E Contracts

Introduction
The advent of revolutionary technologies has ensured robust e-commerce in the
country. However, the usage of technology without adequate legal framework
will lead to chaos in the society and will prove counterproductive to the
business. The Indian Contract Act, 1872, The Information Technology Act, 2000
and The Indian Evidence Act, 1872 are the crucial legislations which determine
the validity of an e-contract.
E contracts are formed by way of exchange of emails and through online
agreements viz, browse wrap, shrink wrap and click wrap agreements. All the
said forms are valid under Indian law.
The electronic contract is generally different from traditional contracts. E-
contract is a contract executed and enacted by way of software systems. In this
transaction, the issue is raised for its execution and protection of the consumers.
Fundamental Principles of contract law continue to prevail in contracts made on
the internet. In India, the recognition of an electronic contract is mainly
supported by the Information Technology Act, 2000.

Definition
E-contract is a kind of contracts formed by negotiation of two or more
individuals through the use electronic means, such as email or a computer
program. E-contract is one of the divisions of e-commerce or e-business.
E-Contracts are contracts attracting principles of Uberrimae fidei in which the
contracting parties are not dealing at arm's length but one party is entirely
dependent upon the information supplied by the other party on the basis of
which alone he expresses his willingness to contract. The doctrine of Uberrimae
fidei should be considered the foundation of e-contracts as the chances of
misrepresentation or suppression of material facts is most likely to occur in such
transactions. Although legal capacity is not explicitly dealt by the Information
Technology Act, the law presumes that once an online contract is concluded,
both the parties are presumed to be competent to do so. In other words, neither
party is allowed to raise an objection at a later stage that the contract is
unenforceable for want of competence on the part of the parties.
There are different types of electronic contracts -
• Click-wrap Agreements
• Shrink-wrap Agreements
• Browse-wrap/Web-wrap Contracts

Click-Wrap Agreements
In click-wrap agreements, a party after going through the terms and conditions
provided in the website or programme has to, normally, indicate his assent to the
same, by way of clicking on an 'I Agree' icon or decline the same by clicking 'I
Disagree'. These sorts of contracts are extensively used on the internet, whether
it be granting of a permission to access a site or downloading of any software or
selling something via a website. By clicking on any of these choices, he accepts
or declines the terms. If he does not agree, the process is terminated. Click-wrap
agreements can further be of the following kinds:

Type and Click - In this case, the user must type 'I accept' or other specified
words in an on-screen box and then click a 'Submit' or similar button. This
demonstrates acceptance of the terms of the contract.

Icon Clicking - In this case, the user must click on an icon of 'I agree' button on
a dialog box or pop-up window. A user may signify rejection by clicking
'Cancel' or closing the window.

Shrink-Wrap Agreements
The sale of software in stores, by mail and over the internet has resulted in quite
a few specialized forms of licensing agreements. For instance, software sold in
stores is commonly packaged in a box or other container and then wrapped in
the clear plastic wrap. Through the clear plastic wrap on the box, the purchaser
can see the warning that states the use of the software is subject to the terms of a
license agreement contained inside. The license agreement generally explains
that if the buyer does not wish to enter into a contract by purchasing the
software, he must return the product prior to opening the sealed package
containing the CD. If the software is returned with the sealed package
unopened, a refund will be obtained.

Browse-wrap/ Web-wrap Contracts

In browse-wrap contracts, the internet users will find the terms or conditions
hyperlink somewhere on web pages that proposes to sell goods and services. An
agreement is considered as a browse wrap agreement, since it is created by the
use of the website.

ENFORCEABILITY OF E-CONTRACT
The Information Technology Act of 2000 was implemented for the governance
and providing legal sanctity to transactions undertaken through electronic
means and also provide for authentication of digital signature, jurisdiction,
penalties in case of breach, etc. Section 10-A of the said Act has recognized the
validity of these e-contracts. It specifies that if an e- contract fulfils all the
essentials as specified in Indian Contract Act of 1872 of a traditional contract
i.e.; valid offer and acceptance, capacities of the party, free consent, etc., it will
be considered valid and is enforceable in the court of law.
Case - Trimex International v. Vedanta Aluminium Ltd. India, the Supreme
Court recognized that the contract whose terms and conditions are discussed
through e-mails between parties, though no formal contract was formed or
signed is valid in the eyes of law.

