Electronic commerce is one of the byproducts of the 21st century’s economic substance, but what about contracts and all of that paperwork that used to happen? We could see new things that were unimaginable once, whether it was a paperless budget or paperless courts. But what about a paperless contract? Isn’t it a reality yet? The rapid emergence of the SARS CoV2 virus, also known as the COVID-19 pandemic, has undeniably influenced the social, economic, political, and cultural lives of individuals all around the world, as well as pushed all governments farther toward digitalization.

Thus, the internet, with its new way of living, has brought about changes in our own manner while profoundly influencing companies and their diverse methods. We may now engage into contracts by electronic mail, telephone chats, faxes, and other means owing to increasing technology and the electronic era. During this epidemic, when the government announced a total lockdown and it became difficult for individuals to have physical touch, electronic contracts performed a significant and important function.

Contracts have become an indispensable component of our daily lives. We are regulated by contracts in our everyday lives, whether we are purchasing a product at the market or renting a cab, some of which we are aware of and some of which we inadvertently become a part of. In today’s world, an e-contract can be anything from purchasing a product online to signing an international treaty via the internet. In an, the offer, invitation to offer, counter-offer, acceptance, and so on are all done electronically, and such communication results in an agreement. Before learning anything about e- contracts, one needs first to understand what a contract is and what its basics are.

The objective of this blog is to highlight the relevance of E- contracts in the modern world and clarify upon its validity. This blog contends to, inter alia, present an overview on e-contracts, its types, the laws governing to it in India, legal issues pertaining to it and the consumer’s protection in e-contract.

Meaning of E- Contract

The first thing to understand about e-contracts is that understanding is far more important than the “e-” part. Electronic contracts are a tool for generating and negotiating successful contracts for consumer and business e-commerce and related services. A contract that is entered into through e-commerce, often without the parties meeting in person, is referred to as an E-Contract. It is designed to assist persons in developing and implementing commercial contract policies in e-businesses.

It might also apply to any commercial transaction conducted and finished online. A consumer withdrawing money from an ATM machine is an example of an electronic contract. An e-contract is formed when a person orders products from an online shopping website. Globalization and the proliferation of technology have increased e-commerce companies’ global footprint. Online auctions, in which buyers and sellers purchase and sell by bidding on the Internet, are becoming increasingly popular.

Its subject matter, inter alia, includes:

A. Tangible products, in which things are bought on an online platform, payment is done over the internet, and delivery is made.  Amazon or Flipkart are examples of platforms providing such services.

B. Digital items, such as software and other, of notable assets.

C. Services such as electronic banking, financial counselling, and so on are also covered.

Electronic contracts include several typical exclusions. Wills, adoption documents, court orders, notices of cancellation of utility services, notices of default, a notice of termination of health insurance benefits, notices issuing a warning of a product’s health hazards, documents permitting the transport of dangerous materials, and other documents must be in writing.

Nature Of E-Contracts

I. The parties do not physically encounter each other, and there are no physical limits established.

II. There is no requirement for a handwritten signature. It ought to be digitized.

III. The risk element in such contracts is quite large due to the absence of complete security, as such.

IV. Jurisdictional concerns are a significant detriment to e-contracts in the case of breach.

V. There is no one authority that is solely responsible for investigating the entire process in shrink-wrap contracts.

VI. When a matter is brought to court, digital signatures and electronic records are utilized as evidence.

Parties to an E-Contract

According to the Information Technology Act of 2008, an Originator is a person who sends, creates, stores, or transmits any electronic communication to be sent, created, stored, or transmitted to another person, and does not include any intermediary.

And the person who, the Originator intends to obtain the electronic record without the involvement of an intermediary, is the Addressee.

Kinds of E-Contract

E-Contracts Can Mainly Be of Three Types:

  • Click-Wrap Agreements

It is created when an online buyer or user clicks on the “I AGREE” button on a webpage to buy or download a certain application. It is derived from the fact that most such agreements include selecting an on-screen icon to express approval. A user may also signify rejection by clicking ‘Cancel’ or closing the window.

  • Shrink-Wrap Agreements

These types of contracts are mostly used for software licensing. In this instance, the terms and conditions utilized to access such software items must be enforced by the person purchasing it, beginning with the packing up of the software product.

  • Browse-Wrap/Web-wrap Contracts

This agreement is also known as an agreement that is intended to bind two or more than two parties through the use of a website. In the event of an agreement done while browsing, an ordinary user,  of that particular website,  is required to accept the terms and conditions of use as well as other website rules in order to continue using the website. 

Validity of E-contracts

It is a revolution that has transformed contracts into e-contracts. But one thing we must remember is that electronic contracts, sometimes known as E-contracts, provide a number of problems and legal issues that must be addressed. According to the requirements of the Information Technology Act, 2000 (IT Act, 2000), particularly Section 10-A, and electronic contract is legitimate and enforceable.

Section 10A of the IT Act, 2000 states that “wherein, a contract formation, the communication of proposals, acceptance of proposals, the revocation of proposals and acceptances, as the case may be, is expressed in the electronic form, or by means of 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[1].”. The aforementioned clause was enacted in response to the growing dependence on different electronic channels to obtain commercial agreements. It is applicable if contract formulation, communication, and proposal acceptance are carried out via any electronic methods. The aforementioned provision also corresponds with Section 3 of the Indian Contract Act. 

