E-CONTRACTS: A CONSTRUCTIVE STUDY

Authors:

Maitreyee Bhardwaj (Symbiosis Law School, Pune)

Rishabh Sharma (Jims School of Law, GGSIPU, New Delhi)

Editor:

Yash Raj Gupta (Department of Law, CU)

INTRODUCTION

Gone are the days where people entered into contractual relationships by sending and receiving postal mails. In this era of technology, everything is electronic; from communication to contracts, everything can be done online. Contracts are an essential part of our daily lives and we become a part of various contracts knowingly or unknowingly. From buying grocery from a retail store to installing an application from App Store, everything is governed through a contract. The only difference between the former and the latter is that one is done offline and the other is done online.

E- contract is any kind of contract formed in the course of e-commerce by the interaction of two or more individuals using electronic means, such as e-mail, the interaction of an individual with an electronic agent, a computer program, or the interaction of at least two electronic agents that are programmed to recognize the existence of a contract. E- contracts are also cyber contracts, digital contracts or simply, online contracts. Conceptually, they are very similar to paper-based contracts or “traditional” contracts with the only difference being that e-contracts are digital in nature and require electronic media, internet or some form of electronic means.

ESSENTIALS OF AN E-CONTRACT

There are few essential elements that are required for the creation and execution of an e-contract. These are:

1. Offer requirements to be made

When one person signifies his willingness to do or not do something in order to obtain the consent of another, it is an offer. Offer may not be made directly to the concerned person, whether it is an online or offline contract. For example, when a user searches for an item on e-commerce websites, the website shows a number of products, sort of a catalogue which might serve as invitation to offer in e-contracts. The offer, in this case, is initiated when the customer adds desired products in his carts.

2. Offer needs to be acknowledged

Acceptance is when the recipient of the offer accepts the offer and informs the person who sent the offer. Process for forming electronic contract can be done via e-mail, website forms or online agreements. Offers and aceeptances between the parties can be exchanged by e-mail. It can be collected with faxes, paper documents, telephonic discussions etc. When it comes to websites, the order is complete when the customers finally receives the product they selected. The End User License Agreements also form valid contracts in which end users click “I Accept” or “I Accept the Terms.”

3. Legal Consideration and Object needs to be Lawful

For any contract to be lawfully effective it must have legal consideration. It means when both the parties give and receive something in return. To purchase a polaroid camera, one cannot hack someone else’s computer to get their personal information as a service; such contracts will be void.

4. Intention to Create Lawful Relations

If there is no intention on the part of the parties to create lawful relationships, then no contract is possible between them. Usually, agreements of a domestic or social nature are not contracts and therefore are not enforceable, e.g., a website providing general health related data and instructions.

5. Competency

Both parties in a contract should be competent to contract, i.e., minors, people of unsound mind and ones disqualified from contracting by any law to which they are a subject to cannot enter into a contract as that would be void.

6. Free Consent

The consent of both parties must be free from any deceit, mistake, fraud etc. There must not be any confusion and disturbance of the will of any party to the contract to enter a contract. Usually, in online contracts, when there is no actual real-time communication between the parties involving the contract, then click-through the process ensures genuine and free consent. For example, consent between a website and the customer who buys through the website.

TYPES OF E-CONTRACTS

Online contracts or e-contracts can be of three types-

1. Shrink-wrap contracts

These kinds of contracts can be mostly found in licensing agreement for software purchases. 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.

2. Browse-wrap agreements

This 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 user policies and terms of service of websites such as Flipkart or E-bay and are in the form of a “terms of use”, a “user agreement” or “terms of service”, which can be used as the links at the corner or bottom of website.

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 governs the licensed usage of the software by clicking “I accept” or “I agree” button. There are certain kinds of check which ensures that the terms of the agreement are binding upon the contracting parties.

In the case of Rudder vs. Microsoft Corporation, a classs action law suit alleging breach by Microsoft of certain payment related terms of Microsoft’s MSN Member Agreement which was an line click-wrap agreement. That required each prospective member to scroll down through several pages and then indicate their agreement by clicking on “I Agree” button before being provided to access to services. The plaintiff asserted that since all of the Member Agreement was not visible at one time, thus clauses not applicable. The court determined the agreement to be enforceable stating that scrolling through was akin to having to turn through several pages of a multi-page paper contract and to not uphold the agreement would leads to chaos in the market place render ineffectual electronic commerce.

ADVANTAGES AND DISADVANTAGES OF E-CONTRACT

Advantages

An online legal binding agreement is easy to use as the templates are already available. Anyone can create an e-contract with minimal training. Parties just need to choose a template, fill in the required details, and attach their digital signatures. Electronic contracts lower the cost of material, labor, etc that are involved in using the traditional way of contracting. The digital signatures attached to the document makes it secure so that it cannot be copied. Security is the topmost priority of the Feelium E-contract. They keep the information private and secure from prying eyes and unauthorized access. Additionally, they have an authentication process at every step to ensure data protection. The information will always be easily accessible, but also free from prying eyes and unauthorized access. At Feelium E-Contract, one cannot only create the contracts but can avail some exclusive facilities as well. So, without further ado, let us know the advantages of Feelium E-Contracts.

In general, the e-contract system helps to move away from a paper-based system to an electronic system for the formation of contracts. It is more transparent and quick. The e-contract procedure is simple and it reduces the hardship of the parties. There is minimum risk in these contracts. It is cost-saving also. Electronic bookkeeping, authorization, alerts, and tracking is also possible with an e-contract system. In this type of contract, producers are improving the quality of their products to survive in the competitive market. Therefore e-contract enactment systems can be used for management of even an e-government contract that is otherwise very complex. Therefore, e-contract enactment systems can be used for the management of even an e-government contract that is otherwise very complex.

