Insights & Research

e-Contracts: Are they Legal and Enforceable in India ?

e-Contracts: Are they Legal and Enforceable in India ?


e-Contracts: Are they Legal and Enforceable in India ?

Introduction:

 

In the time of social distancing and virtual business meetings, electronic contracts (e-contracts) are gaining momentum as an alternative to the conventional paper-based contracts. Right from ordering food from Zomato to booking flight tickets online via MakeMyTrip, innumerable things in our day to day lives are governed by e-contracts. People from all walks of life are knowingly or unknowingly entering into e-contracts in everyday life. In this article, I would like to touch upon the legal aspects of e-contracts, its types, modes of e-contracts and their enforceability in India.

 

What is e-contract:

 

E-contracts are simply contracts that are not paper-based but rather in electronic form. In the digital age, the whole transaction can be completed in seconds, with both parties simply affixing their digital signatures or clicking to a hyperlink to an electronic copy of the contract. Hence e-contracts are born out of the need for speed, convenience, and efficiency. There is no need for delayed couriers and additional traveling costs in such a scenario. There were initial apprehensions amongst the legislatures to recognise and enforce this modern technology, but now many countries including India have enacted laws to recognise electronic contracts.

 

Legal framework for e-contracts in India:

 

In India, contracts are governed and based on The Indian Contract Act, 1872. It governs how the provisions in a contract are implemented and codify the effect of a breach of contractual provisions. E-contracts are also governed by the basic principles provided in the Contract Act. Globally, in 1996, the United Nations Commission on International Trade Law (UNCITRAL) adopted the Model Law on Electronic Commerce to bring uniformity in the law in different countries. Based on this, India enacted the Information Technology Act, 2000.

 

Section 10A of the Information Technology Act,2000 expressly provides for the validity of contracts formed through electronic means and 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 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.”

 

Essentials of an e-Contract:

 

The only essential requirement to validate an e-Contract is that it should comply with the necessary prerequisites provided under the Indian Contract Act, 1872. Which are:

 

  • Lawful purpose and consideration - A contract is enforceable by law only when it is made for a lawful purpose and for some consideration. It shall not be in violation with any provision of law and must not be fraudulent in nature.
  • Offer and unconditional acceptance - which may be made online or by e-mail communication.
  • The capacity to contract and free consent - Parties to a contract are capable of entering into a contract, if they satisfy the requirements stipulated in Section 11 and 12 of the Indian Contract Act, 1872 capacity to contract, and consent of the parties must be free as per Section 13 of the Indian Contract Act, 1872.

Admissibility of e- agreements as evidence:

 

Under the Evidence Act, 1872, e-contracts has the same legal effect as a paper-based agreement. Section 3 of the Evidence Act defines “evidence” as “all documents including electronic records produced for the inspection of the court.” Section 65B(1) of the Evidence Act provides that "any information contained in an electronic record which is printed on a paper, stored, recorded or copied in optical or magnetic media produced by a computer shall be deemed to be also a document and shall be admissible in any proceedings, without further proof or production of the original, as evidence of any contents of the original or of any fact stated therein of which direct evidence would be admissible”.

 

Specific Exclusions from e-contracts

 

In particular, the Information Technology Act 2000 excludes electronic transactions and agreement on the following documents:

  • Negotiable Instruments
  • Power of Attorney
  • Trust Deed
  • Will
  • Sale Deed or Conveyance deed concerning the immovable property of any documents relating to any interest in an immovable property.

How e-Contracts can be entered into:

 

E-Contracts can be entered into through various electronic modes such as e-mail, website forms, digitally signed document docu, and fax, etc.

 

  • E-mail: Offer and acceptance can be made and exchanged through e-mail, or can be combined with paper documents, faxes, telephonic discussions, etc.

 

  • Website Forms: The seller can offer goods or services (e.g. air tickets, software, clothings etc.) through their e-commerce website. A customer places his order by filling and transmitting the order form provided on the e-commerce website. The goods may be physically delivered later (e.g. in case of apparels, movie CDs, etc.) or be immediately delivered electronically (e.g. e-tickets, software, mp3, etc.).

 

  • Online Agreements: Users may need to accept an online agreement to be able to avail of the services e.g. while installing a software, clicking on “I accept” or while signing up for an email account, clicking on “I agree” constitutes an agreement.

 

  • Digitally signed documents: An online document / agreement in PDF or hyperlink format may be digitally signed by the parties of an agreement by affixing their personal digital signature certificates.

Common Types of e-Contracts in e-commerce business.

 

In electronic commerce (e-commerce). Browse wrap, shrink wrap, and clickwrap are common types of agreements used by the e-commerce and service providers.

 

1. Browse wrap agreement: Under a Browse wrap agreement, a hyperlink containing the terms and conditions regarding the usage of the website is posted on the website. These terms and conditions usually state that by the usage of the website, the person has consented to be bound by the terms and conditions stated therein. For example, electronic commerce websites such as Amazon and Flipkart display a hyperlink on their websites under the tab of “Terms and conditions” and “Terms of Use” respectively. When one clicks on the hyperlink, it will direct you to a page displaying the terms and conditions in detail. These terms and conditions usually contain a statement to the effect that by accessing, browsing, or otherwise using the website, you indicate your consent to all the terms and conditions mentioned therein.

 

2. Shrink-wrap contracts: These are license agreements or other terms and conditions which can only be read and accepted by the consumer after opening the product. The term ‘shrink-wrap’ describes the plastic wrapping used to coat software boxes, though these contracts are not limited to the software industry.

 

3. Clickwrap agreement: A clickwrap agreement is mostly found as part of the installation process of software packages. It is also called a clickwrap license or "click-through" agreement. The term"clickwrap" derived from the use of "shrink wrap contracts" in boxed software purchases. Click-wrap agreements can be of the following types:

 

  • Type and Click: here the user have to type "I accept" or other specific words in an on-screen box and then click a "Submit" or similar button. This displays user's acceptance of the terms of the contract. A user cannot download or view the target information without following these steps.
  • Icon Clicking: here the user must click on an "I agree” or “OK"button on a dialog box or pop-up window. A user indicates rejection of terms and conditions by clicking “Cancel” or closing the window.

Upon rejection, the user can no longer use or purchase the product or service. A clickwrap contract in other words is a “take-it-or-leave-it” type of contract that lacks bargaining power. The terms of service or license may not always appear on the same webpage or window of the particular website, but they must always be accessible before acceptance.

 

Conclusion

 

Indian laws are not reluctant to the idea of e-contracts and the courts have consistently upheld the validity of e-contracts provided they satisfy the prerequisites of the Indian Contract Act. However, many aspects of an e-Contract, in particular, the requirements of signature, stamping, remain uncertain and confused among the general public that comes in the execution of e-contracts in regular business transactions. But It appears that the current crisis of COVID-19 and the new trend of digitalization will eventually force people into accepting contracts in electronic modes and our legal system has already set in motion the required laws for recognition and enforcement of such contracts. It would be safe to conclude that an era of e-contracts is going to take over the traditional mode of execution of a contract, either willingly or unwillingly in the coming years.