Open Access Research Article
E-CONTRACTS IN INDIA: THE LEGAL FRAMEWORK, ISSUES AND CHALLENGES
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Article Details
E-CONTRACTS
IN INDIA: THE LEGAL FRAMEWORK, ISSUES AND CHALLENGES
AUTHORED BY
- PRAVIN MASHERE
Abstract:-
The advent of revolutionary
technologies has ensured robust e-commerce in the country. However the usage of
technology without adequate legal framework will lead to chaos in the society
and will prove counterproductive to the business. The Indian Contract Act,
1872, The Information Technology Act, 2000 and The Indian Evidence Act, 1872
are the crucial legislations which determine the validity of an e-contract. E
contracts are formed by way of exchange of Emails and through on line
agreements viz. browse wrap, shrink wrap and click wrap agreements. All the
said forms are valid under Indian law as if they comply with the prerequisites
of a valid contract. Major issues which arise pertain to capacity to contract,
free consent, decision on the applicable law and decision on the court
jurisdiction. Though the Indian legal system adequately addresses the e-contracts,
the challenge before the law makers will be to keep abreast of the issues which
will arise with evolving technologies and to adequately address them.
Keywords-E-contracts –– forms - issues
– legal – validity
1 . INTRODUCTION:-
Electronic commerce has existed since
the 1990s in India, but this trend has gained traction in recent years. In
parallel with the governmental policies of Indian digital India, globalisation
has a successful outcome for the Indian economy. In new business countries from
2013 to 2018, a survey shows a 53 percent rise in the Compound Annual Growth
Rate (CAGR) . The country's consumers were even more likely to purchase and
sell online products with the development of multiple digital platforms such as
Flipkart, Myntra, Amazon, OLX, etc. With the advent of numerous digital
channels such as Flipkart, Myntra, Amazon, OLX, etc., customers in the country
have become more likely to purchase and sell online products. The basis of
these contracts or business agreements is the agreement that is the basic
documents that provide a legal obligation for the parties to enforce it with
the capacity to execute it again with legal force. Simple access to the
internet, technical devices, mobile phones, etc. has resulted in electronic
contracts for the country's citizens either by clicking or email, etc. These
agreements are embraced internationally, bridging, for example, the distance
between the parties; Mr. X, an American company who wants to purchase India's
Khadi goods, may easily enter into an e-contract. This paperless contract has
eased business in terms of time and resources. Therefore, legislation that can
govern and monitor such contracts effectively has prompted the greatest need.
In fact, the laws regulating e-contracts in India are the Indian Contract Act,
1872 and the Information Technology Act, 2000, along with the Proof Act, 1872.
This paperless contract has eased business in terms of time and resources.
Therefore, legislation that can govern and monitor such contracts effectively
has provoked the greatest need. In fact, the laws regulating econtracts in
India are the Indian Contract Act, 1872 and the Information Technology Act,
2000, along with the Proof Act, 1872. As a result, we have a strong obligation not
to carry out bad deeds, but no reciprocal duty to act to avoid them. According
to the Indian Contract Act, the "contract" of 1872 is described as a
"law-enforceable agreement." However, the definition is not fully
applicable when defining the term' e-contract 'since it has a wider superiority
over conventional contracts and can even be understood as' any contractual
agreement between parties having legal object and appreciation of their contact
with various networks such as email, audio file MP3, multimedia message, etc.
Therefore, because the legislator has not established an e-contract in any
legislation, his interpretation is the only prevailing opinion with regard to
its context
2.DEFINITION OF E-CONTRACTS:
The "contract" of 1872 is defined as
a "lawenforceable agreement" in accordance with the Indian Contract
Act. Since the term "e-contract" has a wider meaning, the definition
is not entirely applicable when defining it. It has much more superiority over
traditional contracts and could even be interpreted as any contract between
parties with a legal purpose who are aware of their contacts on various
networks, including email and audio files, the MP3, multimedia message, etc.
Thus, an E-Contract is an agreement that is legally binding and is created, negotiated,
and executed entirely digitally. E-Contracts are entirely digital, as opposed
to conventional contracts, which are paper-based. Despite the parties'
inability to physically meet, a meeting of the minds exists in an E-Contract.
Internet or telephonic media are used by the parties to communicate with one
another. A step up from conventional penand-paper contracts, an E-Contract is
created using digital and electronic channels.
