This article is written by Yash Singhal from Vivekananda Institute of Professional Studies, New Delhi. The article deals with the information of technology contracts according to the Information Technology Act, 2000 along with disputes associated with it and how they can be avoided or reduced.
Technological advancement in the contemporary era has allowed the companies to adopt a more digital way of conducting their business to not stay behind the changing times. The contracts which used to be a series of paperwork carried by companies stating their terms and conditions to be a party to the contract, which were read by the other party and suggested changes to the contract according to their interests.
These terms and conditions when mutually accepted by the parties were signed exclusively or impliedly were taken to be accepted on the basis of performance of obligations in the contract followed by legal sanctions against the breach of the contract. This sort of contract had its disadvantages as to the maintenance of bundles of paperwork for every contract, time-consuming to complete the whole procedure, remembering important dates as per the terms of the contract.
How tech contracts came into existence?
In the backdrop of such problems, technology contracts came into existence with the enactment of the Information Technology Act, 2000 in India to give legal validity to these contracts, easing the workload and making efficient contracts in less time while catering to multiple parties at any point of time.
The e-commerce websites are the common users of these technology contracts. They have standard terms and conditions in their contracts to be available at their site during the transaction process for consumers to read it and accept them as they are. The consumers do not have the option of amending these terms as to their convenience. Either they accept the contract as it is or abort the transaction and exit the website. The ‘I Agree’ button to complete the transaction is the implied acceptance on the part of the consumer as the contracting party.
The essentials of a technology contract are similar to Section 10 of the Indian Contract Act, 1872. These contracts are digitally designed and the database of all the contracting parties is stored in the computer itself to avoid missing important dates or make it convenient for the websites to handle and monitor sensitive data of the consumers.
Technology contracts under the Information Technology Act, 2000
The technology contracts got its legal tender through the enactment of the Information Contract Act, 2000. The provisions of the Act deals with the applicability of these contracts and other details associated with them.
Electronic signatures validity
Section 10 of the Act deals with laws governing electronic signatures. The electronic signatures provide enforceability to these technology contracts by establishing the genuineness of the contract as acceptable to both the originator and the other contracting party. It is a unique digital encryption key for every party to store the details separately for every party and avoid a mix-up.
The Central Government has the authority to make rules in the regard of the electronic signatures, from the procedure of affixing the signature to the details of the individual signing it. The government has the power to make any such rule to provide legal enforceability of the electronic signatures.
In an English case Mehta v J Pereira Fernandes S.A, two contracting parties had an issue when some amount was required to be transacted via an email but the defendant refused to comply with the terms as he contended that it was in violation with the requirements of the Statute of Frauds. The court decided that neither an email without a digital signature is sufficient communication nor an email address can be considered as the defendant’s signature.
Electronic record attributed to the originator
Section 11 of the Act states that the electronic record shall be attributed to the originator if the record was sent by the originator himself or by any person who had the authority on the behalf of the originator to send such an electronic record. It also applies to cases where the programme is designed to operate automatically by the originator himself or any person authorised on behalf of the originator.
Legal issues in a technology contract
The technology contracts are required to fulfil certain conditions to be legally enforceable. These are:
The contracting parties must be identified to give authenticity to the technology contract. The parties shall be saved from any kind of misrepresentation as a form of fraud. Any sort of fraud would be a mark on the genuineness of the terms of the contract and the other party completing its obligations as per the contract. Either of the parties should have the means to approach the other party for any communication on the contract details, for which authenticity is a relevant feature in a technology contract.
One party proposing an offer to enter into a contract with its own sets of terms and conditions accompanying the agreement. The other party has the option to accept the offer or decline on non-compliance with the terms and conditions. The offer must indicate the subject of the contract in clear terms for the other party to read it and decide on its interest in entering into a contract or not.
The legality of the contract is based on the clause of the non-repudiation of the contract after it is accepted by both parties. It becomes a legal obligation on the parties to abide by the terms or sanctions are imposed, from the time the contract is accepted in a similar manner on similar terms by both parties. It is an issue of discrimination against the other party in case a party repudiate from the performance of its duty as per the contract.
