jurisdiction for enforcement of contracts entered into by means of
computer internet.” In India, the Code of Civil Procedure, 1908 provides the manner of determining the
jurisdiction of Civil Courts, which is based on the place of residence and the place where the cause of action arises.
Generally, the contracts
insert a specific
clause to determine the territorial jurisdiction to
resolve the dispute arising under such contracts.
6. (1999) 2 CPR (4th) 474.
7. (2010) 1 SCALE 574
An
E-contract crosses the jurisdictional boundaries as it can be created from any place in the globe. This raises the
question of jurisdiction of the court in case of any dispute between the parties to E-contracts. If there is any
dispute among the parties belonging
to the same jurisdiction related to E-contract, then such dispute can be resolved
similar to the traditional contract
disputes. However, the challenges
would arise when the parties to E-contract are belong to the different countries.
Jurisdictional
problem in E-contract has been resolved under IT Act in India. Specifically Section 13 of the IT Act
deals with the time and place of dispatch and
receipt of an electronic
record and electronic contracts. Section 13: Time and place of dispatch and receipt of electronic record This section
stated that “the dispatch of an
electronic record occurs when it enters a computer resource outside the
control of
the originator.” It
provided the time
of dispatch of the
digital record. The dispatch means
electronic transmission of the electronic record
to the addressee. Here, ‘outside the control of the originator’ means he cannot recall it back and make any changes
in it specifically when it enter into e- mail
server of any parties. The electronic record is considered to be dispatched when it communicate to the proposed
addressee. Sub-section 2 of the Section 13, determined
the time of receipt of an electronic record. The receipt occurs at the time when the
electronic record enters the designated
computer resource if the addressee has designated it. If
the addressee has not designated a computer resource
then the receipt occurs when the electronic records enters the computer resource of the addressee. Sub-section 3
of the above Section stated that, the place
of dispatched and received of an electronic record of both the parties
i.e. the originator and the
addressee. An electronic record is dispatched from the place where the originator has his place
of
business and
is
received at the place
where the addressee has his place of business.
According to the Sub-
section
4, the location of computer resource is not so important in determining the time and place of dispatched and the receipt
of records between
both the parties.
As per Sub-section 5, “if the originator or the addressee
has more than one place
of business, the principal place of business,
shall be the place of business; If both the parties does not have a place
of business, his usual place of residence shall
be deemed to be the place of business; Usual place of business for corporate is the place where it is registered.” Thus, it emphasis
on principal place of business
and usual place of residence to determine the time and place of dispatch and receipt of electronic record.
In
case of PR Transport Agency vs. Union of India8, the above provision
applied. In this case, the Allahabad
High Court had to decide the question of jurisdiction. The respondent had sent the letter of acceptance by an e-mail to
the petitioner’s e- mail address. After that, the respondent sent another e-mail cancelling the e- auction
due to some unavoidable reasons.
The petitioner challenged this communication in
the
Allahabad High
Court, objection was raised
by the respondent about the territorial jurisdiction of the Court on the basis of cause of action had not arises within
Uttar Pradesh. In this case, the Principal place
of business of the petitioner was in the Chandauli district of U.P. and his other place of business was in Varanasi of
U.P. The Court, on the basis of Section 13(3)
of the IT Act, held that “the
acceptance of tender by e-mail would
be deemed to have been received by
the petitioner at Varanasi or Chandauli, which
are the only two places where the petitioner has his place of business.
As both these places fell within the territorial jurisdiction of the Allahabad High Court,
the Court assumed the jurisdiction to try the dispute.” Thus, it is observed that principal place of business of the
originator and the addressee becomes the criteria
to decide the jurisdiction of the Court. However, the contracting parties particularly in E-contract must insert a
specific clause on jurisdiction to avoid further complications.
Conclusion
In
the recent era, the E-commerce grow exponentially so the use of E-contract is increasing day by day. Online businesses
spread across the global markets and reach
to the millions of consumers. Eventually,
E-contract becomes essential part to govern under statutory
law to avoid any uncertain
disputes in online transactions.
The E-contract in India is governed under several legislations to validate it. Indian Courts also upheld the
validity and passed the judgments in the cases
related to jurisdiction of E-contract, it becomes helpful to solve the disputes related
to these issues.
With the advancements in technologies, the Indian Parliament enacts law like IT Act to accustom
with modern global trade transactions. There is a need to cover all
the aspects of E-contracts in a single, comprehensive
and updated legislation to the protection of consumers and traders in E-commerce and for enforcement of E-contracts.
8. AIR 2006 All 23.
Article Information
E-CONTRACTS, ITS ENFORCEMENT AND JURISDICTIONAL ISSUES BY: SANIL JOSE
Authors: SANIL JOSE
- Journal IJLRA
- ISSN 2582-6433
- Published 2023/04/06
- Volume 2
- Issue 7
About Journal
International Journal for Legal Research and Analysis
- Abbreviation IJLRA
- ISSN 2582-6433
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