ISSUES FACED BY E-CONTRACT

Following are a few issues faced by electronic contracts in our country:
JURISDICTIONAL ISSUE
Paperless transactions like e-contract are borderless, therefore, it becomes
difficult to determine the jurisdiction i.e.; the extent of the limit of the court's
authority over any suit or appeal at the time of breach of e- contracts.
As per Section 13(3) of the Information Technology Act of 2000:
a) the place of business of the originator will be deemed to be place where the
information was dispatched, and
b) place of business of the addressee will be deemed to place where the
information was received.
This implies that the location of computer sources through which it was
dispatched and received, places no role in determining the jurisdiction of the
case. However, this section limits the power provided by Section 20 of Code of
Civil Procedure, 1908.
In case of P.R. Transport Agency vs. Union of India & others, the Allahabad
Court dealt with the question jurisdiction and held that the acceptance of the
contract was sent through email and received in Chandauli (U.P) and principal
place of business of the petitioner was at Varanasi (U.P) thus, the place of
jurisdiction on the present case lies in U.P.
As electronic transactions have no boundaries, it has become difficult to deal
with the jurisdictional issue, especially when both parties belong to different
part of the world. The present legislations governing e-contract have failed to
answer questions as to jurisdiction lies in which country in case of dispute, Law
to be applied to solving the disputes (suppliers or consumers) or how will
decision be enforced in both the countries.
PARTIES TO CONTRACT
Transactions in an electronic contract are between parties which are stranger to
each other. This poses threat to both the contracting parties. As for validity of
the contract under section 11 of the Indian Contract Act of 1872 it is necessary
that parties are not minor, lunatic or disqualified by the law however, while
executing e-contract the major question arises are over the competencies of the
parties. Minors can easily enter into contracts through click wrap or browse
wrap contracts with the website. So, the legal liability is on the websites to
ensure that the party contracting is competent under Indian Contract Act of 1872
for it. To ensure the competency of the party, the online websites have come up
with various methods such as signing up to the site, in which the person enters
personal details including birth date ensuring the website that the party has the
capacity to enter into the contract. It is sometimes accompanied with a dialogue
box containing pictures, and users are required to identify things in them to
ensure the lunacy of the party. Despite these methods the enforceability of e-
contract is in question due to lack of stringent legislation to deal with such issue
in depth.
SIGNATURE AUTHENTICATION
Indian Contract Act of 1872 recognizes both oral and written contracts;
therefore, it is not mandatory under this law for the valid contract to be signed
by the parties. E-contract being generated through electronic means cannot be
signed traditionally by the parties, so, it is required to be signed electronically
through electronic signature or digital signature as defined under section 3 or
Section 5. But, the major drawback of it is that e signature is not valid on every
document. Documents like:
a) Negotiable instrument except the cheque
b) Powers of attorney
c) Trust Deed
d) Real Estate Documents
These are the documents which are required to be physically signed by the
parties and Information Technology Act 2000 has no applicability over it.
LOSS DUE TO TECHNICAL ERROR
E-contracts are documents which are entered into by the parties through
electronic transmissions and are stored in the virtual world. But, like paper
transactions there is no safety in the information stored in the world. Though, it
is believed that anything which enters the digital world always exists and is
never lost yet there are no administrative, legal or judicial guidelines over the
scenario where the whole information or part of information is lost due the
failure of the technology.

THE INFORMATION TECHNOLOGY ACT, 2000

Basic Purposes and Features of IT Act, 2000:

The Information Technology Act, 2000 was enacted by the Indian Parliament in
2000. It is the primary law in India for matters related to cybercrime and e-
commerce. The act was enacted to give legal sanction to electronic commerce
and electronic transactions, to enable e-governance, and also to prevent
cybercrime.

Importance of IT Act 2000 -

(a) The Act provides legal recognition to electronic records, resulting in the
growth of e-commerce and digital transactions in India.

(b) It has established electronic signatures as legal as physical signatures.

(c) The Govt. established the Controller of Certifying Authorities (CCA), a

government body that is responsible for issuing digital signatures.

Sec. 1 Short title, extent, commencement and application —

(1) This Act may be called the Information Technology Act, 2000.

(2) It shall extend to the whole of India and it applies also to any offence
committed outside India by any person.

Sec. 2 Definitions —

(1) Cyber Security - means protecting information, equipment, computer,

communication device and information stored therein from unauthorised access,
use, disclosure, modification or destruction.

