This article is written by Khushi Sharma, currently pursuing B.A. L.L.B. (Hons.) from IIMT and School of Law, IP University. This is an exhaustive article which deals with the most frequently used technology contracts.
The word ‘contract’ is not something which is always interfaced through a subject of law or any legal person. We are not even aware, the plenty of times that we have come across a contract or any contractual relationship. It will sound surprising but the process of completing our education through schools is also a kind of contract. Therefore, most of our life revolves around a contract which we will not be even aware of. Now, coming to the legal statute of a contract; the contracts are governed under the Indian Contract Act,1872. It deals with the various kinds of contracts, But the main question which arises is, whether the contracts can be of electronic nature? Or, if they do exist in electronic nature, what are the most used technology contracts?
About e-contracts and e-commerce
E-contracts refer to all the online contracts or technology contracts which are transacted via technology, i.e. the internet, computers or different technologies governing such transactions. E-commerce resides in such groups and companies that facilitate such contracts and introduce them to fellow customers. E-contracts and e-commerce are governed through the Information and Technology Act, 2000, which provides procedure and terms and conditions regarding such transactions.
Need for technology contracts
Earlier when the technology was not that advanced, people used to get ‘Bill-receipts’, and various proof of transactions in the paper form, but with the emergence of advanced technology, such proof of transaction has become obsolete and difficult to look up to. Bills and receipts are essential as they work as evidence that you did such a transaction; but if you are a person who loves shopping, I think a load of stacking up the receipts is really going to rip that favouritism away!
Bills, receipts and other proofs of transactions are tough to maintain, whereas the technology-based transaction stores everything at the right place. Transaction via technology or any e-contract will save all the proofs and evidence. Technology contracts are convenient, hassle-free, and also more people are realising its importance with time, as most of the population transact online or via some mode of technology.
E-contracts will soon be subjected to even higher usage due to COVID-19, people will reduce the use of hand to hand transactions which will make tech-contracts to be the most widely used mode. As COVID-19 is a highly contagious infection, reducing all the human contact transactions would really help and this all can only be achieved through e-contracts.
Examples of technology contracts
Some of the commonly used technology or e-contracts are as follows:-
- Out-Sourcing Agreements- When the service provider promises to provide a particular service which may include data processing and information management, and which may take place between a business and service provider, such agreements are called out-sourcing agreements.
- Software Licensing Agreement- They are agreements between a company and a customer to enforce the use of software which a company has a right to. It informs how software can be installed and how it can be put to use.
- Software Development Agreement- Agreements which are set out by the developer to sell and transfer customized software that a person will further incorporate into products.
- Cloud Computing Agreement- Such agreements host application service providers and are equally known as cloud computing agreements.
- Data-Processing Agreements- It is a legally binding agreement entered by the processor and controller in writing or electronic form.
Frequently used technology contracts
Now we will deal with the frequently used technology contracts, as has been already discussed that people are nowadays transacting via online mode more than the hand to hand transaction, let’s see some of the most used contracts which are as follows:-
Shrink-wrap agreements are legally binding agreements or any purchase agreement on the packaging or shipping of the products. In this agreement, the packages are enclosed in a plastic wrap which means that it can be only opened by the final purchaser and this can be completed once the buyer has completed its purchase. The shrink-wrap agreement also includes other elements enforcing such transactions like the price of the product, the warranties attached to the products and also the rights to use the product.
Click or Web-Wrap Agreements
Click or Web-Wrap Agreement came into existence after the shrink-wrap agreement. Click or web-wrap agreements are those which are digitized and are user friendly. They come into enforcement by clicking the ‘I agree’ button. The clicking to the ‘I agree’ button shows the acceptance to the agreement. Once the acceptance has been made willingly then you are into force of a particular contract.
Browse Wrap agreements are those which are legally binding to the customers through browsing of any website. For any browse-wrap agreement to turn into a contract the website must give notice to the customers which exhibits the agreement and if the user accepts such agreement only then, it will convert to a valid contract. The Courts are more likely to enforce the click-wrap agreement than the browse-wrap agreements.
Sources of Technology contract
Technology contract is formulated through various sources which are stated below:
- Website- Technology contract can be entered through the websites. Different e-commerce groups provide the customers with different offers, which the customers can enter into by accepting the terms and conditions.
- E-mail- Technology contracts can also be entered through the help of an e-mail. A person can mail to the interested company or any authority with whom he wants to enter the contract. Or the offering company can send the email and the acceptance can be made through a message or a reply.
- End-user license agreement- These are the agreements in which the user enters into the contract by accepting the terms and condition and by clicking the ‘I accept’ button.
