This article is written by Samridhi Chauradiya and edited by Nishka Kamath, Team LawSikho.
It has been published by Rachit Garg.
Table of Contents
Introduction
Gone are those days when contracts were entered into by sophisticated, literate adults. Nowadays, you might have witnessed a 6-year-old using their parents’ phone to play games or do other random stuff. Recently, there was this news about how a kid had ordered 1000$+ worth of stuff online from his father’s card and that order could not be cancelled. So now in this particular case, on whom shall the burden of proof lie as to prove that the contract was invalid because was entered into by a minor. Let’s find out about this with the essentials of a valid online contract that are covered briefly in this article.
What is an online contract
Online contracts, commonly known as “e-contracts” are those contracts formed between two or more individuals via any electronic means like emails, computer programmes, an application, or an electronic agent. They may also be formed between two electronic agents that are programmed to recognize that a contract exists. The most important factor involved in online contracts is that such contracts take place via digital modes of communication, thus avoiding the involvement of any middlemen. In India, online contracts are governed under the Indian Contract Act, 1872, the Information Technology Act, 2000, the Code of Civil Procedure, 1908, amongst other laws.
Components of online contract
For an online contract, the following components are of utmost importance:
- An offer must be made.
- The offer has to then be acknowledged by the other party/parties.
- There has to be some legal consideration.
- Further, there has to be an intention between the parties to create lawful relations.
- The parties must be able to and have the capacity to contract.
- There must be free and unaffected consent between the parties.
- The object of the contract has to be legitimate.
- There must be conviction and possibility of performance.
Essential elements of online contracts
Essential elements of online contracts are the same as physical contracts i.e., offer, acceptance, lawful consideration, consent, and capacity of parties who enter into the contract.
Let us have a look at each of them in the context of online contracts.
Importance of consent in online contracts
You may have observed that workers and senior citizens are using smartphones these days, but there is a higher chance that they might not have reading and writing proficiency in the English language. So when they download a mobile application and just give consent or click ‘I agree‘ button to give access to their contacts, access to reading messages there is a higher chance that they might not be aware as to what they are giving consent to and later if they are defrauded or have an issue with a mobile application misusing their data how will they prove that they did not give access knowingly or they did not understand what they were agreeing to.
How will an illiterate prove that he was not aware of what he was giving consent to when he was downloading or using a particular mobile application most mobile applications or software have their terms and conditions in the English Language.
Essential elements of online contracts under the Indian Contract Act of 1872
Section 3 and 4 of the Indian Contract Act, 1872
Section 3 deals with the communication of proposals, the acceptance of proposals, and the revocation of proposals and acceptances.
Section 4 lays down conditions and examples for when the communication of a proposal is complete. It states that the communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.
As per Sections 3 and 4 of the Indian Contract Act, 1872, there is no specific provision for communicating an offer and acceptance. A mere click on the “I agree” button on the web page can have you enter into a contract. So, if Mr. A visits the website of ‘Flopkart’ which uses cookies to track its users, and Mr. A clicks “I agree” option for the use of cookies, then such acceptance can be termed as valid acceptance.
Section 5 of the Indian Contract Act, 1872
Section 5 states that a proposal can be revoked at any time before its communication of acceptance is complete, as against the proposer. So once Mr. A clicks on the option “I agree” on the website ‘Flopkart’ for the use of cookies and submits it, then such acceptance cannot be revoked.
Section 10 of the Indian Contract Act, 1872
Section 10 states that if the agreement is made with the free consent of parties competent to contract for a lawful consideration and with a lawful object and is not expressly declared to be void, then it is a contract. So if Mr. A, who is 18 years of age and of sound mind, has ordered a mobile phone from the e-commerce website ‘Flopkart’ and has consented to it and made payment online, then it is a valid contract.
Example of consent
If Mr. A understands only native languages such as Hindi and he wants to open an account on a video streaming website. There might be a possibility that the “I agree” button that he is clicking on has a description only in English. If later he wants to sue that website for the subject matter already mentioned in that online contract, he won’t be able to, as ignorance of the law cannot be excused.
Section 11 of the Indian Contract Act, 1872
Section 11 lays down provisions for persons who are competent to enter into a contract. If Mr. A, a 17 year old, enters into a contract with the website ‘Flopkart’ then, the burden of proof shall lie on Mr. A to prove that he was not a competent party at the time of entering into the contract with the website ‘Flopkart’, in case this contract becomes subject matter of dispute in court.
Section 12 of the Indian Contract Act, 1872
As per the provisions of Section 12, if the person is of unsound mind at the time of making the contract, then such a contract cannot be enforced. In the case of online contracts, it is difficult to find out whether a person is of sound mind or not. The burden of proof should lie on the person who has entered into a contract online to prove that he was of unsound mind or was unable to understand or form a rational judgement at the time of clicking and submitting the “I agree” button.
Section 23 of the Indian Contract Act, 1872
Further, Section 23 states that every agreement whose object or consideration is unlawful is void. For example, if Mr. A visits a link on the dark web and pays Rs 5,00,000 against the delivery of drugs, then such an agreement is void as the payment of consideration is unlawful. Hence, even though Mr. A does not get delivery of the drugs even after payment of consideration, such a contract cannot be enforced as it is void ab initio.
Section 28 of the Indian Contract Act, 1872
As per the provisions of Section 28, agreements that restrain a person from enforcing his rights through a legal proceeding are void. So say, if Mr. A is restrained from filing a suit against the website ‘Flopkart’ even if it delivers bad quality products and refuses to take back, pick up, or exchange such defective/damaged goods expressly through its terms and conditions displayed on its website, then such a contract is void as it restricts Mr. A to file a suit against the website ‘Flopkart’.
In simple words, any clause or terms in a contract that does not allow a party to file a suit against the other party, will be termed as a void agreement.
Information Technology Act, 2000
The Information Technology Act, 2000, has made certain provisions for the validity and formation of online contracts, but there is no specific legislation for the validity of online contracts in India per se.
Section 4 of the Information Technology Act, 2000
Section 4 gives legal recognition to electronic records for subsequent reference. When the Indian Contract Act, 1872, came into force, no provision was made to give legal recognition to contracts entered by a person online by clicking the “I agree” button because computers did not exist then. With the advancement in technology, we can see that jurisprudence has evolved as well.
Section 75 of the Information Technology Act, 2000
Section 75 is applicable to offences and contraventions committed outside India that involve a computer, computer system, or computer network located in India. So if Mr. A, a UK resident, uses an Indian IP address to commit online banking frauds, then such an offence can be charged and tried in an Indian court as per Section 75 of the Information Technology Act, 2000, as an Indian IP address was used to commit online banking fraud.
Essential elements of online contracts under the Indian Evidence Act, 1872
Section 65B of the Indian Evidence Act,1872
Section 65B allows information contained in an electronic record to be deemed evidence if it satisfies the conditions mentioned in that Section. So if a transaction between Mr. A and the website ‘Flipkart’ generates an online record, then the same shall be considered evidence as per the provisions of Section 4 and Section 65B of the Indian Evidence Act, 1872.
Section 85A of the Indian Evidence Act,1872
As per the law laid down in Section 85A, if an electronic record is affixed with an electronic signature by the parties involved, then such a record shall be presumed to be an “e-agreement.” This gives validity to the income tax returns filed online and verified by DSC.
Section 85B of the Indian Evidence Act,1872
As per the provisions of Section 85B, it shall be presumed by the court that the secure electronic record has not been altered and it is authentic from the point of time to which the secure status relates unless the contrary is proved. So, if Mr. A has verified his income tax return and is later prosecuted for Income Escaping Assessment for that specific return, then Mr. A cannot plead later that he did not file and verify the income tax return under dispute because the court shall not doubt the integrity and authenticity of the return unless the contrary is proved.
Section 85C of the Indian Evidence Act,1872
As per the provisions of Section 85C, it shall be presumed by the court that the subscriber information listed in the Digital Signature Certificate (DSC) is correct unless the contrary is proved. As per the author’s interpretation, the burden of proof lies on the person who objects to such DSC and its use, he shall have to prove the ineligibility.
Essential elements of online contracts under the Code of Civil Procedure, 1908
Section 13 of the Code of Civil Procedure, 1908, lays out conditions when a foreign judgement is not conclusive. Mr. A, a resident of India, living in Mumbai, orders goods from the website ‘Flopkart,” registered at its principal office in California, United States of America. If these goods are found to be defective, Mr. A can file a suit in an Indian court or a U.S. court. If Mr. A files a suit in the Court of California and receives a judgement, then such a judgement shall not be conclusive and can be appealed, or a fresh case can be filed in Indian court if it does not satisfy the conditions specified in Section 13 of the CPC.
Important case laws on online contracts
Trimex International FZE Ltd. Dubai v. Vedanta Aluminum Ltd. (2010)
In this case, the Hon’ble Supreme Court that offer and acceptance conveyed via email will be deemed to be valid.
Tamil Nadu Organic Private Ltd. and Ors. v. State Bank of India (2019)
In this case, the Madras High Court applied several laws pertaining to the IT Act, 2000, and stated that contractual liabilities can arise by any electronic means and that such contracts will be valid and enforceable in the eyes of law.
State of Punjab and Ors. v. Amritsar Beverages Ltd. and Ors. (2006)
In this case, the Apex Court observed that the computer outputs on media, papers, and other magnetic forms are admissible under Section 63 of the Indian Evidence Act.
Conclusion
To bring this article to a conclusion, the author has tried to interpret all the important sections relating to communication and acceptance of proposals online through websites and how an individual can use them in different scenarios. The author has tried to explain when communication of a proposal is completed online if a minor enters into a contract online on a website, and if that becomes a subject matter of dispute as to whom the burden of proof lies.
Further, how the elements of valid contracts are satisfied in the case of online contracting has been demonstrated in this article by way of examples. There would always be a conflict in determining the jurisdiction for online contracts because the laws of each country are different. The settled position with regard to the burden of proof in contracts won’t be altered in online contracts because Ignorance of law cannot be excused. The website and applications these days take various permissions and age declarations, such as “this site can only be visited by adults,” etc. You do not just waive off your responsibility by saying that, “I was not having my mobile or DSC with me when the contract was entered.” You are responsible for the consequences that result due to the use of your mobile device and DSC. Hence, report to the police as soon as you lose your phone, DSC, or any other electronic device.
Moreover, online contracts, also known as e-contracts or digital contracts, are now used in our day-to-day lives. It has several advantages, like the fact that it saves a lot of time that would have otherwise been spent commuting from one place to another, it also saves money as there is no need to be present in person to form a valid contract.
Frequently Asked Questions (FAQs) on online contracts
Are online contracts legalised in India?
As long as a contract serves all the essentials of a valid contract, any contract, no matter what type of contract it is, will be legal. So, to answer the question, online contracts are legal in India, provided they fulfil the conditions of an essential contract.
Why are online contracts needed?
In order to get into an agreement and eventually sign a contract with an individual(s) residing far away from one of the parties to the contract, one can opt for an electronic contract for getting into a contract with the other party/parties.
References
- The Indian Contract Act, 1872
- The Code of Civil Procedure,1908
- The Indian Evidence Act, 1872
- The Information Technology Act, 2000
- https://legalstudymaterial.com/e-contracts/#Case_laws_on_electronic_contracts
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