contract
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This article is written by Yasar Arafath who is pursuing a Diploma in Business Laws for In-House Counsels from LawSikho.

Table of Contents

Introduction

In recent times, electronic commerce has been growing rapidly in India and consumers are preferring online transactions due to the convenience provided by online. The very rapid emergence of Modernization and technological advancement has increased complexities in the lives of human beings and this has certainly extended to commercial transactions. Thus, the internet has become a new culture and the wide range of activities performed online has proven to offset the old way of doing the same activities. The Internet has a great deal of impact on business and its practices, where local markets are replaced by global markets.

This led to the emergence of new business models i.e the birth of Electronic-commerce (E-commerce). One of such Electronic transactions includes an Internet contract, which is E-contract. The basic premise for any commercial or trading activity in general provided by Contract. Legally enforceable agreements form the structure of all commercial activity. Except an enforceable contract is concluded, no commercial transaction can take place.

E-commerce 

A commercial transaction is divided into three stages, advertising and searching stage, ordering and payment stage and delivery stage. Which are carried out electronically and may, therefore, be covered by the concept of E-commerce (electronic commerce). Electronic commerce encompasses all forms of commercial transactions comprising organizations and individuals that are transacted over an electronic medium or network, fundamentally, the Internet. 

In the last decade, the concept of electronic commerce has paced in India. Increasing use of Information technology has overcome the geographical constraints with respect to time limit, the current scenario is completely different to the one which prevailed about a decade back, where use of information technology was limited to selected individuals and the orthodox methods of entering into contracts were the only method for entering into a legal relationship.

Electronic commerce is the selling and buying of goods and services, or the transmitting of data or funds, over an electronic network, primarily the internet. Those business transactions occur either as business-to-business, consumer-to-consumer, business-to-consumer, and consumer-to-business.

E-Contract

In today’s time the internet is no more just used merely for communication or computing and analysis of data, Electronic contracts are now the order of the day and there are no differences between offline and online contracts. Hence online contracts are still contracts and all the rules of Indian contracts law will still apply to them.

In the electronic age, where the whole contract can be completed in seconds, simply with both parties attaching their digital signatures to electronic copy of the contract. There was initially a reluctance amongst the administrations to recognize this modern technology and now many countries have passed laws to recognize electronic contracts.

The contracts which take place through e-commerce platforms, without meeting the parties to the contract are defined as Electronic contracts. E-contracts are the same as the paper based commercial contracts conducted and concluded electronically. 

In every electronic contract, there are 2 main parties – The Originator and the Addressee.

As per Information Technology Act, 2008 Originator is a person who sends, generates, stores or transmits any electronic message to be sent, generated, stored or transmitted to any other person and does not include an Intermediary.

As per Information Technology Act, 2008 Addressee is a person who is intended by the originator to receive the electronic record but does not include any Intermediary

Types of Online Transactions

  • Business to Customer transactions – [B2C]

In online transactions where an individual customer and a business entity conduct business together. The word ‘Business to Customer transactions [B2C]’ has been generally used to define a sale made by a business enterprise or retailer to a person or consumer over the internet.

For example: Tata Cliq is an online portal that offers facilities for customers to buy goods from their online website. Where the online website itself serves the purpose of a physical shop. It can however be divided into tangible and intangible products based on what the vendor is selling on the website.

  • Business to Business [B2B]

This type of online transaction where two business organizations who conduct commercial transactions online with each other by using the internet.

  • Customer to Customer [C2C]

In this online transaction where two or more customers make a sale with a business entity that offers a web-based platform which facilitates transaction between two consumers. The word ‘Customer to Customer [C2C]’ defines the sale of a product that happens between one consumer to another either directly or through an intermediary who is wholly dedicated to this activity.

For example: On the OLX website, any individual can buy and sell, exchange goods and articles, and freely interact and transact with each other.

Legal provisions of Electronic Commercial Transactions in India

There are various legal issues that need to be dealt with relating to the formation and validity of electronic transactions and enforcement issues.

(A) Formation of an E-Contract:

General forms of electronic contracts are browse-wrap, click-wrap contracts and shrink-wrap.

A browse-wrap contract is proposed to be binding on the contracting party by the mere use or browse of the website. 

Though Shrink wrap agreements are not directly related to e-commerce platforms but mostly appropriate in the context of e-commerce commonly because of the kind of goods associated with it. In this agreement, the contracting party can read conditions and terms only after opening the box within which the product is packed.

In click-wrap contract, the contracting party’s confirmatory acceptance is taken by means of clicking on an ‘I accept” tab. There will be a scroll box that shows the terms and conditions to contracting parties.

(B) Validity:

Existence of valid contract forms the core of any transaction including an online commercial transaction. Like all other contracts, E-contracts in India are administered by the basic principles of contracts in India, i.e. the Indian Contract Act, 1872 (“Indian Contract Act”), which mandates certain necessary elements for a valid contract. It is important to consider that the Information Technology Act, 2000 provides fortification for the validity of online contracts.

Requirements of a valid contract

  1. Free consent of the contracting parties for entering into a contract.
  2. Lawful consideration for the contract.
  3. Competent parties.
  4. Lawful Object

The terms and conditions accompanying an e-commerce platform are of ultimate importance in ensuring and deciding that online commercial transactions meet with requirements of a valid contract.

In Indian Contract Act there is no requirement to have written contracts physically signed. However, particular statues do contain signature requirements. In E-commerce, it is practically not possible to check the age of an individual who is transacting online and it pose problems for the e-commerce platform where the position under Indian contract Law where it specifies that minor is not competent to enter into a contract and when such a contract entered is cannot be enforceable against the minor.

Every instrument under which rights are transferred or created needs to be stamped in India and stamping of the instrument depends on specific state stamp duty legislations enacted.

Whether Standard-form Online Contracts are Unconscionable?

There is no well-developed jurisprudence in India on the standard form online agreements are unconscionable. Though Indian Courts have dealt with instances where contract terms were negotiated between parties in unequal bargaining positions. In the Indian Contract Act, certain provisions deal with unconscionable contracts i.e. when the consideration or object in the contract is opposed to public policy.

The Contract Act in India doesn’t define the word ‘public policy’ or ‘opposed to public policy. Therefore, the Contract Act allows the Court to hold clauses opposed to public policy as void. 

As per Section 16(3) of the Contract Act, where a person who is in a position to dominate the will of another enters into a contract with him and the transaction appears, on the face of the contract or on evidence presented, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall lie upon the person in a position to dominate the will of the other. 

As per Section 23 of the Contract Act, consideration or object of any agreement is unlawful when

  1. forbidden by law, or 
  2. nature of the contract would defeat the provisions of any law; or 
  3. fraudulent, or 
  4. implies injury to the person or property of another, or 
  5. regard as immoral or opposed to public policy by the Courts. 

Conclusion

The rapid growth of the e-commerce industry is not only an indication of the growing acceptance of the public but has also carried the issues that the legal system of the country has to face with. The Indian legal system has constantly tried to incorporate especially with the enactment of the various rules under the Information Technology Act to deal with issues emerging from the use of the internet. It is required to have in-depth understanding of the legal regime and the potential issues that an e-commerce business would face. Even an online contract should possess all the essential ingredients of a valid contract. The essential ingredients of a valid contract have a distinct association in the context of online contracts and if all the elements of contract law are satisfied, contract formation can be seen in all e-commerce transactions

References


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