E-Contracts in India: The Legal Framework, Issues and Challenges

Abstract

The advent of revolutionary technologies has ensured robust e-commerce in the country. However the usage of technology without adequate legal framework will lead to chaos in the society and will prove counter productive to the business. The Indian Contract Act, 1872, The Information Technology Act, 2000 and The Indian Evidence Act, 1872 are the crucial legislations which determine the validity of an e-contract. E contracts are formed by way of exchange of Emails and through on line agreements viz. browse wrap, shrink wrap and click wrap agreements. All the said forms are valid under Indian law as if they comply with the prerequisites of a valid contract. Major issues which arise pertain to capacity to contract, free consent, decision on the applicable law and decision on the court jurisdiction. Though the Indian legal system adequately addresses the e-contracts, the challenge before the law makers will be to keep abreast of the issues which will arise with evolving technologies and to adequately address them.

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International Journal of Emerging Innovations in Science and Technology (ISSN: 2348 – 4403)
Volume 4– Issue 2, 2018
www.ijeist.in 13
E-Contracts in India: The Legal Framework,
Issues and Challenges
1Dr.S.Sethuram, 2Ms. Deepa. C.Kumar
1,2Assistant Professor, SRIT Business School, Sri Ramakrishna Institute of Technology, Coimbatore, India
Abstract—The advent of revolutionary technologies has ensured
robust e-commerce in the country. However the usage of
technology without adequate legal framework will lead to chaos
in the society and will prove counterproductive to the business.
The Indian Contract Act, 1872, The Information Technology Act,
2000 and The Indian Evidence Act, 1872 are the crucial
legislations which determine the validity of an e-contract. E
contracts are formed by way of exchange of Emails and through
on line agreements viz. browse wrap, shrink wrap and click wrap
agreements. All the said forms are valid under Indian law as if
they comply with the prerequisites of a valid contract. Major
issues which arise pertain to capacity to contract, free consent,
decision on the applicable law and decision on the court
jurisdiction. Though the Indian legal system adequately
addresses the e-contracts, the challenge before the law makers
will be to keep abreast of the issues which will arise with evolving
technologies and to adequately address them.
Keywords-E-contracts –– forms - issues – legal - validity
1 . INTRODUCTION
The models of ecommerce and e-contracts have introduced
revolutionary innovations to businesses, management,
interregional and international trade. At this juncture we need
to ascertain whether the legal framework in India adequately
addresses to the concerns of the stakeholders. The following
lines will throw light upon the legal technicalities of e-contract.
2. CONTRACTS IN INDIA
2. 1 CONTRACT:
The word Contract was derived from a Latin word
Contractum. The word contractum means drawn together.
According to Salmon “A contract is an agreement creating and
defining obligations between the parties.”
2.2 E CONTRACT:
An e-contract is a contract modeled, executed and enacted
by a software system. It is a contract “drafted” and “signed” in
an electronic form.
3. FORMS OF ELECTRONIC CONTRACTS
The following forms of Electronic Contracts are in vogue in
the Indian business scenario.
3.1 E-Mail Agreements:
The e-mails which convey the clear intention of parties can
be treated as a binding contract.
This can be inferred from the decision in the case of
Trimex International FZE vs Vedanta Aluminu m Limited, in
which while recognizing the change in execution of
commercial transactions the Supreme Court disregarded the
argument that exchanges over e-mail did not qualify as
contracts and held that “ on ce the contract is concluded orally
or in writing, the mere fact that a formal contract has to be
prepared and initialed 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 initialed”.
3.2 On line Agreements:
On line agreements are of three kinds
3.2.1 Browse Wrap Agreements
An agreement is considered as a browse wrap
agreement which is intended to be binding upon the contracting
party by the use of the website. These include the use of the
website. These include the User Policies and terms of service
of web sites and are in the form of a “ter ms of use” or “terms of
service”, which can be used as the links at the corner or bottom
of website.
3.2.2 Shrink Wrap Agreements
These contracts are the license agreement by which
the terms and conditions of the contract are enforced upon the
contracting parties and are usually present on the plastic or in
manuals accompanying with the software products which the
consumer buys.
3.2.3 Click Wrap Agreements
These agreements require the user to give his consent to the
terms and conditions which are known as end user agreement
and govern the licensed usage of software by clicking “Ok” or
“I agree” button.

