Legality of Electronic Contracts

    The world has become a lot more competitive than the previous decade and now the companies are under immense pressure to perform better than their competitors, constantly more so than ever. Efficiency and Quality are the most important aspects of delivery and service today. Also, through the emergence of the digital era and introduction of modern technologies in the market, the commercial sector has witnessed groundbreaking changes. These changes have fastened the process of dispatch and production and have led to the introduction of technological innovation in the corporate world. One such innovation that concerns itself with the commercial life while also simultaneously navigating the legality of deal making, albeit digitally, is E-Contracts or Electronic Contracts.

    This is a breakthrough innovation in the contracting world that is also environmentally friendly as it makes paper-based contracts digital and also makes the business relations more efficient and reliable.

    E commerce & E Contract

    E-commerce is the buying and selling of goods and services over the Internet. These commercial transactions are either business-to-business, business-to-consumer, consumer-to-consumer or consumer-to-business. Such commercial advancement also paved the way for online contracts, which are widely prevalent now. [1]

    Electronic Contract formation involves the use of communication technology which has various intermediaries such as Internet Service Providers. Initially, many legislatures were hesitant about inclusion of modern technology in formation of contracts but many countries have recognised. E contract has originator and addressee [2] as its two parties. It is a contract modelled and executed on digital space.

    Formation of E Contracts

    E contracts with essential elements are deemed valid and are enforceable. The party’s actions like exchanging emails for proposal and acceptance and subsequently discussing conditions are indicated as a valid deal the digital platform.[3]

    E contract is formed through various methods. The following methods are the most common form of contract formation:

    • Website forms: E commerce websites sell products or offer services for the consumers by way of forms or seeking data in form of order for the seller’s disposal. Later the vendor or the seller approves the order and sends the dispatch or delivery details for the goods or services to be shipped off. The website also has a standard form of contract for the customer to acknowledge by clicking on the ‘I Agree’ button.
    • Electronic Mail: Deal making over the internet usually involves exchanging a series of emails and discussing the terms of the contract which includes dispute resolution, mode of delivery and payment. Employees with company authorization generally exchange emails and discuss the terms and eventually sign the contract over the Internet.
    • EULA: The End User License Agreement is a form of legal contract that is standard in nature and does not allow any change by the user. It is a form of forced agreement hence the presence of consent is much debated since the user has no other option other than to click on ‘I Allow’ or ‘I agree with the Terms’.[4]

    Hence, it is evident that an E contract is different from a conventional contract since the parties mostly rely on written communication for negotiations as opposed to face-to-face negotiations in terms of traditional paper-based contracts.

    Types of Contracts

    Shrink-wrap Agreements are applicable to products that have the terms and conditions on the packaging and the vendor breaks the seal to access the product. This is usually seen in electronic products like CDs and Softwares.

    This kind of agreement offers immunity to the manufacturer with respect to copyright and intellectual property until the consumer breaks the package for use. Yet, in India there is no validity or legitimacy for such agreements especially because of a lack of judicial precedents and legal recognition.

    Click-wrap Agreements are contracts where the customer agrees to the terms by clicking on a button while visiting a particular website. The user has no resort for negotiation and can only ‘I Agree’ or ‘I Disagree’ to the terms. Such contracts are also standard forms of contracts which are available only in digital form.

    This is the most common form of agreement over the Internet as almost all shopping websites and elite magazines seek customers approval by mentioning the terms of usage.

    Browse-wrap Agreements are binding on two or more people only based on the usage of the website. The user has to acknowledge and agree to the terms of the usage of the website only then will they be allowed continuous usage of the website. [5]

    This is the most common form of agreement however its legality and enforceability are debated since there are no precedents and such an agreement also does not fulfil the essential requirement of contract.

    https://legalreadings.com/r-srinivas-kumar-v-r-shametha-irretrievable-breakdown-of-marriage/

    Validity of Electronic Contracts under various Indian Laws

    With the growing trend of concluding commercial transactions online, formation of contracts and their subsequent execution have also become online.

    The Indian Contract Act, 1872

    Like paper-based contracts, E contracts are also governed by the Indian Contract Act 1872. Thus, an E contract should also have essentials of a valid contract, such as (a) “Offer” and “Acceptance”; (b) Lawful consideration; (c) Lawful object; (d) Free consent; (e) Parties to be competent to contract; (f) Intention of parties to create legal relationship; (g) Certainty and possibility of performance; (h) Not be expressly declared to be void; and (j) Compliance with formalities under different laws governing the agreement.

    Whereas all other provisions and statutes applicable to E contracts are read in conjunction and not in substitution of the Indian Contract Act. Hence, it is essential that the parties to the contract maintain a record of the series of the electronic communication that has captured the essential elements like offer, acceptance, consideration and keep these records safely for proving the validity and existence of contractual arrangement in future.