3. ESSENTIALS OF VALID E-CONTRACT:
As much as we are used to fulfilling
our contractual obligations in the conventional manner, in the modern era, we
are also becoming more open to the concept of Econtracts, largely because such
transactions are hassle-free and primarily because it is recognized by the
Indian Judicature. The relationship between Indian Contract Act of 1872
(section 10) and the Information Technology Act of 2000 (section 10-A) must be
emphasized in order to better understand how an E-Contract is recognized
legally under Indian law. The essential requirements for a Contract's legal
validity are laid out in Section 10 of the Indian Contract Act of 1872. A
Contract must meet the requirements listed in Section 10 of the Contracts Act,
i.e.
A. Offer
B. Agreement to Accept
C. Competency of Parties
D. A Legal Consideration
E-Contracts should have the same elements as
conventional contracts. It should be noted that the Indian Contract Act
expressly excludes references to electronic contracts. We can ensure the
legality of contracts created using electronic means thanks to Section 10-A of
the Information Technology Act, 2000. "Information Technology Act of 2000
(Section 10-A): Validity of agreements made electronically. In the event that a
contract is formed and proposals, acceptances, and revocations of proposals and
acceptances, as applicable, are communicated electronically or through the use
of an electronic record, the contract shall not be deemed unenforceable solely
on the basis that such an electronic form or means was used for that purpose.
”. The relationship between Income Tax Act (Section 10-A) and Indian Contract
Act (Section 10) is that when an E-Contract complies with Section 10 of the
Indian Contract Act's requirements, under Section 10-A of the Income Tax Act,
its legal validity cannot be questioned
4. CONTRACTS IN INDIA
4. 1 CONTRACT:
The word Contract was derived from a Latin
word Contractum. The word contractum means drawn together. According to Salmon
“A contract is an agreement creating and defining obligations between the
parties.”
4.2 E CONTRACT:
An e-contract is a contract modeled, executed
and enacted by a software system. It is a contract “drafted” and “signed” in an
electronic form
. 5. FORMS OF ELECTRONIC CONTRACTS
The following forms of Electronic
Contracts are in vogue in the Indian business scenario.
5.1 E-Mail Agreements:
The e-mails which convey the clear intention
of parties can be treated as a binding contract. This can be inferred from the
decision in the case of Trimex International FZE vs Vedanta Aluminum Limited,
in which while recognizing the change in execution of commercial transactions
the Supreme Court disregarded the argument that exchanges over e-mail did not
qualify as contracts and held that “ once the contract is concluded orally or
in writing, the mere fact that a formal contract has to be prepared and
initialed by the parties would not affect either the acceptance of the contract
so entered into or implementation thereof, even if the formal contract has
never been initialed”.
5.2 Online Agreements:
Online agreements are of three kinds
5.2.1 Browse Wrap Agreements
An agreement is considered as a
browse wrap agreement which is intended to be binding upon the contracting
party by the use of the website. These include the use of the website. These
include the User Policies and terms of service of web sites and are in the form
of a “terms of use” or “terms of service”, which can be used as the links at
the corner or bottom of website.
5.2.2 Shrink Wrap Agreements
These contracts are the license
agreement by which the terms and conditions of the contract are enforced upon
the contracting parties and are usually present on the plastic or in manuals
accompanying with the software products which the consumer buys.
5.2.3 Click Wrap Agreements
These agreements require the user
to give his consent to the terms and conditions which are known as end user
agreement and govern the licensed usage of software by clicking “Ok” or “I
agree” button
6. LEGAL VALIDITY OF E -CONTRACTS IN
INDIA
The validity of e contract is to be arrived at
considering the provisions of The Indian contract Act, 1872, The Information
Technology, 2000 and Indian Evidence Act, 187
6.1 INDIAN CONTRACT ACT,1872
The law relating to contracts is
governed by the Indian Contract Act, 1872. The Indian Contract Act 1872 has
defined in Section 2(h) that “An Agreement enforceable by Law is a Contract”.
The Act provides a basic contractual rule that a contract is valid if it is
made by competent parties out of their free consent for a lawful object and
consideration. There is no specific way of communicating offer and acceptance;
it can be done verbally, in writing or even by conduct. It is the acceptance of
offer and intimation of that acceptance which results in a contract. This
intimation must be by some external manifestation which the law regards as
sufficient. Thus Electronic contracts are as valid as written contracts; the
only condition is they should possess all the essentials of a valid contract.
6.2 THE INFORMATION TECHNOLOGY ACT,
2000
6.2.1 Validity of E-contracts:
The provisions of the Information Technology
Act, 2000 give legal recognition to an Electronic Contract. This can be
inferred from Section 10-A of the Act which states “Where in a contract
formation, the communication of proposals, the acceptance of proposals, the
revocation of proposals and acceptances, as the case may be, are expressed in
electronic form or by means of an electronic record, such contract shall not be
deemed to be unenforceable solely on the ground that such electronic form or
means was used for that purpose."
