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E-Contracts

What is E-Contracts & its uses in Modern Times

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E-Contracts are agreements modelled, signed and executed between parties to the contract electronically, usually over the internet. In this digital world, with advancements in computer, telecommunications and information technology, the way of making a contract has changed a lot. At present, more than half of the world population gets access to technology where computer networks serve as channels between electronic trading across the globe. Generally, contracts are done through the way of writing in letters, but now through an online platform a contract is being made (Known as E-Contract). For example, booking railway tickets online. It is an e-contract.

What is E-contracts:

The electronic contract or online contract is an agreement modelled, signed and executed between parties to the contract electronically, usually over the internet[1]. This E – Contract is very similar to a traditional contract. It is drafted in the same manner in which a traditional paper- based contract is drafted.

E- contracts is any kind of contract formed in the course of e- commerce by the interaction of two or more individuals using electronic means, such as e- mail, the interaction of an individual with an electronic agent, such as computer program, or the interaction of at least two electronic agents that are programmed to recognise the existence of a contract[2]. It is a contract modelled, specified, executed and deployed by a software system[3].

In E- contract there exist 2 parties- 1) Originator and 2) Addressee.

According to the IT ACT, 2008, Originator is a person who sends, generates, stores or transmits any electronic message to be sent, generated, stored or transmitted to any other person and does not include any intermediary[4]. And Addressee means a person who is intended by the originator to receive the electronic record but does not include any intermediary[5].

Kinds of E-contracts:

Commercial contracts can be entered electronically in 2 ways, they are,

  1. – E- Mail contract and
  2. – Contract through website

E- Mail Contract:

The Common method followed by many is entering a contract through the exchange of electronic mail ‘E- mail’. And the other method of making a contract is using websites.

In E- Mail contract, the offer, acceptance and consideration are done through the exchange of various mails between the parties to the contract. In this case, the E-Mail serves the same purpose as normal letters and negotiations between parties are done through E-Mails.

Contract through website:

There exist various kinds of E- contracts, but contracts through websites act as the elementary one, which we agree or disagree with in our everyday life. Contracts through websites are of different kinds, they are,

1. Click wrap agreement:

This is a kind where the end-user comes across a word called “I agree” or “I disagree” tab before proceeding/ continuing to the next progress. While purchasing or selling using the web page, this kind of contract is used.

2. Browse Wrap:

These agreements are those where the terms and conditions are mentioned on the official web page of the product or hyperlink to another website[6].

3. Shrink Wrap:

In this kind, the end-user is provided terms and condition agreement, whereby agreeing to it, the end-user can use the license of the owner. These are generally license agreements.

Essentials of E-contracts:

  1. A valid offer must be provided
  2. The offer must be accepted
  3. Free consent
  4. Lawful consideration
  5. The parties to the contract must be competent to contract
  6. Lawful object & lawful means.

These are the essentials of a Valid E- contract. An offer is revocable until the acceptance is made.

Validity of E-Contract:

Various sections of Indian Evidence Act and Information Technology Act have recognised electronic contracts. Section- 65 of Indian Evidence Act deals with the admissibility of electronic records[7]. Section 85A, 85B, 88A, 90A and 85C of the Indian Evidence Act deals with the presumptions as to electronic records. To confirm the validity of electronic contracts, Section 85A was inserted.

In 2008 the Information Technology Act was amended where Section 10A was inserted which states that “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 electric 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”[8].

Legal issues involved in E-contracts:

Is e- contract a valid contract:

In general, the law of contracts does not impose any restrictions or requirements for the form of the contracts in order for a contract to be valid. E- contract and traditional/ normal contract are similar, the only difference is the platform in which the contracts are made. A valid offer, acceptance, consideration is enough to constitute a contract. So, an offer sent by email and approval received in response with consideration forms a valid e-contract.

How can an electronic record be attributed to the originator?

According to Section 11 of the Information Technology Act, 2000– the electronic record can be attributed to the originator[9],

  • If it was sent by the originator himself.
  • By a person who has authority to act on behalf of the originator has sent the electronic record
  • An electronic system has been sent by an information system programmed by or on behalf of the originator[10].

How to determine the acknowledgment of an electronic record when the originator has not agreed with addressee regarding acknowledgment of receipt?