    The Information Technology Act, 2000

    Electronic contracts have a statutory recognition in India under the Information Technology Act, 2000 (“IT Act”) also. As per the application of this act it is ensured that the contract shall not be deemed invalid only because important communication like proposal, acceptance, revocation is communicated through electronic form and digital means. With the application of the IT Act, digital authorization in form of “digital signatures” or “electronic signatures“[6] is recognised for authentication of these electronic records.

    Section 10A provides legal basis for implementation of E Contracts. This Section was added via an amendment in 2008 and helps in acknowledging all electronic communication and records for contract development. Section 11 deals with the originator and his rights especially when the communication is sent through some other person working for him.

    These electronic records are recognised as evidence in cases of breach and dispute between the parties through the application of the Indian Evidence Act, 1872.

    The Indian Supreme Court recognised the validity of E contracts in the Timex International Ltd Dubai v. Vedanta Aluminium Ltd.[7] and iterated that the conclusion of contracts digitally is valid since all essentials of contracts as specified under the ICA have been met and the contracts were unconditionally accepted.

    The Indian Parliament also authorised the IT Act, 2000 for dealing with exceptional issues that arise in the verification of electronic contracts. [8]

    Territorial jurisdiction to try disputes arising out of E contracts

    As per Indian procedural law- the Code of Civil Procedure, 1908 (“CPC”) aids in determining jurisdiction for civil suits and prescribes that this jurisdiction is based on following principles:

    (i) the place of residence of the defendant; and

    (ii) the place where the cause of action arises.

    Thus, the parties are free to determine the choice of court for adjudication and parties should only approach courts with this territorial jurisdiction and should not confer jurisdiction on courts.

    Usually, contracts have specific clauses ascertaining the place of execution and jurisdiction, however, this is relatively difficult in cases of electronic contracts. E contracts are not physically signed and are executed in a virtual space thus imposition of conventional principles of jurisdiction is not possible in this scenario. Hence, it is important that such jurisdictional issues are specifically addressed by specific law.

    The IT Act, 2000 addresses these jurisdictional issues of electronic contracts. Section 13 of the IT Act specifies provisions relating to time and place of dispatch and the receipt of electronic record of this communication.[9] Allahabad HC in PR Transport Agency vs. Union of India[10] said that since the principal place of business was in UP therefore the court under Section 13(3) of the IT Act has a territorial jurisdiction even though the communication between petitioner and respondent was concluded at places beyond the territory of Allahabad HC.[11]

    Also, in cases of website form contracts, Delhi HC specified that if the website is accessed from Delhi then the court will have territorial jurisdiction. [12]

    Hence, the place of contract in E contract, specifically for jurisdiction purposes, is the place where the cause of action arises or the place of business of either of the parties. Also, it is recommended that parties through mutual agreement specifically decide the place of jurisdiction and include it in the contract itself so as to avoid future conflicts of choice of law especially in complicated cases where there is an absence of national boundaries for execution.

    Conclusion

    E Contracts are appropriate to encourage building businesses over long distances and reduce costs, spares time and improves work quality by reducing unnecessary desk work. Also, businesses that are completely working over the Internet are greatly benefited from such electronic management of ground legality. Also, COVID-19 served as a mechanism for pushing the work into digital space and promoted increased use of modern technology for ascertaining the terms and also executing the contract.

    REFERENCES

    [1]Ruth Opwood, “Electronic Contracts: Where Weíve Come From, Where We Are, and Where We Should Be Going”,Vol. 1 No. 3 International In-house Counsel Journal 455-466 Spring 2008.

    [2] The Information Technology Act, 2000 s.2(1)(a), 2(1) (za).

    [3] The effectiveness of e-contracts in the contemporary period, 5th Voice News, available at: https://5thvoice.news/legalnews/Njk3NA==/The-effectiveness-of-e-contracts-in-the-contemporary-period (last visited on 24 December 2020).

    [4] E-contract law and legal definition, Us legal website, available at: https://definitions.uslegal.com/e/e-contract/ (last visited on 26 December 2020).

    [5] E-contract, Definition, Jurisdiction and types, available at :https://www.defactolaw.in/post/e-contract-in-india (last visited on 26 December 2020).

    [6] Cavell Leitch, Electronic Contract-when has an agreement been reached, Cavell leitch law firm, available at:https://cavell.co.nz/articles/2014/electronic-contracts-when-has-an-agreement-been-re  (last visited on 26 December 2020).

    [7] (2010) 3 SCC 1.

    [8] Academic publications, available at :https://acadpubl.eu/hub/2018-120-5/4/377.pdf, (last visited on 28 December 2020).

    [9] E- Contracts and the Law, Indian Law Watch, available at:https://indianlawwatch.com/practice/e-contracts-and-the-law/  (last visited on 28 December 2020).

    [10] AIR 2006 All 23.

    [11] The Information Technology Act, 2000 s.13, 2(p).

    [12]Casio India Co. Limited v. Ashita Tele Systems Pvt. Limited, 106 (2003) DLT 554.


    BY MAHIMA AGRAWAL | SYMBIOSIS LAW SCHOOL PUNE

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