6.2.2 Digital signature:
A signature is a schematic script related with
a person. A signature on a document is a sign that the person accepts the
purposes recorded in the document. Section 3 of the Act delivers for the
verification of Electronic Records by affixing Digital Signature. Verification
of electronic record by electronic signature or electronic authentication
technique shall be considered reliable. Thus an electronic contract can be
created by digital signatures and is recognized by the laws in India.
6.3 INDIAN EVIDENCE ACT, 1872
The courts in India recognize electronic
documents under Section 65- A of Indian Evidence Act, 1872. The procedure for
furnishing electronic documents as evidence is provided under Section 65-B of
the Indian Evidence Act, 1872. The latter section provides that, any
information contained in an electronic record produced by a computer in
printed, stored or copied form shall be deemed to be a document and it can be
admissible as evidence in any proceeding without further proof of the original.
But, admissibility of the same is subject to various conditions prescribed
under section 65-B of the said act. It is required that the document or e-mail
sought to be produced from a computer, was in regular use by a person having
lawful control over the system at the time of producing it; the document or the
e-mail was stored or received during the ordinary course of activities; the
information was fed into the system on a regular basis; the output computer was
in a proper operating condition and has not affected the accuracy of the data
entered. An e- contract is basically a communication between two parties in
respect of the transfer of goods or services. Thus, any e- mail communication
and other communication made electronically is recognized as valid evidence in
a Court of law.
7. ENFORCEABILITY OF E-CONTRACT
India is transforming into a visual
jungle with internet becoming part and parcel of our life. The growing trend of
social media, online shopping, e-retailing has created a predicament for the
law makers in protecting the users from fraud, misrepresentation, identity
theft and other such challenges. The Information Technology Act of 2000 was
implemented for the governance and providing legal sanctity to transactions
undertaken through electronic means and also provide for authentication of
digital signature, jurisdiction, penalties in case of breach, etc. Section 10-A
of the said Act20has recognized the validity of these e-contracts. It specifies
that if an e- contract fulfils all the essentials as specified in Indian
Contract Act of 1872 of a traditional contract i.e. valid offer and acceptance,
capacities of the party, free consent, etc., it will be considered valid and is
enforceable in the court of the country for any kind of breach when undertaken
through any electronic means. As in case of Trimex International FZE v. Vedanta
AluminiumLtd. India21, the hon‘ble Supreme Court recognized that the contract
whose terms and conditions are discussed through e-mails between parties,
though no formal contract was formed or signed is valid in the eyes of law. The
enforceability of click wrap, browse wrap and shrink wrap contract have been
challenged in various US Courts. Like, in case of Feldmanv Google, Inc22 the
validity of Clickwrap contract was discussed and the hon‘ble court observed
that Feldman had sufficient notice of terms and conditions of the contract as
he went through a proper signing up process including scrolling through whole
terms and conditions page before assenting for it. Hence, the court held that
the contract entered between Feldman and Google was valid. However, in the case
of browse wrap contracts foreign courts are hesitant in enforcing its validity.
In such contracts, Judicial opinion holds that for constituting a valid
contract it is necessary for the party to have constructive or actual notice of
the terms and conditions of it23. Therefore, where the defendant failed to
specify near the ?download button‘ that the user will be bound to the license
agreement if he downloaded the software from the website, no contract was
executed between the parties24. In light of these, the websites are now a days
more inclined towards clickwrap contracts. Similarly, in case of shrink wrap
contracts the court infers the assent of the party from their scrapping of the
wrap which has terms and conditions attached with it. In the case of ProCD, Inc
v. Zeidenburg25,Zeidenburg protected his price discrimination policy of the
product through shrink-wrap licensing agreement however, ProCD after purchasing
the product uploaded the information on less rate over the internet violating
the license agreement. The court, in this case, held that ProCD had the option
to reject the terms and conditions of the contract by returning it, but his
scrapping the wrap providing terms and conditions was inferred by the court as
his consent, thus he is bound by it. Indian judiciary has failed to acknowledge
the question of validity of these contracts as there is no precedent till date
for providing any type of ground rules over the enforceability of these
contracts. Although in the case of L.I.C India v. Consumer Education and
Research Centre26the hon‘ble court has tried defining such contracts and
observed that where the weaker parties do not have a bargaining power, such
type of contracts were referred as ?dotted contracts.‘ ?Thus, it can be said
that the Indian courts have recognized the concepts of these contracts though
no guidelines for its regulation have been laid down by it. The reliance can be
placed on the foreign judgments based on the facts and circumstances of the
case, yet a strong necessity for proper legislative structure for its
implementation has aroused has the Indian economy is moving to paper less
transactions?