Writing and signature
Every contract should include a signed digital signature along with the terms and conditions as the indication of acceptance by the other party. It also requires a date of activation of a contract to aware both the parties about the initiation of their obligations under the contract. Any contract without either of them would be deemed invalid on it not complying with the legal requirements.
In a technology contract with e-commerce websites or any other company for that matter are under an obligation to maintain the confidentiality of its consumers. If in any case, they leak the sensitive data then they will be subjected to legal implications. The database has all the information of the consumers according to the details they fill in while purchasing a product along with the payment details. It is the implied term of the contract to monitor the information from getting leaked.
Elements of the technology contract
The elements of a technology contract are similar to a contract under the Indian Contract Act, 1872. It has a whole procedure to be followed by the parties in order to have a valid technology contract.
An offer shall be made by an individual/ a party as its willingness to enter into a contract for the performance of specific conditions. It is based on the individual making an offer to lay down the terms and conditions of the contract.
Any person accepting the offer communicates his interest in entering into a contract and legally binds itself with the obligations of the contracts. It becomes a legally enforceable contract with the acceptance by the party.
The consideration for the contract shall be lawful. Consideration is an act done or abstained on the desire of the promisor. Unlawful consideration would render the contract illegal and invalid.
The object for which the contract was entered into by the parties shall not be contrary to law. Similar to the clause of unlawful consideration, an unlawful object would lead to an invalid contract.
Competent parties to contract
The parties entering into a contract shall be competent to contract according to the conditions stated in the Indian Contract Act, 1872. The parties must not be minor as per Section 11 of the Act.
The contracting parties must consent to enter into a contract without any undue influence or coercion. One party should not be in a position to dominate the other person nor any party should be forced into entering a contract.
The certainty of terms
The terms of the contract must be certain in nature. Both the parties should understand the terms in a similar way and then give acceptance to the contract.
Disputes with regard to technology contracts
It has been a revolution in the field of cyberspace with the introduction of a separate statute for Information Technology. This is an initiation of a generation of techno-friendly legal aspects to ease the workload of the legal professionals as well the companies that have adopted technology contracts as modes of conducting businesses.
It is not a free-flowing field with its own disputes which need to be enumerated in order to be settled in coming times. These disputes are legal in nature and have to be sorted with legal procedure. These loopholes cannot be ignored as they impair the very foundation of the legal framework.
Every court or tribunal in the country has a well-defined jurisdiction, pecuniary and territorial, that restricts its interference into other’s jurisdiction. The court or tribunal is authorised to resolve the disputes in its jurisdiction. We have jurisdiction for ordinary laws, but for special laws like cyber law, we do not have a demarcated jurisdiction. It is a debatable issue with the maintainability of suits in what the court has to be defined.
The territorial aspect of the jurisdiction is not applicable to cyber law due to its boundary-less reach across continents in some cases. For cross-country transactions through technology contracts, an Indian court cannot have the jurisdiction of the matter taking place in another country.
This issue has to be resolved with a proper legal framework to monitor the technology contracts internationally through some clause to take cognizance of any matter, in respect of cyber law, taking place in another country to provide some sort of relief to the aggrieved party.
Lack of physical interaction
The technology contracts do not have a mandatory clause for the physical interaction of the parties. It is understandable with the scope of cyber law to reach out to every individual across the globe at an instant without any boundary barriers, the possibility of physical interaction of each contractual party is almost impossible.
It does not make much difference until a dispute over the misrepresentation is there and the other party is not aware of such fraud that was carried out against him. It requires some sort of identity reveal of both parties to each other for situations where there is any requirement they know whom to approach.
The technology contracts come with an issue of no single authority to monitor the whole process of formation, regulation and performance of the contractual duties. It requires a single competent authority to handle all the details about technology contracts to avoid simple as well the complex disputes in regard to these contracts.
Every company that is involved in the usage of technology contracts have their separate systems to control the management of everything in relation to these contracts. A single central authority would be better to increase the authenticity of the contracts with greater assurance on the part of consumers as to the maintenance of confidentiality. This will also ensure that the terms of the contract are not discriminatory or legally incompatible.