International Journal of Emerging Innovations in Science and Technology (ISSN: 2348 – 4403)
Volume 4– Issue 2, 2018
www.ijeist.in 14
Fig 1 - Forms of e-Contracts in India
4. LEGAL VALIDITY OF E -CONTRACTS IN INDIA
The validity of e contract is to be arrived at considering the
provisions of The Indian contract Act, 1872, The Information
Technology, 2000 and Indian Evidence Act, 187
Fig 2 E-Contracts – The legal framework
4.1 INDIAN CONTRACT ACT,1872
The law relating to contracts is governed by the Indian Contract
Act, 1872. The Indian Contract Act 1872 has defined in Section 2(h)
that “An Agreement enforceable by Law is a Contract”.
The Act provides a basic contractual rule that a contract is valid if
it is made by competent parties out of their free consent for a lawful
object and consideration. There is no specific way of communicating
offer and acceptance; it can be done verbally, in writing or even by
conduct.
It is the acceptance of offer and intimation of that acceptance which
results in a contract. This intimation must be by some external
manifestation which the law regards as sufficient. Thus Electronic
contracts are as valid as written contracts; the only condition is they
should possess all the essentials of a valid contract.
4.2 THE INFORMATION TECHNOLOGY ACT, 2000
4.2.1 Validity of E-contracts:
The provisions of the Information Technology Act, 2000 give
legal recognition to an Electronic Contract. This can be inferred from
Section 10-A of the Act which states “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."
4.2.2 Digital signature:
A signature is a schematic script related with a person. A signature
on a document is a sign that the person accepts the purposes recorded
in the document. Section 3 of the Act delivers for the verification of
Electronic Records by affixing Digital Signature. Verification of
electronic record by electronic signature or electronic authentication
technique shall be considered reliable. Thus an electronic contract can
be created by digital signatures and is recognized by the laws in India.
4.3 INDIAN EVIDENCE ACT, 1872
The courts in India recognize electronic documents under Section 65-
A of Indian Evidence Act, 1872. The procedure for furnishing
electronic documents as evidence is provided under Section 65-B of
the Indian Evidence Act, 1872. The latter section provides that, any
information contained in an electronic record produced by a computer
in printed, stored or copied form shall be deemed to be a document
and it can be admissible as evidence in any proceeding without further
proof of the original. But, admissibility of the same is subject to
various conditions prescribed under section 65-B of the said act. It is
required that the document or e-mail sought to be produced from a
computer, was in regular use by a person having lawful control over
the system at the time of producing it; the document or the e-mail was
stored or received during the ordinary course of activities; the
information was fed into the system on a regular basis; the output
computer was in a proper operating condition and has not affected the
accuracy of the data entered. An e- contract is basically a
communication between two parties in respect of the transfer of goods
or services. Thus, any e- mail communication and other
communication made electronically is recognized as valid evidence in
a Court of law.
5. ISSUES AND CHALLENGES:
5.1. Capacity to Contract:
One needs to ensure that the persons who are parties to the
electronic “contract” have the legal competence and capacity t o enter
into an agreement. Often it is a nameless individual entering into a
contract. The service provider has no idea whether the individual who
has clicked on “I Agree” t ext or icon is legally competent to enter int o
a contract.
Capacity of parties is one major requisites of a valid Contract as
under the Indian Contract Act, 1872. Sections 10, 11 & 12 of the Act
provide for the competence of parties. Contracts entered into by
individuals, who are not competent to contract are void. There may
arise in a situation, wherein infants who are not old enough to enter
into a contract are entering into an online contract with the service
provider by clicking on “I Agree” text or icon.
5.2 Free consent:
Free consent is an essential prerequisite of a valid contract. In on
line contracts there is no scope for negotiation. This is a great
Forms of
E-Contracts
Exchange
of e-mail
Onli ne
Agreement
Browse Wrap
Shrink wrap
Click Wrap
The
Indi an
Evidenc
e Act,
1872
The
Informat
ion
Technol
ogy
Act
,2000
The Indian Contract
Act, 1872
Exchange
of e-mails
Online
Agreements

International Journal of Emerging Innovations in Science and Technology (ISSN: 2348 – 4403)
Volume 4– Issue 2, 2018
www.ijeist.in 15
disadvantage for the user. But the option “take it or leave it”
transaction is always to the user. In the case of LIC of India Vs
Consumer Education and Research Centre, the Supreme Court has
held that “In dotted line contracts there would be no occasion for a
weaker party to bargain as to assume to have equal bargaining power”.
He has either to accept or leave the service or goods in terms of the
dotted line contract. His option would be either to accept the
unreasonable or unfair terms or for go the service forever.” Hence it
can be concluded that the user should be prudent while giving his
consent to avoid troubles.
5.3. Decision on the Applicable Law:
The Indian law provides two choices to apply personal
jurisdiction, i.e., to apply the law of the forum, or to apply the law of
the site of the transaction, or occurrence that gave rise to the litigation
in the first place. The courts do have a judicial right to determine the
choice of law by identifying the system of law with which the
transaction has its closest and most real connection. There is no bar
that law of a foreign country cannot be applied or an Indian party
could not be subject to foreign jurisdiction. The emphasis is on to
select proper law.
5.4 Decision on the Court Jurisdiction:
E-contracts gives wide scope for cause of action arising at very
many geographical locations. This might lead to filing of cases at
different places. Defending lawsuits at multiple geographical
locations could be both expensive and frustrating. Hence choice of
forum clause should be included in all online contracts. It makes a
good legal sense for the online service providers to limit their
exposure to one jurisdiction only. Thus the online service provider has
no other choice but to subject themselves to only one set of forum and
applicable laws only. The user has no other choice, but to accept the
service provider‟s Standard Terms and Conditions by clicking an on-
screen text or icon “I Agree”, “I Accept” or “Yes”
6. CONCLUSION
The legislation in India addresses all avenues of e-contract.
However the advancement of technologies will bring in new
challenges for the law makers and the government departments.
Law needs to be updated and upgraded from time to time it to
keep up with the evolving technologies.
7. REFERENCES
[1] The Information Technology Act, 2000
[2] The Information Technology (Use of Electronic Records and
Digital Signatures) Rules, 2004
[3] The Indian Contract Act, 1872
[4] The Indian Evidence Act, 1872
[5] The Sale of Goods Act, 1930
[6] Purohit, TD, „Contracts Via E-mail -A Note of Caution‟,
Corporate Law Cases, Vol. 9, Part-11, 2008 (November), pp 488-489.
[7] Malik, Surendra& Malik Sudeep, “Supreme Court on Cont ract
and Specific Relief - Since 1950 to 2014”, ed.2nd, (2014), p ublished
by Eastern Book Company.
[8] Sharma Vakul, “Information T echnology, Law and Practice”,
Universal Law Publishing Co. 2004.
[9] https://indiacode.nic.in/acts
[10] http://www.legalserviceindia.com/articles/ecta.htm