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E-contracts and its Validity in India

January 24, 2023

Electronic contracts are the contracts which take place through e-commerce, without meeting of the parties to the contract. These contracts are generally very similar to the paper based commercial contracts

Electronic contracts are the contracts which take place through e-commerce, without meeting of the parties to the contract. These contracts are generally very similar to the paper based commercial contracts in which the commercial transactions conducted and concluded electronically. With the advancement of technology and the globalization, it has accelerated the presence of e-commerce companies throughout the world.

Kinds of E-Contracts

1.Browse Wrap Agreements

This agreement is considered as a browse wrap agreement which is intended to be binding upon the contracting party by the use of the website. These include the user policies and terms of service of websites such as Flipkart or E-bay and are in the form of a “terms of use”, a “user agreement” or “terms of service”, which can be used as the links at the corner or bottom of website.

2. Shrink Wrap Contracts

These contracts are the license agreement by which the terms and conditions of the contract are enforced upon the contracting parties and are usually present on the plastic or in manuals accompanying with the software products which the consumer buys.

3. Click Wrap Agreements

These agreements require the user to give his consent to the terms and conditions which are known as end user agreement and governs the licensed usage of the software by clicking “Ok” or “I agree” button. There are certain kinds of check which ensures that the terms of the agreement are binding upon the contracting parties. These are as follows:

1.The user agreement or the terms of service must be specifically conveyed to the party. By simply inserting a link to the terms on the website without drawing any attention of the user shall not be considered as the intimation to user. Therefore, if the user continues to use the website after the intimation of the terms shall be considered as the acceptance of the contract.

2.The terms of the agreement should not be changed if the user has given his assent for the particular action.

3.The changes made to the terms of the agreement must be specifically intimated to the user which providers a user to give a fresh consent for the modifications in the terms. In case the user does not agree to the changes then he has the option to leave the website at that very moment

Execution of E-contracts

The recognition and regulation to E-Contracts is provided by various laws such as Information Technology Act, 2000 and the Indian Evidence Act, 1872. The provisions in the I.T. Act mention about the attribution, acknowledgement and dispatch of electronic records and secured electronic procedures.

The IT Act recognizes the basic features of the contract such as the communication of the proposals, acceptance of proposals, revocation of proposals and acceptances, as the case may be which could be expressed either in electronic form or by means of an electronic record.

Further, the recognition of a contract is accorded under the Indian Evidence Act, by which the term “document” includes 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. Such information are in conformity with the conditions of Section 65B of the Act which shall be admissible in any proceedings, without any further proof or production of the original document before the concerned authority and shall be regarded as an evidence of any content of the original or any fact stated therein of which direct evidence would be admissible.

Electronic Signatures

The Information Technology (Amendment) Act, 2008 has substituted the term ‘digital signature’ with the term ‘electronic signature’. A digital signature is the technology specific and is irreversibly unique to both the document and the signer. However, an electronic signature is technology unbiased and general in nature. However, there is no standard for electronic signature. It can be either a typed name or digitized image of hand written signature. The substitution of the term ‘digital signature’ with ‘electronic signature’ is meant to expand the scope of E-contracts in an e-commerce world.

Recognizing the change in the execution of commercial transactions the Supreme Court disregarded the argument that exchanges over e-mail did not qualify as contracts and held that “Once the contract is concluded orally or in writing, the mere fact that a formal contract has to be prepared and initialed 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 initialed.”Thus, the e-mails which convey the clear intention of the contracting parties can be treated as a binding contract

Validity of Electronic Contracts in India

The Indian Contract 1872 has recognized the traditional agreements which include the oral contracts made by the free consent of the contracting parties who are competent to contract for the lawful consideration with a lawful object and are not expressly declared to be void. Hence, there is no provision in this Act which prohibits the enforceability of electronic agreements provided that the essential elements of the valid contract must be present in such agreements.

The free consent is considered as the main characteristics of the valid contract. Generally, there is no scope for negotiation on E-contracts. The option of “take it or leave it” transaction is always available to the user.

There are various cases where the Indian Courts have dealt with validity of the e-contracts such as negotiation of the terms of the contract. In the case of LIC India vs. Consumer Education and Research Centre, the Supreme Court had held that “In dotted line contracts there would be no occasion for a weaker party to bargain as to assume to have equal bargaining power. He has either to accept or leave the service or goods in terms of the dotted line contract. His option would be either to accept the unreasonable or unfair terms or forgo the service forever.

Trimex International FZE vs Vedanta Aluminum Limited, India, 2010 (1) SCALE 574

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