Lack of security
Every company appoints a legal advisor to draft technology contracts which are standard for all sorts of situations for a consumer. It is observed that the terms and conditions are partial in nature towards the company forming those. Consumers do not read these terms and conditions carefully and later concerns over security are raised due to the language of the terms in such a way.
The security concerns of consumers must be solved to promote technology contracts as an alternative to traditional contracts. The security is a major issue that needs to be dealt with at the earliest by the government or extra-governmental authorities through a well-structured protection system.
The technology contracts often include uncertain clauses which are out of the understanding of the consumers but don’t give enough options to them than accepting it due to its standard terms and conditions policy. It is required for the parties to interpret the clauses in a similar manner or they are invalid.
Every clause shall consist of the legal implications on the breach and what duties does the company forming those clauses carry. If it is the responsibility to adhere with the terms of the contract by the consumers, it is an obligation of the company to provide clarity over each clause stated in the contract for the understanding of all individuals.
It is not strange to discover competitors at every stage of business, hence, even in e-commerce business there are numerous competitors providing similar services, such as Amazon and Flipkart. This competitive spirit harms the companies in their technology contracts as the competition disputes arise.
The competition law that regulates the anti-competitive conduct resolves the competition disputes. It is a requirement to enable measures to limit competition disputes.
Ways to avoid disputes
It is evident by the number of disputes that there is a great need to search for ways to avoid disputes in the field of technology contracts. There is no single method to completely end the problem of disputes in a go but certain solutions have been devised by legal professionals to be adopted in order to at least minimise the effect of the dispute.
The technology contracts are solely based on the originator’s interest in regard to the terms of the contract. It is a rule in business that single-party dominated clauses without a room for negotiation always arise disputes in future, either practical or legal. It is an added leverage with the originator to reduce its efforts and time while saving money that sometimes subject the other party to discriminatory behaviour.
A contract is more likely to be uncertain with no scope for negotiation and a chance for the other party to enquire about the state of the terms mentioned in the contract. There should be substantial negotiation authority vested in the other party to suggest changes to the originator. This would still be less time consuming than the traditional contracts as the suggestions with majority votes should be included.
Short and simple
The effectiveness of a technology contract lies in its simple language that is comprehensible by almost everyone. The contract should be short and precise for consumers to read in an instant without wasting much time. The clarity of thought in the clauses for no scope of uncertainty is another facet of efficient contract.
When a single contract is binding on all parties equally across the world, the clauses of the contract should be framed in a manner that no room for subjectivity is left. The legal professional can help the originator in identifying the issues that need to be addressed and include appropriate clauses in a simple and concise manner.
Identification of areas where tech contracts can be applied
The most obvious things are sometimes missed out and one such thing is the knowledge of fields or areas where technology contracts can be applied and what clauses would be relevant to the objective of the contract. The appropriate clause is the foremost requirement considering an e-commerce shopping contract clause cannot be applied in a construction-based contract.
A corrective approach in the selection of a type of technology contract to be administered for every kind of business is the duty of the originator. This will reduce the number of disputes in the area of technology contracts.
The contracts formed shall avoid one-sided clauses in the favour of the originator. The clauses shall be balanced in nature to provide some relief to the other contracting party as they do not have the option to amend the terms of the contract. This is an effective mechanism of mitigating risks of discrimination for any contracting party.
A certain reinforcement on the standard clauses for the other party would motivate them to fulfil their obligations as well as involve in future technology contracts. The reasonable clauses for both parties in the contract should be established as a permanent guideline for the originator to reduce the technology contract disputes.
The technology contracts have been a new norm in the e-commerce business with certain other companies also adopting this change to reduce time consumption, ease the workload, reach out to maximum people at a particular point of time and be updated with important dates of the individual contracts, among others. There have been certain disputes with regard to technology contracts that have posed a significant barrier in the mass acceptance of these contracts, which needs to be resolved at the earliest.
There are some ways to mitigate the disputes like a scope for negotiation clause, simple language of the contract, proper identification of types of tech contracts applicable and balanced contracts already enumerated in the article. It is not easy to resolve all the disputes in a day but a constant effort from the contracting parties as well the governing authorities to put these solutions into proper practice.
LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join: