This article has been written by Ridhi Jain, pursuing a Diploma in English Communication for Lawyers – oratory, writing, listening and accuracy and has been edited by Oishika Banerji (Team Lawsikho).
it has been published by Rachit Garg.
Table of Contents
Contracts have been essentially expressed in the traditional paper-pen-based format requiring the fulfilment of elements of Section 10 of the Indian Contract Act, 1872. However, with evolving unforeseen circumstances like the Covid-19 pandemic, and the increasing rate of technological development and advancement, globally, the concept of e-contracts i.e., electronic contracts has been coined. Its need was strongly felt during the pandemic in the year 2020 when businesses and companies were shut down and industries stagnant for a considerable period of time. Such circumstances gave rise to the implementation of e-contracts and e-signatures to cope with unfortunate situations and revive business functioning and growth overall. Electronic contracts and electronic signatures have reshaped the way of doing business, facilitated ease of doing business, and marked the beginning of a digitally equipped India. This article has been written with the intention of discussing the validity and enforceability of electronic contracts thereby also discussing the scope and future possibilities it brings along with itself.
What are electronic contracts
Electronic contracts have attracted large-scale use and became very popular in day-to-day business. Electronic contracts do not resemble traditional paper-based contracts but rather are conduits through the use of electronic communications. The UNCITRAL Model Law on Electronic Commerce states that a contract can be made by exchanging data messages, and when a data message is used in the formation of a contract, the validity of such a contract should not be denied.
Need and subsequent inclusion of e-contracts
The rapid transition from paper-based transactions to electronic mode was mainly due to factors like convenience, better efficiency, and less cost. However, such factors were overshadowed by the brutal reality of factors like lack of trust, identity and security issues, internet availability, and primarily, the absence of recognition of such contracts in other common and civil law countries as well.
A milestone achievement happened in the world of contracts with the enactment of ‘The United Nations Convention on Contracts for the International Sale of Goods (1980), bringing a drastic impact on the commercial business functioning. However, it failed to provide particular laws on e-contracts, which gave birth to UNCITRAL Model Law on e-commerce. They realised the growth of the e-sector and approached enacting a model law to recognize and legitimise such procedures of business doings.
It minimised the limitation of authentication and verification of identity by devising and legitimising digital signatures for eliminating unverified and unauthentic transactions. With this, India on the forerun, enacted in 2000, the Information Technology Act (IT Act) and made various simultaneous amendments to the Indian Penal Code, 1860, Indian Evidence Act, 1872, the Bankers’ Book Evidence Act, 1891, and the Reserve Bank of India Act 1934, to provide recognition to electronic documents and electronic commerce transactions.
Validity and enforcement of electronic contracts
The primary statutes governing e-contracts are covered by the provisions of the Indian Contract Act, 1872 and the Information Technology Act, 2000. The former lays down in Section 10, the essential requirements for a contract’s enforceability namely, basic principles of contract like offer and acceptance, free consent, capacity, and lawful consideration. These principles form the core structure of a valid contract and for an e-contract to hold ground, it needs to pass the litmus test laid under Section 4 read with Section 10A of the IT Act, 2000.
In Tamil Nadu Organic v. State Bank of India (2019), the court of law recognized the validity of the e-auction sale procedure and the legal necessity of observing the obligations arising out of it. The court in the above case remarked on the need of promoting development in technology and appreciated its objective of facilitating transparency and efficiency in the conduct of business.
With the growing upgradation in technology, the manner of executing documents has also evolved. There was a need to resort to convenient and transparent ways of executing binding documents and thus, e-contracts and e-signatures gained immense momentum.
The legal character of the concept of e-signatures is expressed in Section 5 of the IT Act of 2000. An electronic signature enables one to provide individual identity. Identification, verification, and authentication are some of the prime worrying limitations of electronic transactions have been attempted to be overcome by legitimising safe procedures and concepts of e-contracts and e-signatures. The enforceability of electronic/digital signatures is treated as that of handwritten signatures in India.
Admissibility of e-contracts
E-contracts gained admissibility as evidence following the passage of the Indian Information Technology Act of 2000, and as a result, Section 65(b) of the Indian Evidence Act of 1872, allowed the presentation of an electronic record as evidence in a court of law. There are other provisions, such as Sections 3, 85, 88, and 90, that deal solely with the numerous presumptions relevant to the legal notion of electronic records.
Under the provision of the Indian Evidence Act, 1872, Section 3 read with Sections 65A and 65B, amended as of the year 2000, explicitly recognizes electronic records as admissible evidentiary documents produced for the inspection of the court. Consequentially in the year 2009, another required amendment in the Evidence Act, 1872 extrapolated the concepts of electronic signatures and certification into its paradigm. Sections 85A and 85B were also inserted in the year 2000, to raise a presumption of validity and legitimacy of the electronic record/signature and document/agreement until proven otherwise. Such laws strengthened digital laws and acceptance, thereby providing inclusivity to digital/electronic media in the justice system. Such inclusivity and acceptance were long-awaited and required to keep pace with the modern world of the growing use of technology.
Judicial decisions in relation to electronic contracts
A series of ratios upheld in various judgments by the Indian judiciary have been laid down hereunder. The ratio makes the point of view of the judiciary clear with regard to electronic contracts. Not only are these decisions relevant, taking into account our topic for discussion, but they can be said to be a notable precedent for a similar range of issues to arise in the coming future.
1. The Supreme Court of India while deciding the case of Arjun Panditrao Khotkar v. Kailash Kushanrao Gorantyal and Others (2020) had observed the elements and importance of Sections 65 A and 65B of the Indian Evidence Act, 1872 in ascertaining the validity of a document. It had stated that while it is easy to figure out uncertainty to be faced by courts while deciding the proof and enforceability of electronic contracts, such uncertainty will function as a catalyst in aiding complete development and effective use of such technology.
2. The Supreme Court’s view while deciding the case of Trimex International FZE Ltd. Dubai v. Vedanta Aluminium Ltd (2010) is notable for it stated that in the absence of signed agreement between the parties, it would be possible to infer standing of a valid agreement from various documents duly approved and signed by the parties in the form of exchange of emails, letter, telex, telegrams and other means of telecommunication. Thus, the Court clarified that even digital means of approval will be termed as valid forms of approval and will hold the same value as written forms of approval.
3. In the case of State of Punjab and Others v. Amritsar Beverages Ltd. and Others (2006), the Supreme Court of India had highlighted that Section 63 of the Act of 1872 includes in its ambit the procedure for furnishing electronic documents as evidence, as have been provided by Section 65B of the Act.
4. The Karnataka High Court’s opinion in the case of Sudarshan Cargo Pvt. Ltd. v. M/s. Techvac Engineering Pvt. Ltd (2013) is noteworthy for discussion in light of our present subject matter for it had upheld the validity of e-mail correspondence as a legitimate electronic record and piece of evidence towards a confession, as in the particular case. Thus the Court had clarified that communication made through email qualifies under Section 2(b) of the IT Act, 2000.
5. In a notable case of Rudder v. Microsoft Corporation (1999), the court of law had determined that the “click-wrap” agreement was enforceable, by ruling that scrolling across multiple pages was to be presumed to be the same as turning through multiple pages of a written contract in the paper. Thus, digital contracts were given a dignified position through this decades-old case.
The world has innovatively progressed and evolved commercially starting from the very first barter system trade, recognizing the need for token money, paper-based written contracts, and eventually adopting electronic agreements in its realm of growth. Receiving recognition towards electronic contracts can anticipate the future potential of the unimagined growth of technology, cyberspace, commerce, and trade. Thus what we discuss today, is our present and not the coming future, for the future is getting better than now and has more to explore.
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