This Article is written by Divya K. (currently pursuing BBA LLB in Symbiosis Law School)
INTRODUCTION:
The Internet has become a new office of work for people. Today, with the help of technology people can do the majority of their work sitting at home. Undoubtedly, business is not devoid of the advantages of the internet. Many businesses use the internet as a medium for conducting their operations. These commercial activities and transactions are conducted with the help of e-contracts. In a traditional contract, the two parties must meet and form a contract, but in an e-contract, the parties can be sitting in two different far-off places and form the contract online. That is why e-contracts can also be referred to as online contracts. E-contracts are somewhat similar to traditional contracts and are subject to all the essentials that a traditional paper-based contract follows. However, since the contract is formed online the legal issues and challenges concerning e-contracts are more complex. The current article will study the concept of e-contracts and also highlight the legal challenges faced concerning the aspects of e-contracts in India.
ABOUT E-CONTRACTS: DEFINITIONS, ESSENTIALS, AND TYPES
E-contracts are formed between two or more parties with the help of electronic means. The communications for such contracts are conducted with the help of mails or other electronic methods. The parties can form these contracts digitally without travelling to different places. These contracts are usually concluded with the electronic signatures of the parties. It follows the principle of Uberrimae fidei which means ‘utmost good faith’. This is because the parties have to entirely depend on the information provided by them to each other. It is time-saving and an effortless way of forming contracts. However, these kinds of electronic contracts are exposed to high risks of fraud. E-contracts are governed by the Indian Contract Act, 1872, Information Technology Act, 2008, and Indian Evidence Act, 1872.
ESSENTIALS OF E-CONTRACTS:
The Indian Contract Act, 1872 defines the essentials required for forming an e-contract. Following are the essentials of e-contracts:
- There must be a valid offer by one of the parties.
- The offer must be followed by a valid acceptance.
- There must be a lawful consideration that can be legally enforceable.
- The object of such e-contract must be lawful in the eyes of law.
- The contract must be formed with the free consent of all the parties and the consent should not be attained by misrepresentation, fraud, coercion, or undue influence.
- The parties to the contract must be competent to enter into a contract.
- There must be a valid offer by one of the parties.
- The offer must be followed by a valid acceptance.
- There must be a lawful consideration that can be legally enforceable.
- The object of such e-contract must be lawful in the eyes of law.
- The contract must be formed with the free consent of all the parties and the consent should not be attained by misrepresentation, fraud, coercion, or undue influence.
- The parties to the contract must be competent to enter into a contract.
TYPES OF E-CONTRACTS
Electronic contracts can be broadly classified into three types. They are as follows:
Click-wrap Agreements:
Click-wrap agreements are usually provided on the websites or any software programs and assent to such agreements are necessary to avail the product inside. The assent can be given by clicking on the ‘I agree’ or ‘OK button. The user can also decline from giving the assent by clicking on the ‘I disagree’ button.
Shrink-wrap Agreements:
A shrink-wrap agreement is considered as a license agreement and the terms and conditions of the agreement becomeapplicable as soon as the customer opens the package. These kinds of agreements are generally noticed in the case of purchasing software products. The agreement cannot be read before the purchase of the software product.
Browse-wrap Agreements:
The browse-wrap agreement is usually observed in the cases of websites. The continued use of the website to purchase goods and services denotes the acceptance of the terms and conditions of the agreement.
VALIDITY OF E-CONTRACTS:
E-contracts are also subject to the essentials mentioned in section 10 of the Indian Contract Act (ICA), 1872[1]. It validates all the e-contracts which have the necessary requisites provided under section 10. There is no specified way of communication under ICA, 1872, it can be oral or written or even by way of conduct. Information Technology Act, 2000, in particular,gives legal recognition to the e-contracts. Section 10 A of the IT Act, 2000[2]provides validity to the contracts that formed through electronic means. It states that “Where in a contract formation, the communication of proposals, acceptance of proposals, revocation of proposals and acceptances, as the case may be are expressed in electronic form or by means of an electronic record, such contract shall not be deemed to be enforceable solely on the ground that such electronic form or means was used for that purpose.”The parties can enter into e-contracts through e-mail, internet, or fax. The authenticity of the e-contracts can be guaranteed by electronic signatures and is thereby recognized by the laws in India. The digital signature is a sign that a person puts to denote that whatever information is mentioned in the document is reliable. Section 3 of the IT Act[3] provides the procedure through which any person can authenticate an electronic record by attaching his digital signature. The courts in India recognize electronic records provided under section 65 A of the Indian Evidence Act, 1872[4]. Section 65 B[5] of the said act, provides the procedure through which the electronic records can be admissible in courts. It states that any electronic record that is produced by a computer in printed, stored, or copied form is deemed to be a document and shall be admissible in courts without any further proof of the original. The admissibility of electronic records in the courts is subjected to certain conditions like, the computer which was supposed to produce the electronic record was in control of a lawfully authorized person and was in regular use, the information derived from such record was regularly fed to the computer, through this activity the computer properly working and it did not affect the accuracy of the information derived, and the information derived from the record fed into the computer during the ordinary course of activities.
CHALLENGES FACED BY E-CONTRACTS IN INDIA
- Ensuring the legal competency of the person entering into the contract becomes difficultes pecially because the service provider has no idea who is clicking on the icon of ‘I agree’. The person who entered into the contract may be a minor. Such contracts are deemed as void under ICA, 1872.
- The user does not get the opportunity to negotiate the terms and conditions of the contract. The only discretion he has is to decide if wants to enter into the contract or not, it’s a ‘take it or leave it’ situation for the user. This does not give him the chance to give his consent freely. In LIC of India v Consumer Education and Research Centre[6], the court observed that the user does not have the power to bargain and is not equal in negotiating the terms and conditions to the service provider.
- In traditional contracts, in case of disputes, the jurisdiction of trying the case lies with the court of the place where the contract was entered. But the jurisdiction of trying cases related to e-contracts is wide. It can be tried anywhere. However, the service provider usually mentions the place according to his discretion and the disputes can be solved by that court in that particular place only. The user does not get to say concerning this and the most he can do is to agree to the terms and conditions.
- Since these contracts are formed online there is a high risk of fraud. The personal details of the other party are also at risk since the party involved in fraud may use his identity and personal information for extorting money.
CONCLUSION
E-contracts have proved very helpful during this globalization era especially during covid-19 when every business is operating online. E-contracts are time-efficient, effortless, and cost-efficient since there is no requirement of printing the contract. However, it has its own set of challenges. It fails in ensuring the legal competency of the parties, lacks free consent, compromises the security of data, and is unassertive with respect to jurisdiction. E- contracts can be beneficial in the development of businesses in India if the above-mentioned challenges are resolved. Therefore, a well-formulated law is required which can address the issues related to e-contracts and will help in regulating e-contracts in India.
[1]Indian Contract Act, 1872, § 10, No 9, Acts of Parliament, 1872 (India).
[2] Information Technology Act, § 10A, No 21, Acts of Parliament, 2000 (India).
[3] Id. § 3.
[4] Indian Evidence Act, 1872, § 65A, No 1, Acts of Parliament, 1872 (India).
[5] Id. § 65B.
[6]LIC of India v Consumer Education and Research Centre, 1995 AIR 1811.
