IT ACT PROVISIONS relating to E-CONTRACTS

Updated: Feb 27




The emergence of inept modern technology led to rapid digitalization all over the world. So the consequent vigorous shift to e-commerce seen in our country was prone to happen no sooner than later. Though this phenomenon has led to significant advancements in the fields of business, trade, and the like this growing use of technology will be beneficial only if done with appropriate legal support to back it up. Legislations that facilitated this much needed legal framework include The Indian Contract Act, 1872, The Indian Evidence Act, 1872, and The Information Technology Act, 2000.


E-Contracts.


Derived from the Latin word 'Contractum', Contracts refer to those agreements which create and define legally enforceable obligations between private parties. E-Contracts, on the other hand simply refer to those contracts which aren't paper-based and come to be through the interaction of people through computational methods. This can be with the use of electronic means such as e-mail, the interaction between individuals, and electronic agents, or even the interaction between two electronic agents. Their initial purpose was to facilitate contracts between people living in different parts of the world. Such contracts are both drafted and signed electronically via a software system. They caught on due to the ease with which they allowed operation, their lack of time intensiveness, and convenience.


Types of E-Contracts.


Essentially, E-Contracts can be of two types, namely agreements through email and online agreements.


Agreements via Email.


All communication be it offers, acceptances, documents, or even faxes takes place over email in the case of the former. Such contracts are legally binding provided they convey the intentions of the parties involved and fulfill all the necessary requirements.

In order to understand the same better one can refer to a case.


Case; Goel & Anor v Grant & Anor [2017] EWHC 2688.


In the case of reference, a disagreement relating to price arose between two shareholders of a company and an administrator. The administrator contacted solicitors of the shareholders via email wherein they discussed a probability of them pursuing their rights with respect to a potential legal claim against third parties at a certain price. The shareholders then claimed that this created a legally binding contract between the two and the administrator was now obligated to give the shareholders the rights to pursue the claim at the price mentioned in the e-mails. The administrators, however, did not agree and planned on auctioning the rights. On being approached by the shareholders in this regard, The High Court held that no legally bound contracts had been formed between the two parties due to the absence of an intention to enter into legal relations, an offer, an acceptance, and a consideration. The court ruled that the emails were only 'subject to contract' as the subsequent agreements and negotiations for it to be a contract were missing.


Coming to an Indian Case Law dealing with an issue similar to the previous.


Case; Trimex International FZE vs Vedanta Aluminum Limited India, 22 January 2010.


In this case, the Supreme Court held that when a contract is concluded orally or written, the simple truth that a proper agreement must be arranged and initialed by the gatherings would not influence the acknowledgment of the agreement regardless of whether the conventional agreement has never been initialed. The decision focuses upon the expectation of both parties concerned to negotiate and arrange a finished up agreement, by virtue of email correspondences and the activity of the Petitioner according to the correspondence. Considering this choice, parties going into dealings should be exceptionally cautious in phrasing their correspondence and unmistakably and completely show that a straightforward "yes" or "no" doesn't suggest an acknowledgment of the total proposition, in case the contract is concluded.


Online Agreements.


Online agreements can be categorically divided into three sub-types. These include; Browse Wrap Agreements, Shrink Wrap Agreements, and Click Wrap Agreements.


Browse Wrap Agreements: These are typically agreements via websites that bind the user through the user browsing the website. It isn't necessary for users to actively imply or take any action and affirm their consent to be bound on these websites. The browser assumes acceptance of the agreement by use of the website by the user. The terms of service or user policies here are in the form of links on the website which users have to agree to in order to proceed to the website. According to Courts, unless the user knows of the terms and conditions clearly, the contract formed isn't legally enforceable.


Shrink Wrap Agreements: These refer to those licensing agreements which are packed and enclosed inside a product and through which terms and conditions of a product are enforced upon the parties involved. This type of agreement owes its name to the shrink wrap (also called plastic wrap) within which the product and the terms or legal documents related to it are encompassed and kept for the perusal of the buyer alone. The matter in these legal documents usually is the terms and conditions of the product, price, warranties, guidelines to use, limitations, licenses, and the like.


