Home Digital evidence All you need to know about evidentiary value of e-contracts

All you need to know about evidentiary value of e-contracts

June 27, 2024

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This article has been written by Sahiti Somanchi pursuing a Diploma in International Contract Negotiation, Drafting and Enforcement from LawSikho.

This article has been edited and published by Shashwat Kaushik.

Introduction

The era of digitisation has ushered in a new concept known as e-contracts. In this globalised world, with the advancement of technology, e-contracts have become really common, not only for businessmen but also for ordinary people. They have permeated modern day transactions and all of us, at one point or another, have entered into them. Therefore, it is very important to know about the concept of e-contract and its evidentiary standing.

E-contracts also known as electronic contracts or digital contracts, refer to contracts made through electronic means. They are the digital counterpart of a physical contract. In recent years, they have become increasingly prevalent due to digitisation and the growth of online commerce and business. They are very convenient and efficient by allowing the parties to enter into agreements remotely and eliminating the need for physical paperwork. The pandemic further helped in the acceleration of e-contracts.

The legal system in India is focused mainly on physical contracts. In recent years, some laws have been introduced and amendments have been made to include e-contracts and documents.

The main acts that deal with e-contracts in India are the Information Technology Act, 2000, Evidence Act, 1872; and the Indian Contract Act, 1872.

Examples of e-contract

E-contracts have become part of various spheres of modern life, offering ease and effectiveness for both parties involved. Some examples of e- contracts which many of us may have entered into include:

Digital Subscriptions to OTT, media and other educational platforms- This category includes agreements for accessing online streaming services that provide entertainment services such as movies, TV shows, music, etc. Similarly, educational platforms for e-learning purposes also fall into this category.

Eg: Netflix, Spotify

Shopping through online platforms and apps: The purchasing of a diverse range of products, from clothing to electronics and other household items, from online websites and apps also falls under the category of e-contracts.

Eg; Flipkart, Amazon, Myntra

Licence to software and other technology- While purchasing software, the users obtain the right to use the software under certain terms and conditions agreed upon digitally at the time of purchase or download.

Eg: Adobe Photoshop

Employment contract- Nowadays, many employment related documents, such as offer- letters, contracts and HR policies, are exchanged electronically. These agreements outline the terms of employment, compensation, benefits and other details between employer and employee.

Kinds of e- contract

Click-wrap contract

A click-wrap contract is a digital agreement where individuals express their acceptance of the terms and conditions of a website by clicking on an “I agree” button.

Eg- When a user downloads an app or agrees to the terms of service by clicking a button, it is known as click-wrap contract.

To be legally binding, they must be easily available to the user to review before clicking on the agree button.

Shrink-wrap contract

They are most commonly used for software licencing purposes. In these kinds of contracts, this agreement is implied by the breaking of shrink wrapped packaging.

Eg- When a person purchases software, they are required to agree to the terms and conditions before using it.

Browse-wrap contract

Browse- wrap contracts are a type of online agreement where the users are not asked to expressly agree to the terms and conditions. Instead, the terms and conditions are presented to them on a separate web-page or hyperlink. Since the users are not required to acknowledge or agree to the terms and conditions, this type of contract is not enforceable in India.

Essentials of e-contract

An e-contract is a legally acceptable contract if it fulfils all the essentials of a valid contract. The essentials of e-contract are the same as those of a physical contract.

Offer and Acceptance: There should be a valid offer and acceptance done through electronic means.

E.g- The display of products on a website is an invitation to offer rather than constituting offers themselves. The display of products on the website constitutes an invitation to treat. When a user selects an item, puts it in the cart and checks out, they are making an offer. Upon the completion of the transaction, a legally binding contract forms.

Intention to create a legal relationship: The parties must intend to create a legally enforceable contract. The intention should be expressed electronically.

E.g- ticking off a checkbox to signify that the terms and conditions have been read.

Consideration: Consideration is the price paid for a promise in the contract. In e- contracts, consideration can be made through online payment systems.
Contractual capacity: For a contract to be valid, the parties must possess the legal capacity to enter into it, i.e., they must be competent to contract under the Indian Contract Act, 1872.

Eg- many websites, while signing up, require users to confirm if they are over 18 or not, ensuring legal capacity.

Consent: Consent should be genuine and should not have been obtained through coercion, fraud, undue influence, misrepresentation or mistake. In the digital realm, a transparent interface and clear terms are essential to securing proper consent.
Lawful object: The contract must be for a lawful object. Any agreement aimed at illegal activities or that is against public policy would render the contract void.

Eg- Selling illegal things online would not be considered a lawful object and would be considered unenforceable.

Thus, if an e-contract fulfils all the essentials of a valid contract, the electronic medium would not hamper the validity of the contract.

