E contracting in india

By: Atul S. Jaybhaye
Assistant Professor
Hidayatullah National Law University

Definition of Contract
 Indian Contract Act, 1872
Sec.2(h) An agreement enforceable by law is a
contract;
A contract provides the rights and obligations of each
party.
It provides for legal remedies in case there is a breach
of contract.
Pacta sunt servanda "agreements must be kept or
honoured"

Essentials of a valid contract
 Offer,
 Acceptance,
 Consideration,
 Free consent,
 Lawful object,
 Major parties to the Contract.

Definition of E-contract
 E-contract is any kind of contract formed in
the course of e-commerce by the
interaction of two or more individuals using
electronic means,
 such as e-mail, the interaction of an
individual with an electronic agent, such as
a computer program, or the interaction of
at least two electronic agents that are

Features of E-contract
 Two main parties :Originator and Addressee.
 Originator according to the IT Act, 2008 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.
 An Addressee according to the IT Act, 2008 is a person
who is intended by the originator to receive the electronic
record but does not include any Intermediary.
 The parties do not, in most cases, meet physically.
 There are no physical boundaries.
 No handwritten signature and in most times, no hand
writing is required.
 Jurisdictional issues are a major setback on e-contracts

Features of E-contract
 Contracts which are excluded from e-contracting:
 First schedule to the IT Act, 2000:
1. A negotiable instrument (other than a cheque)
2. A power-of-attorney
3. A trust
4. A will
5. Any contract for the sale or conveyance of
immovable property or any interest in such property.

Types of E-contract
Two ways through which contracts can be entered
electronically:
1. Through websites:
 Click wrap
 Browse wrap
 Shrink-wrap
2. Through E-mail

Click wrap contract
 Click- wrap agreements are web based agreements
which require the assent or consent of the user by
way of clicking “I Agree’ or “I Accept” or “Ok” button
on the dialog box.
 In click –wrap agreements, the user basically have to
agree to the terms and conditions for usage of the
particular software.
 Users who disagree to the terms and conditions will
not be able to use or buy the product upon
cancellation or rejection.
 A person witnesses click-wrap agreements almost

Shrink wrap contract
 The term "shrink wrap agreement" refers to the
purchase agreements that are attached to shipped
products, usually bound by shrink wrap (plastic
wrapping) that contain terms and conditions. Shrink
wrap agreements can include the following terms:
 licenses
 rights of use
 fees and payments
 Warranties and
 limitations of liability.

Browse wrap contract
 A Browse-wrap agreement is one where the terms of an
agreement are located on a website, but are often
connected to the main web page of the product by a
hyperlink to another web page that contains the contracts
terms and conditions.
 Browse-wrap agreements cover the access to or use of
materials available on a website or downloadable
product. Only if the person agrees to the terms and
conditions on the web page, then he can access the
contents of the web page.

Validity of E-Contract
 The Information Technology Act, 2000 provides
various procedural, administrative guidelines and
regulates the provisions relating to all kinds of
electronic transactions.
 These include computer data protection,
authentication of documents by way of digital or
electronic signature.
 Even electronic contracts have been given

 Sec. 4. Legal recognition of electronic records :-
 Where any law provides that information or any other
matter shall be in writing or in the typewritten or printed
form, then, notwithstanding anything contained in such
law, such requirement shall be deemed to have been
satisfied if such information or matter is-
 (a) rendered or made available in an electronic form; and
 (b) accessible so as to be usable for a subsequent reference.

 Sec. 10A Validity of contracts formed through
electronic means. –
 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.

 Imp points:
An online contract is simply a communication between two
parties in regard to transfer of goods/services.
As per Indian Evidence Act any e- mail communication and other
communication made electronically is recognized as valid
evidence in a Court of law.
By considering the points, it can be concluded that the contract
that follows the communication is valid too and Indian law thus
recognizes the validity of online contracts.

 UNCITRAL Model Law on E- Commerce 1996
 Article 11. Formation and validity of contracts
 In the context of contract formation, unless otherwise
agreed by the parties, an offer and the acceptance of an
offer may be expressed by means of data messages.
Where a data message is used in the formation of a
contract, that contract shall not be denied validity or
enforceability on the sole ground that a data message
was used for that purpose.

Evidentiary Value Of E- Contract
 Sec 65B admissibility of electronic records. I.E.A. 1872
 any information contained in an electronic record produced by the
computer in printed, stored or copied form shall deemed to be a
document and it can be admissible as an evidence in any
proceeding without further proof of the original subject to
following conditions are satisfied such as the computer from where
it was produced was in regular use by a person having lawful
control over the system at the time of producing it, 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 have not affected the accuracy of the data
entered.

