November 1, 2020

Are e-contracts Legal in India?

With the advent of modern computers many other associated technologies followed suit, like the world wide web that today connects people around the world and the prevailing framework of society changed. Today technology permeates every facet of our lives, decreasing distances and erasing boundaries. Many existing concepts were revolutionized because of technological advancements and its effects are profound, among the many things that have been impacted by technology, pre-existing concepts in law have also drastically changed. It is very important to understand the meaning of a contract first before we delve into its transformation owing to technology. Sir Frederick Pollock defined contracts as , “Every agreement and promise enforceable at law is a contract” and individuals enter into all sort of contracts without actually realizing it, all citizens of a state are in a contract with the State, people are in a social contract with one other, even the act of buying a mere pencil from a shop entails a contract between the purchaser and the seller. Now with reference to the established definition we can now proceed to analyze the various forms of mutations of legal contracts that exist in the modern world, one of them being E-contracts that have evolved as a result of the genesis of the world wide web. The Internet has made it possible for the contracting parties to communicate with each other even though they might be poles apart, this might be a welcome change for some as it eliminates numerous disadvantages and widens the scope for all interested individuals, but people who are averse to change might generally treat this proposition of E-contracts with hostility.

An E-Contract could be defined as a form of contract in which the parties enter into by utilizing electronic means during the course of e-commerce or separately. According to the Information Technology act of 2008 an E-Contract consists mainly of two parties, an Originator ,who, as the title suggests, creates, stores, sends or transmits an electronic message to another individual without an intermediary’s involvement, and the Addressee, who receives the electronic message that the originator disperses.[1] From the given definition it is very apparent that for an e-contract to be valid the parties need not meet physically to reach their “consensus ad idem” and since an e-contract necessarily eliminates any hindrances and erases boundaries, it is a very expedient way to form contracts in this era. E-contracts can be classified into two broad categories, E-mail agreements and Online agreements which can be further segregated into three distinct types mainly being, Browse wrap agreements, Shrink wrap agreements and Click wrap agreements.[2] In the case of Trimex International FZE v Vedanta Aluminium Ltd. the Supreme court gave recognition to e-contracts by pronouncing in its judgement that the absence of a formal contract when the contract has been concluded orally or in writing does not render the contract between the parties and the subsequent communication and acceptance of a contract invalid.[3]

E-contracts have been accepted by Indian lawmakers who have subsequently incorporated them into statutes and given them recognition, legal provisions regarding e-contracts have been included into The Indian Contract Act 1872, The Information Technology Act 2000 and The Indian Evidence Act 1872. The Indian Contract act establishes the basic rule that for an e-contract to be valid it must posses all the requirements of a contract, mainly being competent parties who enter into a contract with free consent for a lawful object to be achieved by lawful means.[4] By virtue of section 10-A e-contracts have been given legal recognition through The Information Technology Act 2000 which states that a contract cannot be declared invalid on the basis that the communication, revocation, acceptance of proposals and acceptances were being expressed by employing electronic devices and means.[5] And to make e-contracts more reliable section 3 of the Information Technology Act provides for digital signatures which are supposed to act as markers for verification the contracts that are formed through electronic means which is legally recognized in India.[6] Provisions of the Indian Evidence Act 1872 give legal recognition to electronic documents for reproduction in courts if it meets certain requisite conditions to make it acceptable. Section 65-B states that information stored on an electronic device or electronic documents are admissible as evidence in the court of law, the section also states the several conditions that it needs to meet to be legally recognized.[7] The Indian Legal system has tried to update its existing laws to regulate the new and upcoming issues that development in innovation and technology brings forth by incorporating and according recognition to the constantly evolving sector of E-Contracts.

While it is true that the Indian Legal system has been making attempts to include and give recognition to e-contracts in its legal framework, it is important to note that it is still in its preliminary stage and in order to keep up with the ever changing scenario the legal framework needs to be constantly updated to suit the present requirements. It is a major concern for individuals that sometimes in the case of e-contracts the parties may not be competent enough to enter into a contract and competence of parties is an essential requirement of a valid contract as prescribed by the Indian Contract act. Free consent is also an essential requirement of a valid contract, but in case of e-contracts it can be said that the parties involved don’t have any option to negotiate the terms of their agreement, Supreme Court stated in the case of LIC of India Vs Consumer Education and Research Centre that in case of e-contracts the consumer has to secede to the terms of the contract even though they might be unfair or have to forego it altogether and its safe to assume that the party does not have any bargaining power in such case and should always has to enter into such contracts prudently and at their own risk.[8] And since e-contracts eliminate geographical boundaries altogether, it is not necessarily always and advantage,because in case of a lawsuit the parties may institute cases at any location from their point of origin and it is a big hassle to respond to such lawsuits that are instituted in multiple locations. Hence it would be advisable for e-contracts to include a forum clause which would bind the service providers to a specific forum and its laws.[9]

The Indian Legal framework acknowledges e-contracts, it fails to recognize its other forms such as click wrap contracts, shrink wrap and browse wrap contracts. To avoid ambiguities and any possible hazards while dealing with e-contracts the lawmakers must give recognition to the forms of e-contracts and establish a framework to regulate their proceedings by law. The global scenario is always in a constant state of transformation and with developing technology more and more new avenues are being opened up daily, which might present new issues and challenges for legal systems and lawmakers. In order to to keep up with the dynamic technology legal systems and laws should always stay vigilant and update their existing laws to address the currents issues prevailing in this sector.

[1] The Information Technology ACT, 2000, The Gazette of India

[2] Tirumala Chakraborty, All you need to know about Online Contracts, IPleaders, (March 14, 2017), https://blog.ipleaders.in/all-you-know-about-online-contracts/

[3] Vol. 9, T.D. Purohit, Contracts Via E-mail -A Note of Caution, p. 488-489 Corporate Law Cases, (2008)

[4] The Indian Contract Act, 1872, Imperial Legislative Council

[5] Supra, note.1

[6] Supra, note.1

[7] The Indian Evidence Act, 1872, Imperial Legislative Council

[8] Malik, Surendra& Malik Sudeep, Supreme Court on Contract and Specific Relief – Since 1950 to 2014, (2nd ed., Eastern Book Company, 2014)

[9] Sharma Vakul, Information Technology, Law and Practice, (Universal Law Publishing Co. , 2004)

Author Details: Aporva Shekhar (KIIT School of Law)

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