Issues and challenges in e-contracts
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This article has been written by Kezia Shaji, pursuing a Diploma Programme in Cyber Law, FinTech Regulations, and Technology Contracts from LawSikho.

Introduction

Change is the only constant thing in human life. The state of human beings we witness today is the end result of the gradual evolution of ages. Technology is one thing that human beings today feel crippled and helpless without. E-commerce has now become the hype of the times and has gained immense popularity with the increase of the internet where people just can’t do without the internet. In such times, e-contract has been introduced in order to ease the trade activities or any agreements between individuals living far away. E-contracts is the contract entered into by two individuals in the virtual domain that is through an electronic medium.

These contracts are usually entered by individuals who live in separate corners of the world and find it difficult to travel in order to merely sign a contract. In recent times, e-contract has been gaining a lot of popularity amongst people who find it more convenient to use this method in order to sign a contract. Like any other ordinary contract, an e-contract also requires an offer and acceptance in order to make it enforceable. E-contract can be entered into through e-mails or End User License Agreements (EULA). This article briefly discusses what an e-contract is and what its scope is. Further, the article goes on to talk about the role of the internet in the performance of e-contracts. The article also discusses the various laws and conventions relating to e-contract both in the Indian context and in the world. The article also focuses on the non-repudiation of an e-contract and goes on to conclude with the pros and cons of e-contract.

E-contracts : its scope and the internet as a catalyst in influencing 

The role of performance of the e-contracts

An e-contract is an electronic form of getting into a contract. Here, the parties don’t get to meet physically and since it is carried forward in electronic medium there is no boundary as such. Since the internet is in no way free from the clutches of risk, the security factor in e-contracts needs to be high. Further, an important feature of e-contracts is that there is no handwritten physical signature that is required since there are digital signatures that will carry forward the same functions as that of a conventional handwritten signature. This has still not gained a lot of prominence in the Indian scenario. The Indian Contract Act of 1872, has recognised all traditional kinds of contract agreements which even include verbal agreements. The contract entered could be implied or explicit in nature. However, the agreement needs to be entered into with the consent of the parties who are competent to enter into the contract.

The Act does not expressly or impliedly prohibits electronic agreements. However, even to enter into an electronic agreement there needs to be a lawful consideration and it should be done with the consent and free will of the parties and not out of force. Further e-contract is also recognised by the Indian Evidence Act. The Act refers to a ‘document’ as information that could be electronic, paper-based, recorded, stored, or copied. These documents will very much serve as a basis of evidence in the courts. Although e-contracts are still not absolutely in usage and conventional handwritten contracts are preferred over e-contracts, there are a few types of e-contracts that are commonly used. This includes:

  1. Clickwrap agreement / End User License Agreements (EULA) – In this type of agreement the user should confirm his/her acceptance by stating “I agree” in order to accept the terms of the agreement.
  2. Email – A valid contract can be entered into by exchange of mails by the parties which are sometimes implied in nature.

There are two parties to the e-contract i.e., the originator (the person who sends or generates the information) and the addressee (the one who is entitled to receive the details and information). Further, the subject matter of the electronic agreements includes online payments of goods in online shopping portals and applications, net banking, and any financial advice online and such others. 

Relevant laws and conventions : authenticity and identification of parties with case laws

The Information Technology Act of 2000 mentions the validity of electronic contracts and says that the only prerequisite in electronic contracts in compliance with regard to the requisites in order to enter into a contract. E-contracts in India are governed by the Indian Contract Act of 1872. There have been several instances where Indian courts have taken their stand on the e-contract and its enforceability. In the case of LIC India v. Consumer Education and Research Centre, the court held that in the case of a dotted line contract, the weaker party to the contract has no power to negotiate but he has to either totally accept or reject the contract. The biggest legal challenge faced by parties in e-contracts is the issues arising out of the jurisdiction. Since jurisdiction in cyberspace is an issue, that needs to be addressed and yet the efforts to sort jurisdiction-based issues have been in vain. Therefore, if either of the parties breaches the contract, the question regarding where the proceedings should be initiated against the defaulter party is not clear. Even the existing laws do not have clear provisions to address the same.

However, the courts recommend the parties themselves include a jurisdiction clause in case of any breach or dispute arising in the future. However, the place where the suit for damage is filed should be either way related to any of both the parties (where the addressee resides or the place of business of the parties). Another challenge faced by online contracts is when minors might click into the “I agree” clickwrap agreements while legally minors are not competent to enter into any sort of contracts according to the Indian Contract Act. At the global level, The United Nations have the electronic communications convention and have held them to be equally legitimate as paper-based contracts. Further, the United Nations Commission on international trade law (UNCITRAL) had proposed the Electronic Contracts Convention in order to normalize the electronic forms of evidence and contracts.

Non-repudiation of e-contract

Non-repudiation of contract occurs when either of the parties commits a breach of the agreement made by denying the authenticity of the documents or messages. It serves as proof to show the validity and authenticity of the contracts entered into. Unlike conventional contracts, e-contracts will hold parties liable for breaches that arise due to technical complexities such as typing errors or any such others. The parties need to ensure the security of the details in the agreement and take all other necessary measures in order to reduce or eliminate the scope for breach of liability. Further, laws need to be framed to address the concerned issues with regard to e-contracts. In a digital contract, there is a digital signature. Which is the data which can’t be forged nor repudiated. It includes a name that the party has included. Digital signatures are more secure than conventional handwritten signatures and they are recognised by many countries like India, the USA, Japan, and a few others. Countries like Pakistan also have some recognized electronic signatures to some extent. In digital signatures, non-repudiation is essential to make sure that no party to the contract could deny the authenticity of their signature. In the case of, Mehta v. J Pereira Fernandes S.A, the court held that any offer sent through the signed mail is not sufficient proof, and neither can the mail address of such a sender be considered a valid electronic signature. Although digital signatures are secure nothing is still guaranteed in cyberspace. Therefore, parties should adopt and take various measures so that no breach or repudiation occurs. Further, through e-mail non-repudiation can be monitored by tracking the email status and whether the mail has been delivered to the other party to the contract.

Conclusion

At a time, when all human activities have shifted to the virtual world, e-contracts exist in order to cater to the changing needs of the time. It helps firms and organisations exchange information and collect details while also enabling them to make agreements in spite of being situated at multiple corners of the world. Just as the common saying goes, ‘with every good comes a necessary evil’, e-contracts too, have their pros and cons.  It increases productivity, quickens customer requirements, is cost-efficient and time-saving. It makes customer services more accessible and handy to people all around the world thereby increasing the customer base for the organizations and also leads to increased competition amongst businesses. The laws pertaining to e-contracts too are primarily based on precedents and there is no clear piece of legislation regarding governing of e-contracts. However, one should ensure that they don’t fall prey to the fraud of online platforms. Only then can the real purpose of the existence of electronic contracts be achieved. In doing so, we continue to evolve and embrace what the future of technology might have in store for us.


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