Common mistakes in Technology Contract
- Though technology contracts are very liberal and easy to operate, still it is subjected to many mistakes. Mistakes can be prevented when you are in contact with the parties face to face but transacting online may be subjected to many problems. When the interaction to the party does not occur face to face but in a distant form, then the chances of fraud increases.
- Another mistake that arises in operating the technology contract is the ‘Electronic Signature’. Such a signature has some kind of disadvantage attached to it; i.e the difficulty to know whether the person contracting and the person affixing the electronic signature are the same person. Even the person accepting the offer may be indulged in crimes like fraud or misrepresentation.
- Some small business owners can also be defrauded through different online websites, where they are unaware of the actual transactional procedure leading to their involvement in the fake sites and share their valuable information.
- The people transacting may not know sometimes how to save evidence regarding the transaction which can lead to a huge loss as no evidence means the contract never existed, so the people must be very careful while transacting for the same.
- The next mistake will be, that the children are likely to get into an online contract as an offline contract cannot include a child, but in the online mode, the child may disguise as an adult or even accept it by mistake.
- Another major issue while contracting online is that people can get tricked into the mental trap of the terms and conditions, the user may not even read the terms and condition properly and assent to the offer, even if they are vague.
Essential Clauses of a Technology Contract
Important requirements before getting into a contract
Competency to contract
Similar to the Indian Contract Act, 1872; the competent age to enter into a contract via the online mode or technology contract is after attaining the age of majority (i.e 18 years as per Indian Law). Minors cannot enter into a contract. Their entrance will be considered as void; though the guardian can enter into a contract on behalf of the minor.
Another requirement being, a person of unsound mind cannot enter into a contract. If it comes into the knowledge of the offeror that the person contracting is either of unsound mind or a minor, the offeror can immediately cease the operation to contract.
Before contracting into any agreement through online mode the user must be aware of all the privacy policies properly and must only provide the valuable information after reading all the terms and conditions.
Communicating the party
The main requirement of such agreement is through the interaction of the parties, the user must consent to the offer. Without the assent of the user, the contract can never be formed and before contracting, the parties should duly communicate with each other so that the terms and condition will be visibly clear.
Before contracting through the online mode, the payment mode must be decided before entering into the final contract so that after the creation of the contract, confusion will not arise in between the contract. The payment mode must be selected mutually by both the parties and must be premeditated.
The basic importance that the word ‘offer’ lays down is not only in a normal contract but it is also the case with the technology contract. Before any contract to come into action there must be an existence of an offer or agreement, requiring the user to accept it. Offers are laid down through different domains and websites.
Another important clause of a technology contract is acceptance. Every offer to convert into a contract needs to fulfil the basic element that is accepting an offer; without the acceptance, an offer will never convert into a contract. Before accepting the offer, the user must read the terms and conditions properly so that he would not be defrauded. Acceptance can be through clicking the ‘I accept’ button or through replying to the email.
Signature serves as a piece of important evidence, it tells that the party giving the signature was the contracting party and they cannot withdraw their consent from it, even if they falsely accuse it of not being a part of it. Signature serves as alarming evidence, it shows the absolute consent of the party. But while contracting and providing signature the user should make sure that they read all the required guidelines and give assent accordingly.
The requirement of the stamp
The requirements of stamps are governed through the Indian Stamp Act, 1899 which makes it essential for such documents to have a prescribed stamp and if they fail to do the same; such documents will not be enforceable under the Court and will not be existing in the eyes of the law.
Expulsion in regards to a technology contract
The Information and Technology Act, 2000 deals with e-contracts and expels certain heads from the technology contract that are as follows:
- Negotiable instruments
It includes an instrument in which the person against whom the instrument is issued and that person promises to pay the amount in some future date.
- Trust deed
Trust deed is a document which creates and sets out a contract arising out of Trust.
Will is something which is created by the head of the family, stating how his wealth is going to be distributed between his descendants after his death.
- Power of attorney
Power of attorney is a deed in which certain powers and rights are conferred to a person and such authority may be enjoyed by him in a limited capacity.
In this article, we familiarised ourselves with technology contracts and certain frequently used technology contracts. We came to know that the clauses and requirements of e-contracts are pretty much similar to what the Indian Contract Act,1872 governs. Technology contracts are easier to handle and are hassle-free as compared to normal contracts. The bills and receipts of the normal contract create a mess, which is not the case in technology contracts. But as we know “a bit too much of everything hurts”, such contracts have its own disadvantages. Technology contracts are more likely to get stuck in a fraud session rather than a face to face interaction which takes place in normal contracts. But technology contracts, to an extent, have made it easier for us to transact.
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