ELECTRONIC CONTRACT (E-CONTRACT): AN ANALYSIS

FINAL DRAFT SUBMITTED IN THE FULFILLMENT OF THE COURSE TITLED

“CONTRACT- I” FOR OBTAINING THE DEGREE OF B.A.LL.B.(Hons.)

SUBMITTED BY:

NAME- ANUJ KUMAR

ENROLLMENT NO.- CUSB2413125019

SEMESTER- 2ND

SUBMITTED TO: Dr. CHANDANA SUBA

ASSISTANT PROFESSOR

SCHOOL OF LAW AND GOVERNANCE

MARCH, 2025

CENTRAL UNIVERSITY OF SOUTH BIHAR, PANCHANPUR ROAD, GAYA, PIN-

824236

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 ACKNOWLEDGEMENT

I take this opportunity to express my deep sense of gratitude and heartfelt appreciation to all
those who have contributed to the successful completion of this assignment.

I would like to express my sincere gratitude to Dr. Chandana Suba ma’am for their guidance
and support in completing this assignment. Their valuable insights and encouragement have
been instrumental in my understanding of the topic.

I also extend my appreciation to my family, and friends for their continuous support and
motivation. Their thoughtful discussions, exchange of ideas, and encouragement have helped
me refine my thoughts and strengthen my arguments in this assignment.

Lastly, I am grateful for the various sources of information, including books, research papers,
and online materials, that have contributed to my research and understanding of the topic. The
knowledge gained from these references has been crucial in the compilation of this assignment.

Thanking you

Anuj Kumar

March 24, 2025

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 TABLE OF CONTENTS
SR. NO. CONTENT PG.
NO.
1. Acknowledgment 2

2. Table of Contents 3

3. Introduction 4

4. Concept of E-contract 6

5. Types of E-contracts 7

6. Essentials of E-contract 9

7. Legal Frameworks Governing E-contract Indian Law 12

Perspective

8. Case Laws Related To E-Contracts 15

9. Challenges And Issues Related To E-Contract 16

10. Conclusions 18

11. Bibliography 19

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 INTRODUCTION
With the rapid in the technology and the widespread use of the internet, electronic contracts (e-
contracts) have become an integral part of modern commercial transactions. Unlike traditional
paper-based contracts, e-contracts are formed through digital means, enabling individuals and
businesses to engage in legally binding agreements online.

The rise of e-commerce, and remote business operations has significantly contributed to the
increasing reliance on e-contracts, making them a cornerstone of contemporary trade and
commerce. This type of contracts are commonly used in various sectors, including banking,
retail, and even government transactions. From purchasing goods on e-commerce platforms to
subscribing to software services, e-contracts govern a wide range of digital interactions.

However, their legal recognition, enforceability, and challenges have been subjects of ongoing
debate in legal jurisprudence. While traditional contract law principles apply to e-contracts,
their execution raises unique concerns related to offer and acceptance, authentication, consent,
and security. Given the absence of physical signatures and face-to-face negotiations, ensuring
the validity of e-contracts requires robust legal frameworks and technological safeguards. India
have enacted laws such as the Information Technology Act, 2000, which provides legal
recognition to electronic transactions and digital signatures.

Similarly, international conventions like the United Nations Convention on the Use of
Electronic Communications in International Contracts 2005 have contributed to harmonizing
legal standards for e-contracts globally. Despite these regulatory advancements, challenges
persist in areas such as jurisdictional issues, fraud, data privacy, and consumer protection.

Additionally, the enforceability of click-wrap, browse-wrap, and shrink-wrap agreements

remains a contentious issue, as courts often examine whether users provided informed consent
before agreeing to the terms and conditions of digital agreements. Another significant challenge
is the disparity in legal frameworks across countries, leading to jurisdictional conflicts in cross-
border transactions.

As e-contracts continue to shape the global economy, it becomes imperative to analyze their
legal, ethical, and technological implications. Strengthening cybersecurity measures,
enhancing digital literacy, and developing uniform legal frameworks can contribute to a more
secure and trustworthy digital contracting environment.

