This article has been written by Vijayaditya Reddy, a student of NALSAR University.
The time and place of formation of a contract is crucial as they can have an effect on the rights of the individuals and are also essential in determining the jurisdiction over the case if any dispute arises. Contracts formed by e-mails are not clear considering the fact that it is vague as to when the contract has been formed. Assuming that the postal rule applies to e-mail contracts as well, by analogy, an e-mail contract is formed and is binding on the offeror when the acceptor sends the e-mail of acceptance and is binding on the acceptor when his/her acceptance reaches the offeror. And assuming that the postal rule does not apply to e-mail contracts, under the normal law of contracts, the contract is said to be completed and binding when the acceptance is received by the offeror.
But the question of why one should apply the postal rule to e-mail contracts arises as there is no good reason to do so. The postal rule was introduced because of the time lag between the communication of offer and acceptance. Hence there is no point in applying this rule to instantaneous modes of communication such as e-mails. The Indian Contract Act does not settle the matter. While it does not particularly discuss the idea of e-mail contracts anywhere, it in no way restricts them. This brings forward my two main research questions:
Can e-mail contracts considered to be valid contracts in india and what are the essentials for these contracts to be executed?
With the recent growth of e-commerce sector and the surge in online transactions being made over the internet, formation of contracts online via emails has become quite common in India. Can offer and acceptance exchanged via e-mails give rise to a binding contract? Are such contracts recognised by the Indian Contract Act, 1872 and can they be enforced in a court of law?
Although the Indian Contract Act has not discussed the idea of e-mail contracts, it has also not prohibited such contracts per se. E-mail contracts are similar to any other form of contracts and are therefore governed by the provisions of the Indian Contract Act. Therefore any e-email contract cannot be executed or validly enforced until and unless it satisfies all the required fundamental requirements.
- First, the terms and conditions of the contract must be agreed to by both the parties on the acceptance of an issued offer.
- Second, intention to create a legally binding contract must be present.
- Third, the vital element of consideration must be agreed upon.
Therefore, all the statutes which relate to e-mail contracts must be read along with, and not in place of the Indian Contract Act.
The Information Technology Act, 2002
The Information Technology Act (IT Act) has recognised e-mail contracts as legally valid and binding. It particularly mentions that a contract cannot be deemed invalid solely on the basis of it being an online exchange of offer and acceptance. Section 10A of the Information Technology Act hints at the validity of e-mail contracts.
Section 10A of the IT Act: “Where in a contract formation, the communication of proposals, the acceptance of proposals, the revocation of proposals and acceptances, as the case may be, are expressed in electronic form or by means of an electronic record, such contract shall not be deemed to be unenforceable solely on the ground that such electronic form or means was used for that purpose.”
In the field of business, formation of contracts via emails is exponentially increasing. Especially when taken into account the case of online businesses, this is the only means of carrying out transactions.
Not only does the Information Technology act recognise the validity of e-mail contracts, it has also given a statutory recognition to digital signatures (also known as electronic signatures). The Ministry of Communication and Information Technology ascertained that the validity of digital signatures is same as that of handwritten signatures.
The Indian Evidence Act, 1872
E-mail records can be admissible as evidence in courts under the Indian Evidence Act. Hence issue of an offer or acceptance via mails can give rise to binding contracts and these electronic records can be used an evidence in courts to enforce the contracts.
Section 85A of the Evidence Act: “The Court shall presume that every electronic record purporting to be an agreement containing the [electronic signature] of the parties was so concluded by affixing the [electronic signature] of the parties.”
Formation of contracts online via emails has been recognized and given validity to by the Indian courts time and again. For instance, in the case of Trimex International FZE Limited, Dubai v. Vendata Aluminium Ltd., the parties thoroughly agreed to the terms of the contract via emails. The Supreme Court upheld the validity of this contract and further observed that, “Once the contract is concluded orally or in writing, the mere fact that a formal contract has to be prepared and initiated by the parties would not affect either the acceptance of the contract so entered into or implementation thereof, even if the formal contract has never been initiated.” The Indian Contract Act has acknowledged that conventional agreements which contain oral contracts entered into by competent parties with free consent and a lawful object for a lawful consideration and are not illegal or void. Hence no provision in the Indian Contract Act forbids e-mail contracts as long as all the essentials of a valid contract are present.
How to avoid contractual obligation?
However, contractual obligation can be avoided during exchange of e-mails by placing disclaimers at the top of the mail or at the end of the mail. Disclaimers such as “This e-mail is not an acceptable offer and doesn’t evidence an intention by the sender to enter into a contract” or “Unless and until we agree on other material terms regarding this potential transaction and both sign a written agreement reflecting them, it’s not my intent for our email exchanges to constitute a binding contract” prevent the parties from entering into a binding contract as these disclaimers can be used as admissible evidence in Indian courts under the Evidence Act to prove the absence of intention of one of the parties to enter into a contract.
Should the postal rule apply to e-mail contracts?
There are many similarities between e-mails and posts and hence it is might not seem wrong to argue that the postal rule be applied to e-mail contracts as well. Nevertheless, such application is not right and the arguments against it abundant. It has to be noted that from the very beginning of the introduction of postal rule, its application has limited to only one mode of communication – Posts. Even the courts have shown little to no interest in extending its application but have rather limited its scope. The courts have limited the scope of the postal rule by developing exceptions to the rule itself and by denying to extend its application to other faster modes of communication such as e-mails.
E-mails are considered to be non-instantaneous by many commentators, for they pass through various servers before reaching the intended recipient. So do telephone calls as they pass through various exchanges and service providers but are still considered to be instantaneous. Why should the information transmission process determine whether a mode of communication is instantaneous or not. Moreover, the sender of an e-mail knows if his message has been sent or not unlike the sender of a post who will have no information even his letter has gone astray. Considering all the positions, e-mails are more likely to fall into the category to which the postal rule does not apply rather than falling into the category to which the postal rule applies. Hence it is not surprising that most of the commentators have written against the extension of the postal rule to e-mail contracts.
The exact time and place at which the contract has been concluded are important as they can have an effect on the rights of the individuals and are also needed to determine the jurisdiction over the case in case any dispute arises. It is still debatable as to when the contract via e-mail is concluded and binding. The ‘when’ and ‘where’ questions remain unanswered. There are not enough case laws to ascertain the answers. Till the time these questions are answered, email contracts replete with uncertainty.
While the juridical groundwork administering e-mail contracts is still developing and may not yet effectively cover all facets forming part of such agreements, it is undeniable that many Indian courts recognize the extensive inclination to e-commerce and reliance on the internet. The prevailing legal judicial and legislative intent appears to be that any legally valid acts would maintain their validity even if performed online or electronically provided that such contract satisfies all the essentials of a valid contract.
 2010 (1) SCALE 57
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