Legal issues involved in electronic contracts under Indian law

Introduction

Computer innovation on this globe gave rise to E-contracts which previously were in the form of pen and paper by the name of traditional contracts. This innovation has made everyone’s life more comfortable and easier than ever before like one can order food sitting at home or even in the office.

Now every business has robotized itself somewhat to an extent. Ex- goods being delivered at doorsteps, ordering food, booking tickets of trains, movies, buses, etc., sending gifts to loved ones. There is no need to stand in long queues to withdraw money through banks as online transactions is widely accepted and used.

The concept of an e-contract includes at least 2 people utilizing electronic means to come in a contract which is just a click away. There is an improvement of the electronic commerce framework with the change in time. Electronic trading includes the electronic buying and selling of an item and payment through electronic medium. In this electronic age the work finishes in a moment or two.

No postponed messages take place and no extra travelling costs. Electronic medium not just work automatically but autonomously as well. Electronic Contracting has ratified the problem of jurisdictional aspect, competence to contact, governing laws, etc.

Nothing is perfect in this world. E-Contact has some implications which will be discussed later with the legal validity of E-Contracts.

A brief insight into e-contact

Section 2 of Indian Contract Act, 1872 defines a contract as an agreement enforceable by law. E-Contracts or electronic contracts are basically the digitized form of traditional contracts. E-contract is any kind of contract formed by the interaction of two or more people through an electronic medium. Ex- E-mail sent as a job proposal and agreed by the job seeker through E-mail.

Electronic contracts are recognized by many names such as “E-contracts”, “cyber contracts”, “digital contracts” and “online contracts”. E-Contracts are similar to contracts mentioned in the Indian Contract Act, 1872, the only difference being the medium.

There are two parties to an E-Contract, Originator and Addressee as mentioned in section 2(1)(za) and section 2(1)(b) respectively of the Information Technology Act, 2000. The Originator is the one who sends, generates, stores or transmits the data to the addressee without the intermediary being included. The addressee is the one who is intended to receive the record set by the Originator without an intermediary being included.

The E-contract has reduced the paper workload, travelling costs for contacting and whatnot. But everything has some disadvantages and so here also which will be discussed later.

Forms of e-contracts

There are generally 3 forms of E-contracts. These are-

Clickwrap agreements –

Clickwrap agreements are agreements in which the user read the terms and conditions and then agrees to it by clicking “I accept” or “ok” or “Allow” or “I agree”. If the user doesn’t permit then he/she can access to nothing.

Even if the user clicks to agree without reading the terms and conditions, it will be considered as read. Online registration forms are common examples of this type of agreement.

Browse wrap agreements –

Browse wrap agreements are the agreements which are accepted automatically if the user use a website for a long time. If the user doesn’t agree then he will get no access to the use of that website. Generally, the terms and conditions are at the bottom of the website. Amazon’s website is one of the examples of this type of agreement.

Shrink wrap agreements –

Shrink wrap agreements are agreements in which the terms and conditions automatically impose on the buyer as soon as he/she opens the package. The term and conditions are written usually inside the wrapper of the item.

It is generally observed in the buying of any software product like CD-ROM. These agreements indemnify the user for any copyright or intellectual property rights violation of the manufacturer as soon as the buyer opens the wrapper of the software product.

Essential elements of e-contracts

To validate an E-Contract under Indian Contract Act, of 1872 there are some essential elements. These are-

• Lawful offer
• Lawful acceptance
• Lawful object
• Competent parties to contract
• Certainty of terms

Issues relating to e-contracts

If E-contract saves time and labour, save from the workload and many things everyone witnesses in day-to-day life then it has some limitations and drawbacks also. Here we go with them one by one-

Capacity to contract-

It is one of the most essential elements to consider to enforce an agreement to become a contract. It is mentioned in sections 10, 11, and 12 of the Indian Contract Act, 1872 which includes soundness, major and not disqualified by law to be competent to contract. E-contracts also holds with these basic requirements.

The issue in E-contract is that both parties are unaware of each other. The party providing the service or goods has no idea about the other party if he/she is legally competent to contract or not. Ex- if a minor of 16 years orders something through any shopping site.

Choice of law-

It is one of the issues in E-contracts which needs special attention. This issue arises when the contracting parties are from two different nations or states. In this case, the rules and regulations of both nations clash and become difficulty to choose which rules should be followed.

Another problem is seen when the court applies the jurisdiction where the bulk contracting transactions occurred. It is a complex issue in E-contracts for fixing a surety as to the choice of law when the dispute occurs. Ex- one (Originator) contracting party is from India and the other (addressee) from the USA.

Choice of the forum-

This problem is similar to the problem discussed above in choice of law. In any dispute the parties residing in different nations make their local forums as the governing forums.

Parties to the contract may have different preferences, like if one chooses arbitration and the other commercial suit to settle the dispute. This is one of the never-ending dispute when the parties choose to E-contract.

Electronic authentication-

Previously the contracts were based on pen and paper following the rules and regulations of Indian Contract Act, 1872, but nowadays by the innovation of electronics the contracts are done through this medium. Therefore, the need of specific guidelines was a major concern.