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This paper aims to explore the concept of e-contracts, their legal foundations, types,
advantages, challenges, and potential solutions. By analyzing judicial precedents, statutory
provisions, and emerging technological trends, this study seeks to provide understanding of the
evolving landscape of e-contracts and their impact on the modern legal system.

Through this analysis, it becomes evident that while e-contracts offer unparalleled convenience
and efficiency, their effective regulation is essential to protect the interests of all parties
involved in digital transactions. Therefore, balancing technological advancements with legal
safeguards remains a crucial task for policymakers, businesses, and legal professionals
worldwide.

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 CONCEPT OF E-CONTRACT
The emergence of e-contracts has revolutionized the way agreements are formed in the digital
age. An e-contract is a legally binding agreement created, executed, and signed electronically,
eliminating the need for physical documentation. These contracts are widely used in various
sectors, including e-commerce, banking, insurance, and software licensing, owing to their
efficiency, cost-effectiveness, and convenience.

With the rapid development in Information Technology, it becomes easy and feasible to enter
into e-contract for business transactions. It is feasible to enter into e-contract instantly by the
exchange of communication of offer and acceptance between the parties in electronic mode. e-
contract is one of the important parts of the today’s business transactions.

These days, we all use e-contracts in our daily lives for things like buying groceries, books,
veggies, clothes, booking flights and trains, playing games, viewing movies online, and hailing
a cab, among other things. As a result, we are accustomed to using e-contracts on a daily basis.

The foundation of e-contracts is based on traditional contract law principles, such as offer,
acceptance, consideration, and free consent, but their execution and enforcement involve
distinct legal and technological considerations. The legal recognition of e-contracts in India is
primarily governed by the Indian Contract Act, 1872. and Information Technology Act, 2000,
which provides legal validity to electronic records and digital signatures1.

The validity of e-contracts is often scrutinized in terms of offer and acceptance, where
communication takes place through emails, websites, or electronic data exchanges. Unlike
traditional contracts, where physical signatures indicate acceptance, e-contracts rely on
electronic authentication methods such as digital signatures, e-signatures, and biometric
verification. The Information Technology Act, 2000, grants legal recognition to digital
signatures certified by licensed certifying authorities, ensuring the authenticity and integrity of
electronic transactions2.

Additionally, the advent of smart contracts, powered by blockchain technology, has introduced
self-executing agreements that operate without intermediaries, raising new legal questions
regarding liability and dispute resolution3

1
Information Technology Act, 2000 (Act 21 of 2000), S. 10-A.
2
Information Technology Act, 2000 (Act 21 of 2000), s. 3.
3
Raskin, Max, "The Law and Legality of Smart Contracts," Georgetown Law Technology Review, Vol. 1, 2017,
pp. 305-341.

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 TYPES OF E-CONTRACTS
Click-Wrap Agreements:

Click-wrap agreements require users to actively click an "I Agree" or "Accept" button before
proceeding with a transaction. These agreements are commonly found in software installations,
mobile applications, and e-commerce websites. Since users explicitly consent to the terms,
click-wrap agreements are generally enforceable, provided that the terms are clear and
accessible.

Example: Clicking "I Agree" before installing software or subscribing to an online service.

Browse-Wrap Agreements:

Browse-wrap agreements do not require explicit user consent; instead, they assume that a user
agrees to the terms by simply using a website. These agreements are commonly used for
website terms of service and privacy policies. However, their enforceability is often questioned,
as courts may require proof that the user had actual or constructive notice of the terms.
Example: A website stating that continued use implies acceptance of its terms and conditions.

Shrink-Wrap Agreements:

Shrink-wrap agreements are commonly used in software purchases where the contract terms
are included inside a product’s packaging. The user is deemed to accept the terms by opening
the package or installing the software. Courts have debated the enforceability of these
agreements, especially if the terms are not made available before purchase.

In the case of ProCD, Inc. v. Zeidenberg, where the Seventh Circuit ruled that software license
terms enclosed within packaging were enforceable, provided that the buyer had an opportunity
to review and reject the terms before use4.

However, concerns remain regarding the fairness of such agreements, especially in cases where
consumers are unaware of restrictive clauses until after purchase.
Example: A software CD that includes licensing terms inside the package, which are accepted
upon installation.

