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E-CONTRACTS IN INDIA BY: DHWANI NITIN NAIKWADI & RADHA ANIL KONDE
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E-CONTRACTS IN INDIA
AUTHORED BY:
DHWANI NITIN NAIKWADI
ROLL NO: 31
LL.M First
Year.
(SEM-II)
CO-AUTHOR - RADHA ANIL KONDE
Savitribai
Phule Pune University 2023-2024
Progressive
Education Society’s Modern Law College, Pune
INTRODUCTION
The Indian
Contract Act, 1972 is the primary legislation governing contractual
relationships between the parties. However, the concept of e-contract is not
provided in the Act. E-contracts get their legal validity from Section 4 and
Section 10 A of the Information Technology Act, 2000 which places both
e-contracts and physical contracts at the same pedestal as far as their
validity is concerned. According to Section 4, a document which, according to
the law by which it is governed, can be in typewritten or printed form shall
also deem to include the document made in electronic form with the condition
precedent that it must be available for future reference of the concerned parties.
Also, Section 10A of the Act states that a contract shall not be deemed to be
invalid solely on the grounds that it has been made and concluded in electronic
form. Apart from this, the Supreme Court has also given a favorable stance for
the validity of e-contracts and have accepted the same to be placed with the
age-old physical contracts in Trimex International FZE Ltd. v.
VedanataAluminium Ltd[1].
Insofar as
the execution of e-contracts are concerned, the same can be concluded after an
offer from one party and acceptance after due communication to the other
through emails[2].
Post the acceptance of the terms and conditions of the agreement, the same must
be mandatorily affixed with an e-signature. Two separate modes of e-signatures
have been provided in the IT Act affixing which can result in execution of a
legally binding contract. The first mode of signature is the ‘digital
signature’[3]
which was later called an ‘electronic signature’ through the 2008 Amendment to
the IT Act. An electronic signature can be referred to anything, including an
image of handwritten signature or typed signature which is uniquely linked to
the signatory in such a manner that complete control over all data used to
create the signature vests with the signatory. The second method is the
signature through Aadhar card via third party forums.
CONCEPT OF
E-CONTRACTS
Section
2(h), of the Indian Contract Act, 1872, tells us that the term ‘contract’ is an
agreement that is enforceable under the law. Interestingly, in the case of an E-Contract,
the essence of Section 2(h) is still sustained by only tweaking the mode in
which the Contract comes into existence.
Hence, an
E-Contract is an agreement that is enforceable under the law and is in all
respects drafted, negotiated, and executed digitally. Unlike a traditional
contract which is paper-based, E-Contracts are digital in their entirety. In an
E-Contract, though there is an absence of a physical meeting of the parties, a
meeting of minds is present absolutely. The parties communicate with each other
over the internet or through telephonic media. An E-Contract is a step ahead of
traditional pen-paper contracts and comes into existence through electronic and
digital mediums.
LEGAL
VALIDITY OF E-CONTRACTS IN INDIA
As much as
we are accustomed to performing our Contractual Obligations in the traditional
method, in the current era, we are also warming up to the idea of Electronic
Contracts largely due to the hassle-free nature of such transactions and
primarily because it is recognized by the Indian Judicature. In order to
further understand as, how is an E-Contract legally recognized under Indian Law
it is imperative to emphasize the nexus between Section 10 of the Indian
Contract Act,1872 and Section 10-A of the Information Technology Act, 2000.
Section 10
of the Indian Contract Act, 1872 provides the crucial pre-requisites for a
Contract to be legally valid. It is mandatory that a Contract satisfies the
essentials specified in Section 10 of the Contracts Act, i.e.,
1. Offer
2. Acceptance
to Offer
3. Consensus
ad Idem
4. Lawful
Consideration
Like
traditional contracts, electronic contracts should also possess the said
elements. It should be noted that electronic contracts are specifically not
referred to in the Indian Contract Act.Through Section 10-A of the Information
Technology Act, 2000, we can procure the validity of the contracts formulated
through the electronic medium.