The Information Technology Act of 2000 was then set up to ensure the authentication of contracts by issuing the legal framework. If the guidelines are not followed by any of the parties or both then the contract will loss its legal validity. The things validated under this law are electronic signatures, electronic records and electronic documents.

Free consent-

The free consent is the essential element for a binding contract on both parties. Free consent has been given a special recognition in the section 13 of the Indian Contract Act, 1872, but there is no provision for free consent in Information Technology Act, 2000 to form an E-Contract.

In fact, the concept of consent is not even possible in E-contracts. It is only possible in physical traditional contracts. The Supreme Court of India in the case of LIC of India v. Consumer education and research Held that the user should be careful while giving the consent to avoid implications in future as the duty was of the user only to accept or reject.

Theft of identity-

Theft of identity is as the name only suggests, when the identity of the original user is driven by any other person either knowingly or unknowingly. The theft of identity is the wrongdoing for a purpose like money.

It is normally done by hacking the device. Section 66 with Section 43 expresses that if this happens then the doer will be awarded either imprisonment for 3 years or a fine of 5 lakhs or with both.

E-contract and Indian law

There is no such act or law which specifically talks about e-contracts. Many provisions of different acts combines to enforce E-contracts properly.

The Indian Contract Act, 1872

The Indian Contract Act of 1872 lays down all the essentials for a contract to be legal and enforceable. It also lays down the provisions for if the breach of contracts takes place. Either its E-contract or traditional contract, must fulfill the legal framework mentioned in the Act.

The essential requirements of a contract to be lawful are lawful offer, lawful acceptance, lawful object, lawful consideration, capacity of parties, free consent and the agreement must not be declared as void or unlawful as per the law.

The Information Technology Act, 2000

Though the Indian Contract Act talks about the contracts, it did not mentioned the validity of E-contract. The validity or legality of an E-Contract is recognized by the Information Technology Act, 2000. Section 3 of this act talks about the verification of the E-contract by fixing the electronic signatures by both the parties. In this way E-contracts are now recognized as valid and not void.

Section 11 talks about the attribution, Section 12 talks about the acknowledgement and section 13 deals with the time and place of dispatch. Section 10A of the Information Technology (Amendment) Act, 2000 talks about the validation of agreements through electronic medium. IT act also mentions the cybercrime punishments.

Indian Evidence Act, 1872

In this electronic era keeping evidences is quite normal and the evidences on electronic medium are admissible also. Evidences through video conferencing, audio notes, advanced camcorders and computerized cameras can be presented in courts. Many sections are there in the Indian Evidence Act relating to electronic pieces of evidence like 65B, 85A, 85B, 88A, 90A and 85C.

In the case of Societe Des Products Nestle S.A. v. Essar Industries and Ors. paved way by the Delhi High Court of the introduction of section 65A and 65B in the Indian Evidence Act which makes the electronic based Evidence admissible in courts. In the case of State of Delhi v. Mohd. Afzal And Ors. held that “electronic records are admissible as evidences.

Conclusion

E-contract is one of the global concern and need. The development of many sectors have taken place after the introduction of concept of E-contract. Like Google pay, paytm, UPI, etc.. Everything Nowadays is possible through digital medium like selling goods, booking tickets, buying goods, online registration forms and the list goes on.

The increase in the use of digital medium also increases some responsibilities. Constant surveillance should be there and monitored on timely basis to reduce crime and fraud either online or offline like CCTVs.

The trust of the clients should be maintained by the service providers. A minor can also click to agree the agreement and enter into a contract so there should be something to protect these types of acts.

E-contracts lack in negotiations. Negotiations are negligible in these contracts. The security of data is still a major problem in digital contracts. E-contracts does have some loopholes but it is one of the biggest factors for countries progress.

Bibliography:

Statute referred

• The Indian Contract Act, 1872
• The Information Technology Act, 2000
• The Indian Evidence Act, 1872

Cases referred

• LIC of India v. Consumer Education and Research Centre, 1995 3 SCC 42.
• Societe Des Products Nestle S.A v. Essar Industries And Ors., 2006 (33) PTC 469 Del (India).
• State of Delhi v. Mohd. Afzal And Ors..

Books referred

• Avtar Singh, Contact and Specific Relief, Eastern Book Company, 12^th
• V Nageswara Rao, The Indian Evidence Act, Lexis Nexis, 3^rd Edition.

Papers and articles referred

• Legal Issues Arising in E-contracts in India: An Analysis by S.R. Subaashini.
• E-contracts and Issues Involved in its Formation by Aniket Waghdhare.

Website referred

• Manupatrafast.com
• airwebworld.com

This article has been authored by Jasmeen Choudhary, a student at Jamnalal Bajaj School of Legal Studies, Banasthali Vidyapith University, Rajasthan, and Amulya Nigam, Assistant professor in law, Jamnalal Bajaj School of Legal Studies, Banasthali Vidyapith University, Rajasthan, India.