E-Mail Contracts:

4
ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996).

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Contracts formed through e-mail exchanges are legally recognized if they meet the essential
elements of a valid contract, such as offer, acceptance, and consideration. Courts have upheld
the validity of e-mail communications as legally binding agreements, provided that there is
clear intention and mutual assent.

In the case of Timex International FZE Ltd. Dubai v. Vedanta Aluminium Ltd.5 it was held that
“once a contract is concluded orally or in writing, the mere fact that a formal contract has to be
prepared and initiated by the parties would not affect either the acceptance of the contract so
entered into or implementation thereof, even if the formal contract has never been initiated”.
Example: A business negotiation where parties finalize contract terms through an exchange of
e-mails.

Electronic Data Interchange (EDI) Contracts:

Electronic Data Interchange (EDI) contracts involve automated transactions between

businesses through structured electronic messages. These contracts are widely used in supply
chain management and business-to-business (B2B) transactions. Since there is minimal human
intervention, legal frameworks ensure their validity and authenticity.
Example: Automated purchase orders between manufacturers and suppliers.

Smart Contracts:

Smart contracts are self-executing contracts based on blockchain technology. They

automatically enforce contract terms when predefined conditions are met. Smart contracts are
increasingly used in financial transactions, supply chains, and decentralized applications.
However, their legal status remains a topic of discussion.
Example: A cryptocurrency transaction that releases funds automatically upon verification of
delivery.

5
Timex International FZE Ltd. v. Vedanta Aluminium Ltd., (2010) 3 SCC 1.

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 ESSENTIALS OF E-CONTRACT
The formation and applicability of e-contract depend upon traditional contract law. Like
traditional contracts, e-contracts must fulfil essential legal requirements to be considered valid
and binding. The Indian Contract Act, 18726, along with The Information Technology Act,
20007, provides the legal framework for recognizing and regulating e-contracts. The key
essentials of an e-contract include offer, acceptance, lawful consideration, capacity of parties,
and free consent.

Offer:

An offer is also called as proposal. It is the first essential element for the formation of E-contract
or traditional contract. An electronic offer can be made through electronic modes like e-mails
etc. As per The Information Technology Act, 2000, the term originator8 and addressee9 in e-
contract are used instead of the word proposer and acceptor used in traditional contract. The
originator is a person who send or create the electronic message i.e. originate the electronic
message and transmit it to any other person. An addressee is a person who receives the
electronic record which is sent by the originator.

Section 11 of The Information Technology Act, 200010, deals with the attribution of electronic
records to the originator, if it was sent by originator himself or by authorised person or by
information system programmed on behalf of him. In such contracts, the addressee presumed
that the electronic record is originated from the originator itself.

Acceptance:

Once the offer is accepted, there is a formation of an agreement. But the postal acceptance rule
is an exception to it. The offer is accepted when it is posted, according to this rule. As a result,
the proposer's communication of acceptance is regarded complete when it is placed in the
course of transmission to him, whereas the acceptor's communication of acceptance is regarded
complete when it comes to the knowledge of the proposer.

Once the proposal is accepted, an agreement is formed. However, the postal acceptance rule
serves as an exception to this. According to this rule, the offer is accepted at the time it is

6
The Indian Contract Act, 1872 (Act 9 of 1872).
7
The Information Technology Act, 2000 (Act 21 of 2000).
8
The Information Technology Act, 2000 (Act 21 of 2000), s. 2(1) (za).
9
The Information Technology Act, 2000 (Act 21 of 2000), s.2(1) (b).
10
The Information Technology Act, 2000 (Act 21 of 2000).

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mailed. Consequently, the proposer’s communication of acceptance is considered complete
when it is sent for delivery to him, while the acceptor’s communication of acceptance is deemed
complete once it is known to the proposer.