Evidentiary value of e-contracts

Although e-contracts are valid contracts, the courts in India are still hesitant to embrace them. The main reason is the lack of clear legal frameworks, particularly affecting its evidentiary value.

Before the Information Technology Act of 2000, there existed a legal vacuum regarding digital contracts, leading to ambiguity about the legality of e-contracts. Therefore, Indian courts were hesitant to give e-contracts evidentiary value. The basis of e-contracts in India is found in Information Technology Act and Indian Evidence Act

The IT Act laid down the framework for accepting digital records, while the Indian Evidence Act further strengthened its evidentiary value.

The relevant sections of the IT Act 2000 in the context of e-contracts are-

Section 4 of the Act talks about legal recognition of electronic records

Where 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– rendered or made available in an electronic form or accessible so as to be usable for a subsequent reference.

Section 65B of the Act explains the admissibility of digital records

This section deals with the admissibility of electronic records during legal proceedings. It state the conditions with respect to computer output, which are:

65B(2)(a)- The electronic record must have been produced by a computer regularly used for storing or processing information for lawful activities.
65B(2)(b)- The information in the record must have been regularly inputted into the computer during its regular use.
65B(2)(c)- The computer must have been operating properly during the relevant period, without affecting the accuracy of the electronic record.
65(2)(d)- The information in the electronic record must reproduce or be derived from the information fed into the computer during regular activities.
65(4)- During legal proceedings, a certificate signed by a responsible official regarding the production and management of electronic records can serve as evidence.

Section 10A of the Act is about the validity of the contract formed through electronic means

The 2008 amendment of the IT Act provided for e-contracts and gave legal recognition to them. It states that merely because a contract was made through electronic means, it should not affect the validity of the contract.

The Indian Evidence Act, 1872, also contains provisions that strengthen the evidentiary value of e-contracts. In 2008, the Indian Evidence Act, 1872, was amended to include Sections 85A and 85B.

Section 85A of the Indian Evidence Act

Section 85A states that when there is an electronic record that claims to be an agreement and contains the electronic signature of the parties involved, the court shall presume that the agreement was made by the parties signing the contract.

Section 85B of the Indian Evidence Act

Section 85B of the Act deals with presumption as to electronic records and signatures. It states that in a legal proceeding, the court shall presume that a secure electronic record is not altered unless the contrary is proved.

In legal proceedings involving digital signatures, the Court will presume that the e-signature was put there by the person intending to approve the electronic record. This presumption only applies to secure electronic records and signatures.

The other relevant provision is Section 90A of the Act, which was added by the 2000 amendment of the Act.

Section 90A of the Indian Evidence Act

Section 90A of the act talks about presumption as to electronic records five years old. It states that when any electronic record is proved to be five years old and is produced in proper custody, the court can assume that that the electronic signature on the record, which is claimed to belong to a particular person, indeed belongs to that person.

Model law on electronic commerce

The Model Law on Electronic Commerce was adopted by UNCITRAL on June 12, 1996 for the development of international standards relating to e-commerce which also includes E-contracts. It establishes a framework for e-commerce and e-contracts and aims to harmonise the laws relating to electronic transactions across the world. It gives legal recognition to electronic transactions, sets out the principles of electronic contracts and e-signatures and facilitates the electronic delivery of notes and documents.

Need for inclusion of e-contracts in India

In today’s digital age, e-contracts are becoming increasingly important. E-contracts are electronic contracts that are formed and executed electronically, without the need for physical signatures. They are convenient, cost-effective, and environmentally friendly. However, the legal framework for e-contracts in India is not yet fully developed. There is a need for clear and comprehensive legislation that governs the formation, validity, and enforcement of e-contracts in India.

Benefits of e-contracts

Electronic contracts (e-contracts) offer numerous advantages over traditional paper-based contracts. These benefits include:

Convenience and accessibility:
1. E-contracts can be easily created, signed, and stored electronically, eliminating the need for printing, mailing, and physical signatures.
2. They can be accessed from anywhere with an internet connection, making it convenient for parties to review and sign contracts remotely.
Cost-effectiveness:
1. E-contracts reduce the expenses associated with paper, printing, postage, and courier services.
2. They also eliminate the need for physical storage space and the costs associated with maintaining and managing paper files.
Speed and efficiency:
1. E-contracts can be created and executed quickly, streamlining the contracting process.
2. Electronic signatures allow for instant validation, reducing the time it takes to finalise agreements.
Environmental sustainability:
1. E-contracts promote environmental sustainability by reducing paper waste and the carbon footprint associated with traditional contracting methods.
Enhanced security:
1. Electronic signatures and encryption technologies provide a high level of security, making it more challenging for unauthorised individuals to tamper with or forge contracts.
2. E-contracts can be stored securely in electronic vaults, ensuring the integrity and confidentiality of sensitive data.
Legal validity:
1. E-contracts are legally binding and enforceable in most jurisdictions around the world.
2. Electronic signatures are recognised as valid legal signatures, providing the same legal weight as handwritten signatures.
Easier collaboration and negotiation:
1. E-contracts platforms often include collaborative features that allow multiple parties to review, comment, and negotiate contract terms simultaneously.
2. This facilitates efficient communication and can lead to faster contract closure.
Improved record-keeping and compliance:
1. E-contracts are easy to organise, search, and retrieve, making it easier to maintain accurate records and comply with regulatory requirements.
2. Electronic archives ensure that contracts are readily accessible for future reference or audits.
Increased compliance with data protection regulations:
1. E-contracts enable organisations to comply with data protection regulations, such as the General Data Protection Regulation (GDPR), by providing secure storage and processing of personal data.
Flexibility and adaptability:
1. E-contracts can be easily modified or updated as needed, making it easier to accommodate changes in circumstances or requirements.
2. Electronic signatures allow for quick and seamless adjustments to contract terms.