LAW RELATED
TO GOVERNING E-CONTRACTS
1. Indian
Contract Act, 1872
The Indian
Contract Act, 1872 regulates the contracts in India. Like ordinary contracts,
the e-contracts are also primarily governed by the codified provisions of the
Indian Contract Act. An e-contract to be legally enforceable should fulfill all
the essential requirements of the provisions that are provided under the Act.
2.
Information Technology Act, 2000
E-Contracts
have also found statutory recognition under the Information Technology Act,
2000. According to Section 3 of the Act, the verification of e-contracts is
affirmed by fixing the ‘e-signature; or ‘digital signature’ of both the parties
on them. Section 4 of the IT Act, 2000 provides lawful acknowledgement of the
e-records, where the information is related as a hardcopy or printed structure
and is made accessible to the client for further reference. Section 65 to
Section 71 of the IT Act provides for punishments related to cybercrimes in
India.
India has
legalized the validity of e-contracts under Section 10-A of the IT Act, 2000.
Regarding this, the IT Act excludes certain e-transactions from the documents which
are negotiable instruments, power of attorney, trust deed, will, sale deed, or
conveyance deed about immovable property.
3. Indian
Evidence Act
Section 65
of the Indian Evidence Act, 1872 provides that the court should recognize the
e-documents produced for the formation of the contract. In the case of
Societies Fes Products Nestle S.A &Anr v. Essar Industries &Ors.[4],
admission of e-contracts in Delhi High Court paved way for the immediate
introduction of Section 65A and Section 65B in the Indian Evidence Act, 1872,
where according to Section 65 the content of electronic records can be proved
by parties in accordance with section 65B of the Act.
In the case
of State of Delhi v. Mohd. Afzal and Ors.[5],
the Delhi High Court held that “electronic records are admissible as evidence.”
In the State of Punjab and Ors. v. Amritsar Beverages Ltd. and Ors.[6],
the supreme court in this case observed that “Section 63 of the Indian Evidence
Act makes media like paper, optical or magnetic forms admissible in courts. Section
65-B of the Indian Evidence Act also provides that the information contained in
the form of an electronic record is admissible in court without procuring the
original document. Therefore, the admissibility of the same is subject to
various conditions that are prescribed under Section 65-B of the Evidence Act.[7]
ESSENTIAL
ELEMENTS OF E-CONTRACT
The
essentials of e-contracts remain the same as those of paper-based contracts.
For a contract to be valid, it must contain all the following elements:
1.
An offer requirement should be made.
2.
The offer has been acknowledged.
3.
There must be a lawful consideration.
4.
There must be an intention to create legal relations.
5.
The parties to the contract must be lawfully competent
to enter into it.
6.
Free consent, the contract must be free and void of
coercion, misrepresentation, undue influence, or fraud.
7.
The object of the contract must be lawful in order to
be valid.
8.
There must be certainty and the possibility of legal
performance.
TYPES OF
E-CONTRACTS
1. CLICK
WRAP AGREEMENT
While using
any website or any software, we are very familiar with the “I agree” phase, and
we press the button without thinking twice. However simple it may appear; it
may land us in serious trouble as it gives rise to a legally enforceable valid
contract. This type of contract can be legally enforced against the
user.Click-wrap agreements are generally referred to as those agreements or
long blocks which nobody reads, these blocks contain terms and conditions of
the agreement. But it happens many times that we just click on I agree and
continue to the next page.
After
clicking on the “I agree” button, it means we accepted all written terms and
conditions of the agreement. Such types of agreements are less negotiable and
the user has to accept this if he really wants to use that software or any
other thing related to this agreement.
For
example, you have seen two options: either pay or back while sending the money.