"The plaintiff in the case of Lalman Shukla v Gauri Dutt was a munib. The plaintiff volunteered
his assistance to find defendant's nephew, who had gone missing. Despite the fact that he
located the boy whose uncle had offered to pay Rs 501 to anyone who found his nephew in this
situation. The munib, however, was denied the reward because he just learned about the offer
after discovering him."11

In the realm of electronic contracts, once an offer is transmitted, the originator may not receive
confirmation regarding its receipt. Therefore, it is imperative for the addressee to acknowledge
the receipt of the offer. Should the addressee wish to accept the proposal through electronic
means, this can be achieved by sending their acceptance electronically or by selecting the 'I
agree' or 'I accept' button. Both the offer and acceptance can be executed via email, website
forms, or an online agreement.

Section 12 of the Information Technology Act, 2000 says that, there is no agreement about the
mode of acknowledgement sent by the addressee between both the parties, the addressee may
acknowledge the receipt of electronic records by any communication modes to know the
originator as to the receipt of it by the addressee.

Lawful Consideration:

It is given under Section 10 of the Indian Contract Act, 1872 that for a valid contract, there
must be a lawful consideration. According to section 2(d) of the Indian Contract Act, 1872
"when at the desire of the promisor, promisee or any other person has done or abstained from
doing or does or abstains from doing or promises to do or to abstain from doing something,
such act or abstinence, or promise is called a consideration for the promise."12 Section 24 of
the Act says that "any contract without a lawful consideration is void."13

Capacity of Parties:

11
Lalman Shukhla vs. Gauri Dutt, 1913 11 All U 489.
12
The Indian Contract Act, 1872 (Act 9 of 1872), s. 2(d).
13
The Indian Contract Act, 1872 (Act 9 of 1872), s. 24.

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According to Section 11 of the Indian Contract Act, 1872, "Every person is competent to
contract who is of the age of majority according to the law to which he is subject and who is of
sound mind and is not disqualified from contracting by any law to which he is subject."

Both natural and legal persons are capable of making contracts, but computers are plainly not
natural persons, and neither American nor English contract law considers them to be legal
persons at this time. As a result, computers are unable to enter into contracts.14 In this scenario,
both the buyer and the seller are natural persons and are thereby capable of engaging in the
transaction. However, according to current legal standards, an autonomous computer does not
qualify as a contractual party.

Free Consent:

Section 13 of the Indian Contract Act, 1872, defines 'Consent' as "Two or more persons are
said to consent when they agree upon the same thing in the same sense". Section 14 of the act
clearly defines 'Free Consent' as " Consent is said to be free when it is not caused by-

(1) Coercion, as defined in section 15, or

(2) Undue influence, as defined in section 16, or

(3) Fraud, as defined in section 17, or

(4) misrepresentation, as defined in section 18, or

(5) mistake, subject to the provisions of section 20, 21 and 22.

Consent is said to be so caused when it would not have been given but for the existence of such
coercion, undue influence, fraud, misrepresentation or mistake."

This consent must be freely granted. This is a challenging evaluation due to the fact that the
margin used to establish the stringent norm of free consent can become increasingly narrow
over time.

14
Arshiya, “e-contract: a new normal” 2 Indian Journal of Integrated Research in Law 5 (2022).

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 LEGAL FRAMEWORKS GOVERNING E-CONTRACT INDIAN LAW
PERSPECTIVE
Indian Contract Act, 1872

The Indian Contract Act, 1872, is the primary legislation governing contracts in India. It
outlines the fundamental principles of contract formation, including offer, acceptance,
consideration, and lawful object. Although it does not explicitly address e-contracts, its
provisions apply equally to electronic agreements, recognizing them as valid contracts.

Information Technology Act, 2000

Section- 4

Electronic contracts (E-Contracts) and electronic signatures (E-Signatures) are recognized as

valid in India and are regulated by the Information Technology Act of 2000 (IT Act). According
to Section 4 of the IT Act, the requirement for any information or document to be in written,
typewritten, or printed format under any law is considered fulfilled if it exists in electronic
form and is accessible for future reference. Section 4 of the Information Technology Act reads
as:

“section 4: Legal recognition of electronic records.- here any law provides that information or
any other matter shall be in writing or in the typewritten or printed form, then, notwithstanding
anything contained in such law, such requirement shall be deemed to have been satisfied if such
information or matter is–

(a) rendered or made available in an electronic form; and

(b) accessible so as to be usable for a subsequent reference.”15

In light of the aforementioned provisions of the IT Act, Indian courts have upheld the validity
of contracts made in an electronic format on a number of occasions.