Challenges

Prone to forgery and tampering: In cases of hacking or other unauthorised access, the digital signature of a person can be misused, which may result in the tampering of e-contracts or the creation of fake e-contracts.
Reluctance of judges: A vast majority of the judges in India prefer physical evidence and are sceptical of accepting electronic evidence.
Absence of exclusive legislation: India does not have specific legislation that deals with e-contracts and the existing provisions still do not provide complete clarity.

Recommendations

In order to address the challenges to the development of e-contracts in India, the following recommendations are made:

Enact a comprehensive law on e-contracts: The Government of India should enact a comprehensive law on e-contracts that governs the formation, validity, and enforcement of e-contracts. This law should be based on the UN Convention on the Use of Electronic Communications in International Contracts (2005).
Amend the IT Act to specifically address e-contracts: The Government of India should amend the IT Act to specifically address the use of digital signatures for e-contracts. This amendment should clarify the legal requirements for digital signatures and how they can be used for e-contracts.
Raise awareness about e-contracts: The Government of India should raise awareness about e-contracts among businesses and individuals. This can be done through public education campaigns, workshops, and seminars.

By taking these steps, the Government of India can help promote the development of e-contracts in India and reap the benefits that they offer.

Landmark judgements

Trimex International Fze Ltd. Dubai vs. Vedanta Aluminium Limited, India (2010)

According to the facts of the case, there was an exchange of emails between Trimex International (petitioner) and Vedanta (respondent) regarding negotiations relating to price, quality, quantity, delivery, etc. Vedanta sent an email saying, “We confirm the deal for 5 shipments.” Later, Vedanta refused to honour the contract and stated that there was no binding contract between the parties and therefore the arbitration clause could not be enforced.

The court held that the exchange of emails regarding the offer and the subsequent email from Vedanta confirming the deal for 5 shipments show that a conclusive contract was made.

When the acceptance was sent by Vedanta over email, it satisfied the requirements of communication of acceptance under Section 4 of the Indian Contract Act, 1872.

The court held that even if a contract is made orally or through emails, it would still be a valid contract even though the parties have yet to sign a formal contract.

The court therefore upheld that even in the absence of a signed agreement, a valid contract and arbitration clause can be inferred from the exchange of emails between the parties.

Avnish Bajaj vs. State (2008)

This is a judgement relating to the Delhi High Court to a case relating to the sale of pornographic material on a website. In this case, the Delhi police had evidence of print-outs of emails containing order details of the clip sold online.

The Court held that printouts of electronic communications would be admissible as evidence under Section 65B of the Indian Evidence Act, 1872, as long as it is properly certified by a responsible official.

P.R. Transport Agency vs. Union Of India (2005)

In the present case, the court discussed the principles for determining when an e-contract is complete. It talks about how, in the case of e-contracts, it is not easy to pinpoint the exact location when the contract was formed.

The Court relied on Section 13(3) of the Information Technology Act to determine when an e-contract is completed.

“Save as otherwise agreed to between the originator and the addressee, an electronic record is deemed to be 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.”

Ambalal Sarabhai Enterprise Limited vs. Ks Infraspace Llp Limited (2020)

In this case, the court examined whether the exchange of emails/ and WhatsApp messages between the parties, including the “final draft MOU,” would prove the presence of a concluded contract.

Conclusion

The evidentiary value of e- contracts has undergone significant transformation over time. A few decades ago, they had little to no legal recognition. However, with the enactment of legislation such as the Information Technology Act and amendments in the Indian Evidence act, they have gained some evidentiary value. The judicial pronouncement has further provided clarity on the evidentiary value of the e-contracts. Nevertheless, due to the advancement of technology, the use of e-contracts has increased more than ever. It is evident that the existing laws will not be enough to address the nuances and complexities relating to e-contracts. Hence, comprehensive legislation is required that provides comprehensive guidelines relating to the formation and execution of e-contracts.