Disadvantages

Some of the electronics firms, which one sign for, have limited storage, which makes it difficult to store all the documents on their servers. It leads to the dependency on other sources and becomes a concern for many businesses that are bothered about the confidentiality of the customer’s information. In such cases, one needs to ensure that the vendor can allow access to the digitally signed documents server according to Defence standards. Not all vendors offer enough protection for business deals. Some of the traditional electronic signatures offer no security while some offer basic tamper protection. However, only the digital signature provides the highest security. So you should be extra careful about unsafe electronic software. Electronic signature relies on proprietary software, which can be a concern for businesses that do not want to depend on other vendors for contracting. To overcome this, one must choose a vendor that complies with digital signature standards set by the National Institute of Standards and Technology.

THE LEGAL FRAMEWORK OF E-CONTRACTS IN INDIA

Indian Contract Act, 1872

The Indian Contract Act, 1872 governs how contracts are made and performed in India, so every contract made should necessarily comply with the provisions of the Act to make it legally enforceable. The provisions of the Indian Contract Act are wide enough to cover such transactions. In the context of contract formation unless otherwise agreed with by the parties an offer and acceptance of an offer or either of them, maybe expressed using data messages or electronic records. Where an electronic record is used in the formation of a contract that contract shall not be denied validity or enforceability on the sole ground that data messages were used for that purpose. As between the originator and the addressee of the electronic record, a declaration of will or other statements should be valid, effective or enforceable even though it is in the form of a database.

Information Technology Act, 2000

The electronic contracts would be considered valid under the Information Technology Act, 2000. As per Section 4 of the Information Technology Act, 2000 legal recognition of electronic records, where any Information is in writing, typewritten, or printed form is made available to a user in the electronic form for subsequent reference shall be deemed to have satisfied the requirement of law. In a layman’s language, this means that any document which is in the written or printed version would be treated the same and will have equal validity in the electronic form also. As per the newly introduced Section 10A of the Information Technology Amendment Act, 2008” clearly states that the “Validity of contracts through electronic means, that “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 using 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.” In the case of Mehta vs. J Pereira Fernandis S.A, the court held that the offer sent through an unsigned e-mail communication is not sufficient and the e-mail address of the vdefendant cannot be deemed as his signature. The Act also lays down the instruments to which the Information Technology Act, 2000 does not apply, it includes negotiable instruments, power of attorney, a trust deed, a will, and contracts for sale or transfer of Immovable Property.

Indian Evidence Act, 1872

It is pertinent to contextualize at this juncture that evidence recorded or stored by availing the electronic gadgets is given the evidentiary status. For instance: the voice recorded with the help of a tape recorder. Nowadays, the digital voice recorder, digital cameras, digital video cameras, video conferencing are adding a new dimension to the evidentiary regime. The emergence of information and communication witnessed a sea change by elevating the status of the evidence recorded, generated, or stored electronically from the secondary to primary evidential status. The evidentiary value of e-contracts can be well understood in light of the various sections of the Indian Evidence Act. Sections 85A, 85B, 88A, 90A, and 85C deal with the presumptions as to electronic records, whereas, Section 65B relates to the admissibility of the electronic record.

CONCLUSION

Fundamental principles of the Indian Contract Act will prevail in contracts made on the internet. All the principles will not apply in the same manner that they apply to traditional paper-based and oral contracts. Placing an advertisement on the internet is advertising or offer out to the world at large. A consumer from any part of the world may want to enter into a contract to purchase a product as advertised with the help of internet. On a single screen, he can see advertisements, catalogs, shop displays/windows. E-contracts are beneficial to every consumer. It is time-saving. In today’s lifestyle of people, e-contracts are inevitable. Not only individual customers are purchasing goods etc. through electronic/online mode, but even the libraries of schools and colleges are also purchasing books online. These e-contracts have a dark side also. If a person is not techno-savvy or with sufficient technical knowledge, chances of his being deceived are there. Under the InformationTechnology Act 2000, the amendment of 2008 to Sec.10 in the form of Sec.10A has true relevance and genuine concern with the present situation wherein all of us enter into e-contracts in our daily transactions.


SOURCES

1. S.Gholap “Electronic contract in India: An overview” Impact journal, Vol. 6, Issue 8, p. 251-260, 2018

2. Indrani Aditya Rai, Essentials of E-Contracts, MEDIUM (October 11, 2019) I

3. Rudder vs. Microsoft Corporation (1999) OJ No 3778

4. Daisy Roy, All that you must know about E-Contracts, IPLEADERS, (January 5, 2019), https://blog.ipleaders.in/all-that-you-should-know-about-e-contracts/

5. Indian Law Offices, E-Contracts and its Validity in India, IL

6. Dr.S.Sethuram, E-Contracts in India: The Legal Framework, Issues, and Challenges International Journal of Emerging Innovations in Science and Technology, Vol.4, issue 2, p. 12-15, 2018

7. Mehta vs. J Pereira Fernandis S.A (2006) EWHC 813 (ch)

8. K. Prethev and A. Rajan, “A Critical Analysis of E-Contracts in India and Enforceability with Respect to Sec-65 of Indian Evidence Act” International Journal of Pure and Applied Mathematics Vol. 119, Issue 17, p. 1757-1765, 2018

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