Written by- Himanshu Agarwal
Vivekanand Law College, Vastral, Ahmedabad, Gujarat
Today in a fast-paced society, the expectation to get speedy results is increasing day by day. Now, the internet is taking a paramount position in day-to-day life. With the advancement of the internet, the way of communication, shopping, travelling and professional life is changing. Expectations of people are shifting from meeting someone physically to a virtual meeting. Post-COVID virtual concept is on the rise. Hence, it is prudent that there are some ways to reach an agreement with other parties in virtual mode. Here, E-Contract comes into the picture.
Traditionally, we all recognize the Contract which is governed by the Indian Contract Act of 1872. To regulate the internet agreements, e-commerce translations, and E-Contracts are signed. This article will focus upon the E- Contracts such as how they are governed, how many types are there, legal standing, shortcoming and finally way forward.
Keywords: E-Contract, Information Technology Act 2000, Indian contract act 1872.
Introduction to the concept of E-Contracts
E-Contracts share similarities with Traditional contracts; however, they don’t have physical existence like traditional contracts. E-Contracts are virtual documents that can be signed between two parties based on different time-zone or different locations. Parties in the contract can sign the document using a digital signature or E-Sign. E-Contracts use has increased a multi-fold because of the time convenience, the presence of parties is not required, the contract contains the material description etc and assists in avoiding material breach and fraud.
The need for E-Contracts arose when a sudden spurt was witnessed in the E-Commerce industry. Buyer and seller meeting at one place was not possible and quick turnaround is expected in the E-Commerce industry, hence it is prudent to sign these documents after negotiation. Some years back countries were sceptical with respect to E-Contracts, however, realizing the need of the hour they have enacted laws for E-Contract.
In India, E-Contracts are governed by the Indian Contract Act of 1872, the Indian Evidence Act of 1872 and the Information Technology Act of 2000. E-Contract has reduced the difference between buyer and seller:
Essentials of an E-Contract
Similar to traditional contracts, E-Contracts must have certain essential elements for legal binding. Pursuant to the Indian Contract Act there are certain essential conditions for the successful execution of E-Contracts, which are as follows:
Types of E-Contracts
There are various types of E-Contracts based on the type of execution and mode of formation. These types are stated below:
Electronic mail Agreements
A message circulated or communicated through an e-mail holds legal binding. Supreme court upheld the idea of E-Contract and their validity through the offer and acceptance of its terms, communicated via an exchange of emails in Trimex International FZE Ltd. Dubai v. Vedanta Aluminium Ltd . A message without any mistake, when delivered to another party, is considered binding between the parties. The basic principle of the Indian Contract Act is contracts can be oral or in writing. This judgment reflects the positive instance of the court in favour of the E-Contracts.
Online Agreements
There are three kinds of Online Agreements:
The Click Wrap Agreements
This is a contract that is signed between a service provider and an online user, where an online user signifies his consent by clicking, I agree button. Usually, these agreements are present wherein software installation. Some of the silent features and importance of the Click Wraps agreement are:
The biggest question that comes to mind is, are these agreements enforceable? These kinds of agreements are unilateral in nature and hence forced the user to give their accent. Here are some cases pertaining to the enforceability of the Click Wrap agreements:
Specht v. Netscape Communications Corporation : In this case, the court held for Click Wrap agreement enforceability, they should be placed conspicuously on the website, however, Netscape failed to do so.
Hotmail Corporation v. Van Money Pie : In this case, the court held that when an online user clicks the “I Agree” button, then Click Wrap agreements become enforceable.
Shrink Wrap Agreements
These agreements are considered add-on agreements or bundled agreements along with the main product. These agreements are widely used by software distribution companies. For example, when we buy a CD or DVD, some general terms and conditions are mentioned on the back of the packet. These general terms and conditions are recognized as Shrink Wrap Agreements. To comprehend this further Interglobe Aviation case should be observed. Wherein, Supreme Court outlined the fact that disregarding the guidelines on the ticket is not justified. The user is expected to peruse the terms and conditions of the Shrink Wrap agreement.
Browse Wrap or Web Wrap Contract:
These are acknowledgement contracts, which are mentioned on the websites, wherein a user is expected to comply with these terms and conditions. If the user is making a transaction on these websites, it is expected that the user has read the terms and conditions on the website.
Position of E- Contract in Indian Law.
E-Contract offers great flexibility and has revolutionised the e-commerce industry. E-Contract doesn’t have any specific act or statute; however, they are regulated by certain laws. These laws have been mentioned hereunder:
The Indian Contract Act 1872: All the contracts in India are governed and regulated by the Indian Contract Act of 1872. So, each and every E-Contract must comply with the Indian Contract Act like essentials of the contract. The only difference is that the Indian Contract Act talks about physical contact signed between the parties, and in the case of an E-Contract, they use the electronic medium.