The case of Trimex International FZE Ltd. v. Vedanta Aluminum Ltd[2]. recognized that that communication done via e-mails, between parties about mutual duties constitutes a contract.

The Indian Contract Act, 1872 [3]defines how contracts are negotiated and performed in India, therefore every contract must conform with the Act’s stipulations in order to be legally enforceable. The Indian Contract Act’s provisions are broad enough to encompass such transactions. Unless otherwise agreed by the parties, an offer and acceptance of an offer, or any of them, may be conveyed in the context of contract formation by data communications or electronic record. When an electronic record is utilized in the creation of a contract, the contract’s legality or enforceability should not be rejected just because data messages were employed for that reason[4]. It was in LIC India v. Consumer Education and Research Centre[5]where the Supreme Court held that “In dotted line contracts there would be no occasion for a weaker party to bargain as to assume to have equal bargaining power. He has either to accept or leave the service or goods in terms of the dotted line contract. His option would be either to accept the unreasonable or unfair terms or forgo the service forever.

Furthermore, contract recognition is granted under the Indian Evidence Act[6], which defines “document” as any information included in an electronic record that is written on paper, saved, recorded, or duplicated on optical or magnetic media created by a computer. Such information satisfies the requirements of Section 65B of the Act, and shall be admissible in any proceedings without further proof or production of the original document before the relevant authority, and shall be regarded as evidence of any content of the original or any fact stated therein of which direct evidence would be admissible. As a result, despite the lack of a formal definition, e-contracts are accepted as legitimate under Indian law.

The main point is the negotiating power of the parties, such as when a person accepts unfavourable contract conditions in order to get products, services, or a means of subsistence. However, in circumstances when the parties are in equal or almost equal negotiating positions, the courts will not intervene. Thus, if a consumer asserts that an E-Contract is unreasonable and that there is a disparity in the negotiating power of the parties, he must also demonstrate that the services or goods sought by him under the E-Contract were absolutely necessary and that he had no other means of obtaining the goods or services.

E-Contracts and E-Signatures, or electronic signatures, are recognized under Indian law and controlled by the Information Technology Act, 2000, often known as the IT Act. Section 4 of the IT Act states that any need under any legislation for any information or matter to be in writing, typewritten, or printed form will be deemed met if such information or matter is in an electronic form and is accessible to be usable for a future further reference.

E-contracts and Consumer Protection 

The practice of concluding contracts in standard forms arose from the current need for a standardized set of written conditions that can be used again, for a large number of people, and at a lower cost than an individually negotiated contract. Such contracts restrict the practice’s ability to bargain. 

Although a party, frequently a customer, has the right not to engage with a certain store and to negotiate pricing, delivery dates, and so on, when equivalent conditions are given by other merchants, the individual must either accept the terms spelled forth in the toto or go without. Due to the impossibility of going without numerous products or services, the individual is essentially obliged to abide by those terms.

The trading system has evolved dramatically since then. Because this Act lacks current consumer protection, the new Consumer Protection Bill has made adjustments such as changing the definition of “consumer.” Section 2 (8) Explanation (b) The expressions “buys and products” and “hires or avails any services” encompass transactions done through any manner, including but not limited to offline via electronic means. Teleshopping, direct selling, and multilevel marketing are all examples of multilevel marketing. The filing of complaints online and the payment of costs for such complaints in electronic form is mandated under Section 32.

Conclusion and Future Scope

The COVID-19 has, without a doubt, digitize India and other nations to a large extent, and it is important to note that the Internet, like all ground-breaking technological developments, allows us all to act as a global community, advertise and operate across all frontiers, over borders, and beyond the control of any national government, but it has also created serious problems and challenges for the legal world in all aspects of law due to its borderless nature. The government’s attempts to continue this digitization process so that more and more people may profit from it and engage into various sorts of contracts electronically are rather evident, and this is what we can term the “New Normal.”

  1. http://shodhganga.inflibnet.ac.in/bitstream/10603/49009/14/14_chapter%206.pdf
  2. The Indian Contract Act, 1872, Dr. Narender Kumar,1ST ed. 2015, Allahabad Law agency, at p.870-871
  3. Alghamdi, Abdulhadi M. The Law of E-Commerce: E-Contracts, E-Business. AuthorHouse, 2011.
  4. “A Review of Information Technology Act, 2000.” SSRN Electronic Journal, 2015, doi:10.2139/ssrn.2611827, Kolekar, Yogesh Prasad.
  5. Hedley, Steve. The Law of Electronic Commerce and the Internet in the UK and Ireland. Taylor & Francis, 2017
  6. T.S.Venketesh Iyyer’s “law of contract and specific relief with special chapter on e-contract”, ed 1
  7. Alan Davidson, The Law of Electronic Commerce (Port Melbourne: Cambridge University Press, 2009), atp 73

[1] A2000-21_0.pdf (legislative.gov.in)

[2] 2010 (1) SCALE 574

[3] https://legislative.gov.in/sites/default/files/A1872-09.pdf

[4] Alan Davidson, The Law of Electronic Commerce (Port Melbourne: Cambridge University Press, 2009), atp 73

[5] 1995 AIR 1811; 1995 SCC (5) 482; JT 1995 (4) 366; 1995 SCALE (3)627

[6] https://legislative.gov.in/sites/default/files/A1872-01.pdf

Published by meghachaturvedi

Associate Partner, H.K. Law Offices

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