Section- 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 or bear the signature of any person, then, notwithstanding anything contained in such

15
The Information Technology Act, 2000 (Act 21 of 2000), s. 4.

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law, such requirement shall be deemed to have been satisfied, if such information or matter is
authenticated by means of [electronic signature] affixed in such manner as may be prescribed
by the Central Government.

Explanation.–For the purposes of this section, ―signed, with its grammatical

variations and cognate expressions, shall, with reference to a person, mean affixing of his hand
written signature or any mark on any document and the expression ―signature‖ shall be
construed accordingly.”16

"The Hon'ble Supreme Court of India had held in the case of Timex International FZE Ltd.
Dubai vs. Vedanta Aluminium Ltd., where the parties had communicated their offer and
acceptance via email in the absence of signed documents, that once a contract is concluded
orally or in writing, the fact that a formal contract must be prepared and initialled by the parties
would not affect the contract."17

"The High Court of Madras applied the provisions of the IT Act to an e-auction in Tamil
Nadu Organic Private Ltd. vs. State Bank of India, finding that contractual duties might arise
through electronic methods and that such contracts might be enforced under law. Section 10A
of the IT Act certifies contracts established with electronic means and Section 10B of the IT
Act permits the use of electronic records and electronic methods for contract conclusion as
long as the contract complies with the Indian Contract Act, 1872.

Therefore, when it comes to contract signing, electronic signatures are regarded as

comparable to traditional wet signings and are legally recognised under Section 5 of the
Information Technology Act.

Section- 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, as the case may be, are expressed in electronic form or by means of an electronic
records, such contract shall not be deemed to be unenforceable solely on the ground that such
electronic form or means was used for that purpose.”

16
The Information Technology Act, 2000 (Act 21 of 2000), s. 5.
17
Timex Internation FZE Ltd. Dubai vs. Vedanta Aluminium Ltd., 2010 3 SCC 1.

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Therefore, when it comes to contract formation in accordance with the Indian Contract Act of
1872 by using electronic form then that contract will be enforceable by law.

Section- 11

“Attribution of electronic records.—An electronic record shall be attributed to the originator—

(a) if it was sent by the originator himself;

(b) by a person who had the authority to act on behalf of the originator in respect of that
electronic record; or

(c) by an information system programmed by or on behalf of the originator to operate

automatically.”

This regulation guarantees that electronic documents can be traced to their source, helping to
avoid conflicts over authorship and liability. This is especially important in situations where
contracts, agreements, or transactions are completed electronically, as it aids in establishing
legal accountability for the document.

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 CASE LAWS RELATED TO E-CONTRACTS
Timex International FZE Ltd. Dubai v. Vedanta Aluminium Ltd.18

Issue: Whether an email exchange between parties constituted a binding contract.

Held: The Supreme Court held that e-mail correspondences demonstrating offer, acceptance,
and consideration constitute a valid contract under the Indian Contract Act, 1872. Since both
parties had agreed on the terms via email and there was no need for a physical signature, the
contract was legally enforceable.

Tamil Nadu Organic Pvt. Ltd. v. State Bank of India19

Issue: Enforceability of an e-contract signed through digital signatures.

Held: The Madras High Court ruled that agreements executed through digital signatures are
legally binding under the Information Technology Act, 2000. This case reaffirmed that digital
authentication methods, like digital signatures, hold the same validity as physical signatures.

LIC India v. Consumer Education & Research Centre20

Issue: Whether standard form contracts (including online contracts) are valid under Indian law.
Held: The Supreme Court emphasized that standard form contracts, including online contracts,
are valid but should not include unfair terms that exploit consumers. This case became
significant for e-commerce platforms that impose unilateral terms in clickwrap and
browsewrap agreements.

Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas & Co.21

Issue: Determining the place of contract formation in electronic communication.

