This article is written by Ronika Tater, a student of University of Petroleum and Energy Studies, School of Law. In this article, she discusses the role of the Indian Contract Act on e-contracts and thereby, highlighting the present scenario and changes brought forward in the traditional execution of the contract to electronic execution of the contract.
In today’s technology era, the lives of individuals have shifted from physical mode to online mode. This has made the contractual transaction ease and convenience to access at any place in the world. The electronic or e-contracts provide a platform to make agreements and transactions electronically in the direct absence of the parties. Its objective is to make the legally binding contracts at a faster speed with the use of technology and also used for different assorts including but not limited to digital signatures, e-filing income-tax returns, academic admission form, paying bills, etc. With the increase in economic growth and development, business organizations are realizing the importance and effectiveness to conduct electronic commerce, electronic contracts and e-signatures through technology. Hence, while conducting any electronic translation one should be aware of the different types of e-contracts.
What is an agreement?
A contract under The Indian Contract Act, 1872 embodies the principle of English common law on the statutory form or through judicial precedent in cases where the Contract Act does not cover a situation. The principles of English law are based on justice, equity and good conscience may be applied in this country. Nevertheless, the Indian conditions are different. As per the Indian Contract Act, the contract is defined as “An agreement which is enforceable by law”.An agreement is the first and vital essence of a contract. As per Section 2(e) of the Indian Contract Act, “Every promise and every set of promises, forming the consideration for each other, is an agreement”.
According to Salmond, “A contract is an agreement creating and defining an obligation between two or more persons by which rights are acquired by one or more acts or forbearance on the part of others”.
Contract as per Indian Contract Act, 1872
According to Section 10 of the Indian Contract Act, “All agreements are contract if they are made by the free consent of the parties, competent to contract, for a lawful consideration with a lawful object and are not expressly declared to be void. However, the Section does not per se include an electronic contract.
Essentials of a valid contract
The following are the essentials of the contract:
- Offer and acceptance – An agreement results when two or more parties agree upon the same thing in the same sense. When an offer is accepted in the same sense an agreement comes into being. In the case of, Carlill v. Carbolic Smoke Ball Co., it was held that a contract is an agreement enforceable by law and it is the result of a proposal and acceptance of the proposal when two minds come together.
- Consent– The contract should be made with the consent of two or more parties, “consensus ad idem” and devoid of coercion, undue influence, fraud, mistake or misrepresentation as defined in Sections 15 to 22 of the Indian Contract Act. If consent is in consideration of any of the following it is voidable at the part of the party and consent by mistake is void from the beginning of the contract. In Andhra Sugars Ltd & Another v. State of Andhra Pradesh & Others, the factory zone makes an offer and the occupier of the factory gives his consent. The resulting agreement is made in writing and signed by both parties.
- Competency of parties– Competent parties mean the legal ability of the parties to enter into a valid contract. In the case of Mohri Bibi v. Dharmodas Ghose, an agreement with a person who is a minor or below the age of 18 years, such an agreement is void ab initio. As per Section 11 of the Indian Contract Act which specifies the following qualification that every person should fulfil are as follows:
- Is of the age of majority as per the law; and
- Sound mind; and
- Not otherwise disqualified from contracting by any law.
- Lawful consideration and object– The consideration and object of the agreement should be lawful and about ‘quid pro quo’. It is mentioned under Section 23 of the Indian Contract Act which states that the consideration or object of an agreement is lawful unless it is forbidden by law; which contrary to the provisions of any law; fraudulent; involves harm to the party or his property; against the principle “Ex turpi causa non oritur action“. Henceforth, every agreement of which the consideration and object are unlawful is void. In Union Carbide Corporation and Others v. U.O.I and Others, it was held that a contract opposed to public policy is void and against the provisions under Section 23 and 24 of the Indian Contract Act.
- Not expressly declared to be void – Every enforceable agreement should be lawful and shall not be which the law declares to be either illegal or immoral; be void. Such an agreement is expressly and impliedly prohibited by law.
Electronic contract as per the Information Technology Act, 2000
The Information Technology Act 2000 (IT Act) provides the provision in the legislation around e-commerce, electronic contracts and digital signature in India. It provides the legal structure for e-commerce by recognizing electronic records and e-signatures. Section 10A of the IT act states the legal validity of electronic contracts in India. However, the Indian Contract Act, 1872 does not include electronic contracts, but the IT act provides the same. Section 10 of the IT Act was added in the act through the amendment made in 2008. This amendment is similar to Section 11 of the UNCITRAL Model Law on Electronic Commerce 1996. Section 10 A states the validity of the e-contract and defines it as:
“Where in a contract formation, the communication of proposals, the acceptance of proposals, the revocation of proposals and acceptances are expressed in electronic form or through an electronic record, such contract shall not be deemed to be unenforceable solely because such electronic form or means was used for that purpose”.
Exclusion of e-contract as per the IT Act
The Information Technology Act excludes the following documents from entering into the electronic transactions and agreement:
- Negotiable instrument;
- Power of Attorney;
- Trust deed;
- Sale Deed or Conveyance concerning the immovable property.
How can we enter into an electronic contract
The following provides the way through which we can enter into e-contracts:
- Email– one of the essences of contract offer and acceptance can be made and exchanges with e-mail, combined with paper documents, faxes and telephonic discussions etc.
- Website forms – the seller can offer goods and service through their website and the consumers as per his choice place the order by filling the details and placing the words with the transaction made through the portal. The goods can be delivered through both the physical delivery as well in softcopy.
- Online agreements- to avail of the service provided by a specific website the user is required to click on the “ I accept” or signing up for an email account, this constitutes an agreement.
- The electronic signature of the document– in the present times, due to restriction all over the world, important documents cannot be authorized without the appropriate authority signature on it. Thus, the digital signature signed by the authorities of the parties to an agreement by affixing their digital signature certificate played an important role.
What are the browsewrap agreements?
Browsewrap agreement is a hyperlink or website containing the terms and conditions covering the access or the usage of the materials available on a website or downloaded product. These terms and conditions state that by the usage of this website one person agrees to accept the terms and conditions on the web page and the person has consented to be bound by the terms and conditions as stated.
For example, some of the electronic commerce websites such as Amazon and Paytm display a hyperlink in their official website stating the terms and condition and it contains a statement in the aspect that by accessing, browsing or using the website, it is inclusive you consent to all the terms and conditions mentioned in their website. However, most of the time, the terms and condition of the website are mentioned in the browsewrap explicitly displayed but the existence of browsewrap is hidden or not seen on the website page. This may lead to conflict in the future.
Are they enforceable?
An agreement through the website binds the user to the website’s terms and conditions while browsing the website. It doesn’t need any explicit consent from the user, unlike click-wrap agreements. In the browsewrap agreement, it is deemed that the user has accepted the terms and conditions. Thus, courts have discovered that it is not a binding or enforceable contract unless the website owner produces evidence that the user had actual knowledge of the terms and conditions consented through the website.
However, in the case of, Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas, it was held that an oral contract is as much valid as a written contract; the only condition is they should comply with the essential of a valid contract. In this case, it was observed that ordinary it is the acceptance of offer and intimation which forms a contract binding and this intimation should be through some external manifestation. Hence, in the absence of any specific legislation enforceability of e-contracts cannot be challenged.
What are the other types of e-contract?
In the recent crisis of pandemic, social distancing and virtual business meetings are the new norms leading the electronic contract as an alternative to the existing conventional paper-based contracts. In electronic commerce and trade, various types of the agreement such as Browsewrap, Shrinkwrap and clickwrap agreement are most commonly used in the electronic platform. The following common agreements are below-mentioned:
These are license agreements or other terms and conditions that enable the consumer only when he reads or accepts after opening the product. Moreover, it is observed that after loading the product on the electronic device, if the consumer does not agree to those additional terms and conditions then he has a choice to return the software product. It is also noted that as soon as the consumers uncover the packaging of the product, due to the agreement he receives protection by indemnifying the manufacturer of the product from any Intellectual Property Rights violation.
This agreement is discovered as part of the installation process of software packages and is also known as a “click-through agreement” or “take-it-or-leave-it” contract. The click-wrap agreements can be of two types as below-mentioned:
- Type and Click- “I accept or other specific words displayed on the screen that are used by the user to accept the terms and conditions through the “submit” option. To accept the terms and condition of the products the consumer has to submit, otherwise, the user will be unable to download or view any information about the product.
- Icon Clicking– the user has to click on “ I agree” or “OK button” on the dialogue box or pop-up window to use the targeted information and the user can reject the terms and conditions by clicking “Cancel” or closing the window. Upon clicking on this the user will have no access to the product or service provided on the website.
Today with the advent of technology in the area of computers, telecommunication, software, and information technology has affected the lives of people thereby, changing the standard of living unimaginably. With the economic growth and development in a developing country the demand for using e-contracts has increased, however, Indian laws are not acquainted with the e-contracts and the courts have consistently through past precedents have upheld the validity of e-contract provided if they comply with the Indian Contract Act. But a change has been seen due to the current crisis of COVID-19 and the trend of digitalization and technology use has increased tremendously and eventually forcing people into accepting contracts through electronic mode. The legal system has already recognized the change in the traditional mode of execution contract and is in motion to make the required regulation for electronic execution contracts.
- Indian Contract Act, 1872.
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