Or, while installing software. The terms of services, privacy policies,
copyright policies and non-disclosure policies are commonly used for the
click-wrap agreement. Since it is a convenient way with minimal hassles to
enter a contract, it is gaining a lot of popularity nowadays.
Features of
Click Wrap Agreement
1.
These agreements are non-porous i.e., there is no
other way to move ahead without clicking the “I agree” button.
2.
In this type of contract, the acceptance is very clear
as the user will either accept or reject the offer.
3.
On the screen, the user should be informed that this
is an enforceable contract and a binding on him for his action.
4.
The terms and conditions of the agreement shall be in
a readable font with sufficient visibility.
5.
All the terms and conditions of the agreement shall be
consistent with Section 10 of the Indian Contract Act, 1872.
6.
The information fed by the user is generally retained
by the consumer to avoid any future dispute or litigation.
2. SHRINK WRAP AGREEMENT
Shrink-wrap
agreements are mostly related to computer software. The software is mostly
distributed in CD-ROMs. When the licensing software is opened by the person for
his use, it means he accepts the terms and conditions of that software company.
The term
“shrink-wrap” refers to the plastic wrapping which covers the software boxes.
This wrapping can be understood as the legally enforceable terms and
conditions. As soon as the user removes that wrapping, he is entering into a
contract. In simple words, a shrink-wrap agreement is a boilerplate or license
agreement containing some terms and conditions packaged with the product. The
customer automatically gives his consent when he uses the product.
PC
programming organizations are mainly dependent upon this type of agreement. It
is a sort of unsigned undertaking given by the customer while submitting to the
terms and conditions.
Following
are the terms and conditions which can be made through the Shrink-wrap
agreements-
·
License
·
Fees and payments
·
Warranties
·
Limitations of liability
The
legality of the Shrink Wrap agreement
The
validity of the shrink-wrap agreement came into question in the case ProCd
Inc vs. Zeidenberg.[8]
In this case, the manufacturer has included a shrink license in its packaged
software. The customer purchased the software but did not follow the license
restricting its commercial usage. To enforce the license, the appellant filed
for an injunction. The court denied the injunction while stating that though
the terms and conditions are not explicitly provided, the license was to be
treated as an ordinary contract. Thus, it is enforceable.
3. BROUSE WRAP AGREEMENT
Browse-wrap
agreements are probably seen on many websites while searching or reading
anything on websites. They are some kind of pop-ups that ask you to click “OK”
or “I AGREE” though, you can use the website with or without clicking there.
In this
agreement, there is a hyperlink or website containing the terms and conditions
over the screen of the website. When the person agrees to the above-stated
terms and conditions, he can access the material available and download the
product available therein.
For
instance- Electronic commerce websites such as Amazon and Paytm provide a
disclaimer while entering their website stating that by accessing or browsing
the website, the user has consented to all the terms and conditions. The terms
and conditions clause is hyperlinked.
However, it is also observed that sometimes the browse wrap clause is
hidden or not explicitly shown on the website page. It may lead to conflict in
the future.
The
legality of Browse Wrap Agreements
The
legality of the Browse wrap agreement is not very clear. Unlike the click-wrap
agreement, this type of agreement doesn’t ask for any explicit consent from the
user. So, the court presumed that it is not binding or enforceable against the
customer. The Burden of proof lies on the website owner to demonstrate that the
user has complete and actual knowledge of all the terms and conditions
mentioned therein.
4.
ELECTRONIC DATA INTERCHANGE
Electronic
Data Interchange means to exchange any type of document of a contract by
electronic means.
For
example, Exchange of bills by fax.
5. E-MAIL
CONTRACTS
Any type of
contract where the offer and acceptance are discussed with the help of email is
called an e-mail contract.
6.
E-COMMERCE CONTRACTS
The digital
contract which is used to buy or sell from the website online is called an
E-commerce contract or online shopping contract.