According to Section- 12(1) of the Information Technology Act, 2000– Acknowledgment of receipt[11],

  • Any communication done by the addressee to the originator either electronically or otherwise
  • Through any conduct by the addressee to originator is sufficient to indicate that the electronic record has been received.

How to determine the time and place of dispatch of an electronic record?

Section 13 of the Information Technology Act, 2000 deals with time and place of dispatch and receipt of an electronic record. The dispatch of an electronic record gets complete when it enters the computer resource of the addressee as to outside the control of the originator[12].

According to Section 13(2) of Information Technology Act, 2000[13], the time of receipt of an electronic record shall be determined as follows,

 a.If the addressee has designated a computer resource for the purpose of receiving electronic records,

    i. Receipt occurs at the time when the electronic record enters the designated computer resource

   ii. If the electronic record is sent to a computer resource which is not the designated computer resource, receipt occurs when the electronic record is retrieved by the addressee.

 b. If the addressee has not designated a computer resource along with specified timing, if any receipt occurs to the computer resource of the addressee.

If the originator or the addressee has more than one place of business, then the principal place of business is considered as the place of business. If the originator or addressee does not have a business then the place of residence/ the place where it is registered is considered as the place of business.

Some other issues in E- contracts are,

Capacity to contract:

The basic requisites for a valid contract is to be a competent person. Often it is a nameless individual who enters into an e- contract and the service provider has no idea about the person. If a contract was made with a person who is not competent to contract (as per section 10,11 and 12 of the Indian contract Act, 1872), the said contract becomes void.

Free consent:

Free consent is an essential requirement which is to be satisfied for a valid contract. In e-contract, the service provider provides terms and conditions and asks the end-user to either agree or disagree. But, the problem arises with consent. None knows whether the end-user has done any act with his consent or under control.

And in click-wrap and shrink-wrap contracts, the end-user has no opportunity to negotiate the terms and conditions, they have to accept the contract before the completion of the purchase.

Decision on the court jurisdiction:

E- contracts give wide scope for the cause of action arising at very many geographical locations[14]. This might lead to filing of cases at different locations which could be a frustrating thing for defending lawsuits. So, the choice of forum clause should be included in all online contracts which limit the jurisdictions.

As per section 13 of the Information Technology Act, an electronic record is dispatched at the place where the originator has his place of business and is deemed to be received at the place where the addressee has his place of business[15].

Remedy for Breach of E-contract:

There exist no specific law or rule in case of breach of online contract but remedies which are available for breach of contract can be followed for e- contract. The Indian contract Act talks about two remedies such as Damages and Quantum meruit. Under specific relief Act, there exist remedies such as specific performance of contract and injunction (restricting the other party from making breach/violation of contract).

The victim/suffered person because of breach of contract shall file a suit against the other party where damages or compensation will be provided.

Conclusion:

E- contracts are those contracts that are modelled, signed and executed electronically over the internet. The requisites and remedies for e-contracts and traditional contracts are the same. But with e-contracts, there exist more issues than contracts. Some of the issues involved in e-contracts are mentioned above. 

Endnotes

[1] http://www.slideshare.net/mobile/gagandeepkaur301/cyber

[2] http://www.slideshare.net/mobile/gagandeepkaur301/cyber

[3] http://www.legalservicesindia.com/articles/ecta.htm

[4] http://m.grin.com/document/427203

[5] Section- 2(b) of Information Technology Act, 2000

[6] http://www.slideshare.net/mobile/gagandeepkaur301/cyber

[7] http://devgan.in/iea/section/65/

[8] http://indiankanoon.org/doc/123351751/

[9] http://indiankanoon.org/doc/375524

[10] http://www.lawctopus.com/academike/legal-issues-involved-e-contracts/

[11] http://indiankanoon.org/doc/1968067/

[12] http://www.lawctopus.com?academike/legal-issues-involved-e-contracts/

[13] Section- 13(2) of Information Technology Act, 2000

[14] http://www.researchgate.net/publication/3302812

[15] Section 13 of Information Technology Act, 2000

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Karthikeyan P

Student, Central Law College

Karthikeyan is a 3rd-year law student of The Central Law College. His areas of interest are IPR, contract law and constitutional law. He is an enthusiastic knowledge seeker and a hard worker. For any clarifications, suggestion and feedback you can reach him at spkarthikeyansuvi@gmail.com

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