(2) Digital Signature - means authentication of any electronic record by a

subscriber by means of an electronic method.
(3) Electronic Signature means authentication of any electronic record by a
subscriber by means of the electronic technique and it includes digital signature.

Sec. 3 Authentication of electronic records —

Any subscriber may authenticate an electronic record by affixing his digital
signature or electronic signature.

Sec. 4 Legal recognition of electronic records —

Where any law provides that information or other matter shall be in writing or
in printed form, then, such requirement shall be deemed to have been satisfied if
such information or matter is —
(a) recorded or made available in an electronic form; and
(b) is accessible so as to be usable for a subsequent reference.

Sec. 5 Legal recognition of electronic signatures —

Where any law provides that information or any other matter shall be
authenticated by affixing the signature or any document shall be signed by
signature of any person, then, such requirement shall be deemed to have been
satisfied, if such information or matter is authenticated by means of electronic
signature.

Sec. 10A Validity of contracts formed through electronic means —

Where in a contract formation, the communication of proposals, the acceptance
of proposals, the revocation of proposals and acceptances, are expressed in
electronic form or by means of an electronic record, such contract shall be
deemed to be enforceable like any other written or oral contracts.

Government Contracts

Government contracts are contracts undertaken by the government for various

purposes such as construction, management, maintenance, repairs, manpower
supply, IT-related projects, etc.
Government contracts involve the central government or a state government, or
a government body as one party and a private individual or entity as the other
party.
Government contracts have to comply with certain formalities and safeguards as
prescribed by Article 299 of the Constitution of India.
Government contracts are subject to public scrutiny and accountability and are
governed by the principles of fairness, transparency, competitiveness, and non-
discrimination.
Requirements for Government Contracts:
The contract must be expressed to be made by the Governor or the President.
It must be executed in writing.
The execution should be done by persons and in a manner directed or
authorized by the Governor or the President.

Article 299 of the Constitution of India –

Contracts —
(1) All contracts made in the exercise of the executive power of the Union or of
a State shall be expressed to be made by the President, or by the Governor of
the State, as the case may be, and all such contracts shall be executed on behalf
of the President or the Governor by such persons and in such manner as he may
direct or authorise.
(2) Neither the President nor the Governor shall be personally liable in respect
of any contract made or executed for the purposes of this Constitution, or for the
purposes of any enactment relating to the Government of India nor shall any
person making or executing any such contract on behalf of any of them be
personally liable in respect thereof.

Meaning of Immunity as mentioned under Article 299:

Glock Asia-Pacific Limited filed an application against the Centre regarding the
appointment of an arbitrator in a tender-related dispute.
The government objected to the appointment of a retired Delhi High Court
judge as the arbitrator, citing a tender condition that required an officer from the
Law Ministry to act as the arbitrator.
Court's Interpretation:
The Supreme Court held that the arbitration clause, allowing a government
officer to resolve the dispute as an arbitrator, conflicted with Section 12(5) of
the Arbitration and Conciliation Act, 1996.
Digital Signature
The definition given u/s 2 of the Information Technology Act, 2000 - Digital
Signature - means authentication of any electronic record by a subscriber by
means of an electronic method.
A digital signature is a mathematical technique used to validate the authenticity
and integrity of a document, message or software. A digital signature is
equivalent of a handwritten signature or stamped seal, but it offers far more
inherent security. A digital signature is intended to solve the problem of
tampering and impersonation in communications.

How do digital signatures work?

Digital signatures are based on public key cryptography, also known as
asymmetric cryptography. Using a public key algorithm, two keys are
generated, creating a mathematically linked pair of keys: one private and one
public. For encryption and decryption, the person who creates the digital
signature uses a private key to encrypt (to change electronic information into a
secret code) signature-related data. The only way to decrypt (the process of
converting encrypted data back into its original, readable form) that data is with
the signer's public key. If the recipient can't open the document with the signer's
public key, that indicates there's a problem with the signature. This is how
digital signatures are authenticated.
Importance of Digital Signature:
Sec. 3 of the Information Technology Act, 2000 - Authentication of electronic
records — Any subscriber may authenticate an electronic record by affixing his
digital signature or electronic signature.
Sec. 5 of the Information Technology Act, 2000 - Legal recognition of
electronic signatures — Where any law provides that information or any other
matter shall be authenticated by affixing the signature or any document shall be
signed by signature of any person, then, such requirement shall be deemed to
have been satisfied, if such information or matter is authenticated by means of
electronic signature.