Click Wrap Agreements: In these agreements, users are required to agree to the terms and conditions prior to accessing and using the service or product. If the user doesn't agree to the end-user agreements by clicking 'I agree' or 'yes', he/she can't proceed to use the goods and services be it installation or even an online purchase. These agreements are widely used in software licensing, websites, online transactions, and other electronic media. When the users explicitly agree to these terms and conditions posed before them, they enter into a legally binding contract that is enforceable.


Legal Validity of E-Contracts.


The legal validity of E-Contracts in India is reliant on the provisions of three Acts that address the same. These are The Indian Contract Act, 1872, The Indian Evidence Act, 1872, and The Information Technology Act, 2000.


The Indian Contract Act, 1872.


This Act governs those laws concerning contracts. Section 2(h) of the Indian Contract Act, 1872 states that a contract is basically an agreement that is legally enforceable. According to this Act, a basic contractual rule which governs the validity of any contract is the competency of the parties involved, their free consent for a lawful object, and due consideration. This law also states that contracts can be offered and accepted verbally, in writing, or even by conduct as per the convenience and choice of the contractual parties as all that is required for a contract to be valid is the acceptance of an offer put forward and the express intimation of that acceptance. In all, the validity of both written contracts and electronic contracts are similar in nature and the only prerequisite for either type is the presence of all essentials of a valid contract.


The Indian Evidence Act, 1872.


Electronic documents and the approach behind putting forth these documents are recognized in Indian Courts under Section 65-A and Section 65-B of The Indian Evidence Act, 1872 respectively. Section 65-B further states that content recorded electronically by a computer be it printed, stored, or copied is considered a document and can be admissible as evidence (subject to prescribed conditions) during proceedings even in the absence of the original as proof. However, the data in question is to be procured by someone with lawful control over the system, be fed in on a day-to-day basis, and be accurate. Any electronic communication between two parties relating to the transfer of goods and services constitutes a contract and is valid, legally binding, and enforceable in any Court of Law.


The Information Technology Act, 2000.


The Information and Technology Act is a predominant law which deals with both cybercrime and electronic negotiations in India. Under the provisions of this Act particularly Section 10-A, an electronic contract is valid and enforceable. Compliance with necessary conditions in accordance with The Indian Contract Act, 1872 is the only essential requirement to validate electronic contracts. Furthermore, Section 3 of this Act is concerned with the use of digital signatures for schematic identification and recognition purposes. This method to verify documents is recognized by Indian Laws as it is both reliable and user unique.


Drawbacks of E-Contracts.


Sections 10, 11, and 12 under the Indian Contract Act, 1872, deal with the competence of

contractual parties. Owing to the mode of functioning of e-contracts, it is hard to ascertain the legal capacity of the parties accepting or rejecting the agreements. Though all contracts involving minors are void, there is no way for the service providers to establish that in a fool-proof manner. Another issue regarding e-contracts is the lack of scope for contractual parties to negotiate. This is disadvantageous to the users as they can't even alter it to their liking and have to either take it as is or leave it.


Case; L.I.C. Of India & Anr vs Consumer Education & Research, 10 May 1995.


In the case in reference, the Supreme Court ruled that the weaker party has no say in the

contract and hence, will not have the occasion to bargain. All the weaker party can do is put their signature on the dotted lines present so as to show their compliance with what's being said in spite of how unfair or unreasonable the terms may seem to them. If they aren't willing to do this, all they can do is forego the service or product altogether. Hence, in order to avoid issues, users should be prudent and alert while consenting to electronic contracts.


To sum it up, all avenues of e-contracts have been addressed by Indian legal legislations and are in place so far. However, the ever-adapting technology is bound to bring about new advancements in electronic contracts too. This calls for dynamic up-gradation of laws and legislation so as to avoid the challenges lawmakers will otherwise face if laws are stagnant or don't apply to the latest techniques or methods of functioning.





References.


[1] The Indian Contract Act, 1872

[2] The Indian Evidence Act, 1872

[3] The Information Technology Act, 2000

[4]content.next.westlaw.com

[5] researchgate.net




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