8. ISSUES AND CHALLENGES:
8.1. Capacity to Contract:
One needs to ensure that the persons who are
parties to the electronic “contract” have the legal competence and capacity to
enter into an agreement. Often it is a nameless individual entering into a
contract. The service provider has no idea whether the individual who has
clicked on “I Agree” text or icon is legally competent to enter into a
contract. Capacity of parties is one major requisites of a valid Contract as
under the Indian Contract Act, 1872. Sections 10, 11 & 12 of the Act
provide for the competence of parties. Contracts entered into by individuals,
who are not competent to contract are void. There may arise in a situation,
wherein infants who are not old enough to enter into a contract are entering
into an online contract with the service provider by clicking on “I Agree” text
or icon.
8.2 Free consent:
Free consent is an essential prerequisite of a
valid contract. In on line contracts there is no scope for negotiation. This is
a greatdisadvantage for the user. But the option “take it or leave it”
transaction is always to the user. In the case of LIC of India Vs Consumer
Education and Research Centre, the Supreme Court has held that “In dotted line
contracts there would be no occasion for a weaker party to bargain as to assume
to have equal bargaining power”. He has either to accept or leave the service
or goods in terms of the dotted line contract. His option would be either to
accept the unreasonable or unfair terms or forgo the service forever.” Hence it
can be concluded that the user should be prudent while giving his consent to
avoid troubles.
8.3. Decision on the Applicable Law:
The Indian law provides two choices
to apply personal jurisdiction, i.e., to apply the law of the forum, or to
apply the law of the site of the transaction, or occurrence that gave rise to
the litigation in the first place. The courts do have a judicial right to
determine the choice of law by identifying the system of law with which the
transaction has its closest and most real connection. There is no bar that law
of a foreign country cannot be applied or an Indian party could not be subject
to foreign jurisdiction. The emphasis is on to select proper law.
8.4 Decision on the Court Jurisdiction:
E-contracts gives wide scope for cause of
action arising at very many geographical locations. This might lead to filing
of cases at different places. Defending lawsuits at multiple geographical
locations could be both expensive and frustrating. Hence choice of forum clause
should be included in all online contracts. It makes a good legal sense for the
online service providers to limit their exposure to one jurisdiction only. Thus
the online service provider has no other choice but to subject themselves to only
one set of forum and applicable laws only. The user has no other choice, but to
accept the service provider?s Standard Terms and Conditions by clicking an
onscreen text or icon “I Agree”, “I Accept” or “Yes”
9. CONCLUSION:-
The
legislation in India addresses all avenues of e-contract. However the
advancement of technologies will bring in new challenges for the law makers and
the government departments. Law needs to be updated and upgraded from time to
time it to keep up with the evolving technologie. E-contracts offer numerous
advantages, such as convenience, efficiency, and cost-effectiveness. However,
addressing the legal, technical, and practical challenges associated with
e-contracts is essential to ensure their smooth operation and enforceability in
India. Clear communication, robust authentication mechanisms, compliance with
relevant laws, and dispute resolution mechanisms are key factors in overcoming
these challenges and fostering trust in electronic transactions.
10. REFERENCES
[1] The Information Technology Act, 2000
[2] The Information Technology (Use of
Electronic Records and Digital Signatures) Rules, 2004
[3] The Indian Contract Act, 1872
[4] The Indian Evidence Act, 1872
[5] The Sale of Goods Act, 1930
[6] Purohit, TD, „Contracts Via E-mail -A Note
of Caution?, Corporate Law Cases, Vol. 9, Part-11, 2008 (November), pp 488-489.
[7] Malik, Surendra& Malik Sudeep,
“Supreme Court on Contract and Specific Relief - Since 1950 to 2014”, ed.2nd,
(2014), published by Eastern Book Company.
[8] Sharma Vakul, “Information
Technology, Law and Practice”, Universal Law Publishing Co. 2004..
[9] https://indiacode.nic.in/acts
[10]
http://www.legalserviceindia.com/articles/ecta.htm
Article Information
E-CONTRACTS IN INDIA: THE LEGAL FRAMEWORK, ISSUES AND CHALLENGES
Authors: PRAVIN MASHERE
- Journal IJLRA
- ISSN 2582-6433
- Published 2024/04/29
- Issue 7
About Journal
International Journal for Legal Research and Analysis
- Abbreviation IJLRA
- ISSN 2582-6433
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