The Information Technology Act of 2000: Although the Indian Contract Act talks about and discusses the contracts, the act doesn’t define the legal status of the E-Contracts. Hence, It Act of 2000 comes into the picture and provides the legal status to the E-Contracts. Pursuant to Section 3 of the IT Act 2000, both parties can sign electronically on the E-Contract to give it legally binding.
Section 4 of the IT Act 2000: Pursuant to the section any electronic records which have been archived would be treated in the same way as the old hard copy or printed records. Archived records would have the legally binding.
Section 10A of the IT Act 2000: The section outlines the validity and enforceability of the contacts formed through electronic medium.
Section 1(4) of the IT Act 2000: The section outlines the instruments or documents where the IT Act doesn’t apply: Negotiable Instruments, Wills, Trust deeds, Powers of Attorney (POA), Contracts for Transfer or Sale of Immovable Property
Section 65 to 71 of the IT Act 2000: The section outlines the various punishments applicable in case of cybercrime taking place in India.
Indian Evidence Act of 1872
In case of an adverse situation, the Indian Evidence Act plays a vital role. In the case of a physical contract, evidence like the presence of a witness, a hard copy of the contract and registration in the presence of the registrar comes into the picture. Similarly, it is necessary to accept certain components in the E-Contract.
Section 65B of the Indian Evidence Act of 1872 outlines that any electronic record should be considered valid if they have eSignatures and any other digital confirmation by the parties. The act permits the aggrieved party to present the electronic document with eSignature in court.
Other sections 85A, 85B, 88A, 90A and 85C in the act recognize the concept and expand the definition of the E-Contract.
Payment and Settlement Act of 2007
In a rapidly changing society, the concept of carrying cash is taking a back seat, and the use of electronic mode is on the rise. To safeguard these transactions, this act was enacted. Moreover, to further strengthen the rules for the transaction software and gateways must be registered with the RBI.
Electronic Commerce Act of 1998
After witnessing the sudden spurt in internet use and the growing number of e-commerce transactions, the necessity to amend the Indian Contract Act of 1872. However, the idea to amend the Indian Contract Act of 1872 was dropped and the Electronic Commerce Act of 1998 was enacted. The act consists of several jurisdictions and elements received from nations like the UN States of Texas, Malaysia, Singapore, Florida etc. The concept was modified pursuant to state and national requirements. While enacting the Act all the concepts were considered like a list of online activities, duties and rights of the buyer & seller.
The act has 15 sections. These sections cover all the aspects of the E-Contract such as:
The enactment of the aforesaid act and amendments in certain rules and regulations have fostered the growth of the E-Commerce industry and online transactions. It has helped in reducing the gap and expectation between buyer and seller, which has been outlined earlier in the article.
Even after the recognition of E-Contracts and digital signatures, there are several challenges that are being faced while executing the E-Contract.
LIC India V. Consumer Education and Research Centre: In this case, it was observed by the Supreme Court that in the E-Contract, there exists disproportionate bargaining between the parties. The buyer usually doesn’t have the right to negotiate the terms and conditions set forth in the online purchase transactions. They have to accept these harsh terms and conditions or decline them. Finally, the Supreme Court made the remark that it is necessary that consumers should exercise caution while acknowledging the transactions to avoid future adversities.
Position of E-Contracts in India.
Indian courts have recognized the concept of the E-Contract and upheld their decision in favour.
In the case of Tamil Nadu Organic Private Limited v State Bank of India: In this case Madras Court cited that if a contract is valid & enforceable, even if contractual liabilities arise on the account of electronic means.
In another case of Trimex International FZE Ltd. Dubai v Vedanta Aluminium Ltd: The Supreme Court upheld the concept of E-Contract and legal status if an offer and acceptance have been communicated and acknowledged via a series of emails exchanged between the parties.
Conclusion
In a rapidly changing society E-Contracts are becoming an indispensable part of it due to their speed and convenience. Realizing the gravity of the situation and to foster the concept certain rules and regulations have been amended in the existing act and new acts such as Electronic Commerce Act 1998 & IT Act 2000 have been enacted. E-Contract shares the basic outline of the physical contracts as proposed in the Indian Contract Act of 1872, however, they differ in certain situations, which have been discussed in the article.
Due to the sudden spurt in online transactions, fraudulent activities have also increased in many folds. There are many guidelines to prevent online fraud issued by financial bodies, government bodies, NGO’s and other reliable sources, but still, they are not able to curtail it. In the case of LIC India V. CERC, Court cited that users must pay attention to the details before agreeing to the online agreement. Separate punishment pertaining to identity theft has been incorporated to put a check on the rising fraud activities.
To regulate and foster the E-Contract, it is necessary to further strengthen the rules and regulations during adverse situations. In many instances, it has been observed that the user is not aware of the fraud or comes to know after a good amount of time.
Hence, it is prudent that society should be made more aware of cyber fraud and cyber-crimedepartment response time should be reduced.
In the final conclusion, E-Contracts have their own advantages and disadvantages. Considering the overall advantages of the E-Contract, it is difficult to separate them from society or curtail their increasing use on day-to-day basis.