Buying
shoes from Amazon is an E-commerce contract
EXECUTION
OF E-CONTRACTS
Execution
of any contract finds its basis in the classic principle of consensus ad idem. Parties
entering a contract should agree upon the same thing in the same sense. The
traditional way of executing agreements requires parties to be present
physically, affix their signature and pay the necessary stamp duty. But there
are other ways too through parties can execute agreements, as permissible under
the Indian law.
Section 3
and 3A of the IT Act envisage that users can authenticate electronic records
through digital and electronic signatures. Hence, parties can sign e-contracts
either through digital signatures, or electronic signatures.[9]
FORMATION OF E-CONTRACTS AS PER THE INFORMATION TECHNOLOGY ACT, 2000
First, of all, electronic records are legal. Hence, an electronic
contract is legal. Section 4 of IT Act, provides for legal recognition of
electronic record. It says that where any law requires information in written/
typewritten/ printed form, providing the information in electronic form would
suffice.
Further, Section 10A of the IT Act specifically provides for validity of
contracts formed through electronic means. It states that the communication of
proposals, acceptance of proposals, and revocation of proposals in electronic
form shall not be unenforceable solely because the parties performed it using
electronice methods. closer look at the contract formation process.
1. Originator and Addressee
There are two parties to an e-contract: Originator
(Sameer) and Addressee (Pooja). The Act defines Originator under
Section 2(1)(za) as a person who sends, stores, generates, and transmits any electronic
message to any other person. It defines Addressee under Section 2(1)(b) as the
person intended by the originator to receive the electronic message.
Note: We would be using e-mail address/ computer resources/ information
systems interchangeably. Similarly, we shall be using offer/ email/ electronic
record interchangeably.
2. Attribution of electronic records
Section 11 of IT Act, 2000 provides for the attribution of electronic
records. An electronic record can be attributed to an originator (Sammer or
Pooja)-
where the originator himself sends an electronic message,
or where an authorized person is acting on behalf of originator,
or where the originator has programmed an information system for this
purpose.
3. Acknowledgment of receipt
Section 12 of IT Act provides for methods using which a party
(addressee) can give the acknowledgment of receipt of an electronic record
(simply, the mode of acceptance). Where the originator and addressee have not
agreed on a particular mode of communication, a party can give acknowledgment
of receipt through any way of communication (automated or otherwise).
For instance: Sameer (originator) sends a message to Pooja and offers to
buy her car. Pooja (addressee) is on a vacation and has set an automated
reply to the incoming messages on her Gmail. Sameer receives an automated
reply. This reply means Pooja has acknowledged the receipt of Sameer’s message.
Acknowledgment through conduct:
The addressee can also send acknowledgment through any conductsufficient
to indicate to the originator that it has received the message. E.g. Pooja
doesn’t send an acknowledgment to the above offer but shares pictures of her
car.
No acknowledgment, no offer:
With reference to Section 12(2) of the Act, if Sameer asks for
receipt of an acknowledgment and says that the offer to buy the car will stand
only if Pooja sends an acknowledgment but Pooja doesn’t send one, Sameer’s
offer will be treated as if he never sent it.
If acknowledgement not received despite asking:
With reference to Section 12(3) of the Act[10],
if Sameer doesn’t say that the offer will stand only if Pooja sends an
acknowledgement, nor says that he needs an acknowledgment within a certain
period of time, then he can give notice to Pooja if she fails to acknowledge
his offer. If Pooja doesn’t send an acknowledgment even after giving the
notice, then the electronic record (offer) should be treated as if Sameer never
sent it.
4. Time and place of despatch and receipt of electronic record
Section 13 of the Act provides for the time and place of despatch and
receipt of electronic records.
Time of Dispatch: With reference to Section 13(1) of the
Act, if Sameer presses the “send” button at 01:00 p.m. and the e-mail reaches
an information system that is out of her control, the time of despatch will be
12 noon.