Held: Though the case dealt with telephonic contracts, the principles applied to e-contracts as
well. The Supreme Court ruled that a contract is formed at the place where acceptance is
communicated to the offeror. This principle helps determine jurisdiction in e-contract disputes.

18
(2010) 3 SCC 1.
19
AIR 2014 Mad 103.
20
(1995) 5 SCC 482.
21
AIR 1966 SC 543.

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 CHALLENGES AND ISSUES RELATED TO E-CONTRACTS
Despite the increasing acceptance of e-contracts in various sector of economy, various
challenges and legal issues remain, impacting their enforceability and security.

Authentication and Security Concerns-

One of the major challenges with e-contracts is ensuring the authenticity of electronic
signatures and digital records. While the IT Act recognizes digital signatures, there is still a risk
of forgery, hacking, and cyber fraud, making it difficult to verify the true identity of parties
involved in an electronic transaction.

Jurisdictional and Enforcement Issues-

E-contracts often involve parties from different geographical locations, raising questions about
which court has jurisdiction in case of disputes. Unlike traditional contracts where the place of
execution determines jurisdiction, e-contracts may be executed virtually, leading to ambiguities
regarding applicable laws and enforcement.

Lack of Awareness and Digital Literacy-

Many individuals and businesses, especially small enterprises and consumers in rural areas,
lack adequate knowledge about e-contracts and their legal implications. This results in
hesitation to engage in digital agreements or vulnerability to unfair terms imposed by larger
corporations.

Consumer Protection and Unfair Terms-

Online businesses frequently use standard form contracts (clickwrap and browsewrap
agreements) that may contain unfair terms or hidden clauses favoring service providers. Many
consumers accept terms without reading them, leading to potential exploitation. The Consumer
Protection (E-Commerce) Rules, 2020, attempt to address this issue, but enforcement remains
a challenge.

Data Privacy and Confidentiality Risks-

E-contracts involve the exchange of sensitive information, making them susceptible to data
breaches and misuse. With increasing cyber threats, ensuring the protection of personal and
financial data remains a critical challenge. The Digital Personal Data Protection Act, 2023,

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seeks to strengthen data security measures, but implementation and compliance remain key
concerns.

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 CONCLUSIONS
In recent years the use of e-contract seen substantial increase, by the increase in the e-commerce
transactions as we know online businesses have proliferated around the world.

As we have discussed earlier in this paper about types of e-contracts, in that we have find that
some types of e-contract are favouring business not to the consumers, for example “Shrink-
Wrap Agreements” in this The user is deemed to accept the terms by opening the package or
installing the software. So, for this type of agreement we have to ensure that this type of e-
contract could not become exploitative to the consumer.

As with the increase in the use of e-contract for e-commerce or by appointing online services
like watching movies online, there are need for the enforcement of strict data privacy laws for
ensuring the confidentiality and integrity of data stored in electronic contract is crucial, as cyber
threat and data breaches are a real concern.

With so many challenges of e-contract there are also benefit of this-

Faster execution: E-contracts can be signed and executed quickly, reducing the time spent on
paperwork and administrative tasks.

Automated workflows: Electronic contracts can be automated, streamlining the contracting

process and reducing errors.

Remote access: E-contracts can be accessed and signed remotely, facilitating collaboration and
reducing the need for in-person meetings.

Reduced carbon footprint: E-contracts reduce the need for paper, printing, and transportation,
resulting in a lower carbon footprint.

Due to advancement in technology increasing digital adoption, and favourable government

policies. AI-enabled solutions are boosting clause detection, risk assessments, and contract
lifecycle automation, while blockchain integration is strengthening data authentication, and
traceability. Electronic signatures are becoming increasingly popular, providing an authentic,
secure, and quick way to finalize agreements.

With pros and cons of e-contract we have to develop our economy by ensuring consumer
protection, by securing personal data of consumer, and by making proper laws in this regard.

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 BIBLIOGRAPHY
BOOKS:

1. Dr. R.K. Bangia, Contract-I, (Allahabad Law Agency, India 9th edition 2023).

ACTS:

1. Indian Contract Act, 1872.

2. Information Technology Act, 2000.

WEBSITES:

1. heinonline.org
2. www.scconline.com

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