Time of receipt: As per Section 13(2)(a)(i) of the Act, if
Sameer places the offer on Pooja’s designated e-mail address (or information
system), the time of receipt will be when the email reaches the designated
e-mail address or information system. If Sameer doesn’t send the offer on the
designated email address, then the time of receipt will be when Pooja accesses
the offer. [Section 13(2)(a)(ii)]
If Pooja has not designated any address/ information system for the
purpose of receiving offers/ electronic records, the time of receipt will be
when the electronic record enters any of her information systems. [Section
13(2)(b) of the Act]
Jurisdiction: Section 13(3) of the Act states that the electronic
record is deemed to be despatched at the place of the business of the
originator and electronic record is deemed to be received at the place of
business of the addressee. If the originator/ addressee has multiple places of
business, then the despatch/ receipt will be at the principal place of
business.
Further, if the originator/ addressee does not have a place of business,
his usual place of residence will be the place of business.
ADMISSIBILITY OF E-CONTRACTS IN COURTS
Section 3 of the Indian Evidence Act, 1872 includes electronic records
as documentary evidence in the definition of “Evidence”. For an electronic
record to be admissible as evidence in a court, it should meet the conditions
mentioned under Section 65B of the Evidence Act.[11].
ENFORCEMENT OF E-CONTRACT- STAMPING
In India, states levy stamp duty under the Indian Stamp Act, 1899, and
under various state legislations. E-contracts are not mentioned in the
definition of an instrument [Section 2(14)] under the act. After the amendment
in the Stamp Act by Finance Act, 2019, an “instrument” includes only electronic
documents created for a transaction in a stock exchange or depository.
However, states like Maharashtra, Uttar Pradesh, Gujarat, and Karnataka
have amended their stamp act to include electronic records as an instrument.
E-agreement must be stamped before or at the time of execution (signature) of
the e-document and not after the execution.
In case the parties don’t attach the proper stamp value to the contract,
the contract will still be valid. However, the court will impose a penalty on
the parties before going ahead with any suit.
CONCLUSION
E-contracts
are agreements made electronically instead of physical meetings between the
parties involved in the transaction.
E-contract forms a significant part of E-commerce. E-contracting is a
fragment of e-business. Contracts
entered verbally or digitally are subject to the same fundamental principles of
contract law. E-contracts must contain all these necessary elements in order to
be enforceable and legally binding in India. E-contracts are becoming
increasingly important in today’s world of rapid digitalization and e-commerce
to execute a significant number of business transactions in a variety of
industries.The Information Technology Act, 2000, Section 10A, focuses on the
legality of agreements made using electronic methods.According to the Evidence
Act of 1872, an electronic contract has equal legal validity as a paper-based
contract.
[1]Trimex International FZE Ltd. v.
Vedanata Aluminium Ltd, (2010) 3 SCC 1
[2]Trimex International FZE Ltd. v.
Vedanata Aluminium Ltd, (2010) 3 SCC 1
[3]Information Technology Act, 2000,
s.3, s.5
[4]2006(33)PTC 469 del
[5](2003) 71 DRJ 178V(DB) 2003 SCC del
935
[6]Appeal (civil) 3419 of 2006
[7]https://blog.ipleaders.in/online-privacy-e-contracts/
[8]86 F3d 1447 (7th CIR
1996)
[9]The Law on Digital Signature, and
its position in the Law of Evidence (mylawrd.com)
[10]https://indiankanoon.org/doc/1968067/
[11]The Law on Digital Signature, and
its position in the Law of Evidence (mylawrd.com)
Article Information
E-CONTRACTS IN INDIA BY: DHWANI NITIN NAIKWADI & RADHA ANIL KONDE
Authors: DHWANI NITIN NAIKWADI, RADHA ANIL KONDE
- Journal IJLRA
- ISSN 2582-6433
- Published 2024/04/27
- Issue 7
About Journal
International Journal for Legal Research and Analysis
- Abbreviation IJLRA
- ISSN 2582-6433
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