Evidentiary Value Of E- Contract
 Sec.85A. Presumption as to electronic agreements.
The Court shall presume that every electronic record
purporting to be an agreement containing the digital
signature of the parties was so concluded by affixing
the digital signature of the parties.
 Sec.85B. Presumption as to electronic record and
digital signatures
In any proceedings involving a secure electronic
record, the Court shall presume unless contrary is
proved, that the secure electronic record has not

E-mail Contracting
 A contract can be entered into and
concluded following the exchange of
number of e-mails between the parties.
 Here the e-mail serves the same purpose
as letters.
 E-mail contracting is one of the type of
formation of e- contracts.
 Legally recognised and valid as per IT Act,

E-mail Contracting
 Postal rule vs Mail Box Rule

Evolution of Postal rule
 The postal rule was first created in the Adam v Lindsell
[1818] B & Ald 681.
 The court had to decide the contract formation period by
mail.
 Two parties communicated by post in which the precise
time of the acceptance could not be determined.
 Mailing often lasts for a few days and both parties could
not aware of the communication at the same time.
 This caused lots of problems and led to the creation of
postal rule.

Postal rule
 The postal rule was stated as….
 “Where the circumstances are such that it must
have been within the contemplation of the parties
that, according to the ordinary usages of mankind,
the post might be used as a means of
communicating the acceptance of an offer, the
acceptance is complete as it is posted."

E-contracts are immediate
communications?
 One might express the view that email and other
methods of online contracting are instantaneous
communications and that the general acceptance rule
should apply to their acceptances.
 In fact, this argument may be true in respect to website
acceptances since there is no actual space in time
between the sending and the acceptance of the offer.
 But, contracting through email messages is different than
that happens in website contracting and hence cannot be
treated as instantaneous communication.

Postal rule shall apply to e-mail?
 In email contracts, there is absence of legislative establishment
regarding to determine the acceptance or revocation of offer.
 Offeree may receive the message when it is successfully sent, or the
offeree will receive a failed delivery notice in its email box.
 Computers and internet may take several minutes or longer to
respond.
 Since there are many delays and failure situation in sending and
receiving message through emails, parties could not get
instantaneous communication between each other.

Attribution, Acknowledgement of E-
records
IT Act provisions:
 Sec. 11. Attribution of electronic records.-
An electronic record shall be attributed to the
originator,-
(a) if it was sent by the originator himself;
(b) by a person who had the authority to act on behalf
of the originator in respect of that electronic record; or
(c) by an information system programmed by or on
behalf of the originator to operate automatically.

Attribution, Acknowledgement
of E-records
 Sec. 12. Acknowledgment of receipt:
 The originator has not agreed with the addressee that the
acknowledgment be given in a particular form or by a
particular method. Here, the acknowledgment may be by
any means:
 (a) any communication by the addressee, automated or
otherwise; or
 (b) any conduct of the addressee, sufficient to indicate to
the originator that the electronic record has been
received.

Attribution, Acknowledgement of E-
records
 Sec. 12. Acknowledgment of receipt:
 Clause 2 : If the originator has specified to the addressee that the
electronic record shall be binding only on receipt of an
acknowledgment, then, unless acknowledgment has been received,
the electronic record shall be deemed to have been never sent by
the originator.
 Clause 3 : Provides for an optional procedure to be adopted by the
originator in case of non-receipt of acknowledgment—the originator
may give notice to the addressee and specify a reasonable time for
acknowledgment.

Time & place of dispatch of E –
records.
 Sec. 13 IT Act, 2000:
The dispatch of an electronic record occurs when it enters a
computer resource outside the control of the originator.
 An electronic record is deemed to be dispatched at the place
where the originator has his place of business, and is deemed to be
received at the place where the addressee has his place of business.
If the originator or the addressee has more than one place of
business, the principal place of business, shall be the place of
business.

Case laws
 Bhagwandas Goverdhandas Kedia v. Girdharilal
Parshottamdas, 1966 AIR 543, SC
 “That ordinarily, it is the acceptance of offer and
intimidation of that acceptance which results in a
contract.
 This intimation must be by some external
manifestation which the law regards as sufficient.
 Hence, even in the absence of any specific
legislation validating e-contracts cannot be
challenged because they are as much valid as a
traditional contract is.”

Case laws
 Trimex International FZE Limited, Dubai vs. Vendata
Aluminum Ltd. (2010) 3 SCC 1
 Conclusion of contracts through electronic means, such as
through e-mail communications (or execution of electronic
contracts) have also been recognized by Indian courts from
time to time.
 The Hon'ble Supreme Court of India held that the contract
between the parties was unconditionally accepted through e-
mails and was a valid contract which satisfied the
requirements of the ICA.

US Approach on E-contract
Uniform Electronic Transaction Act (“UETA”), 1999
Sec. 7 of UETA provides:
 (a) A record or signature may not be denied legal effect or
enforceability solely because it is in electronic form.
 (b) A contract may not be denied legal effect or enforceability
solely because an electronic record was used in its formation
 (c) If a law requires a record to be in writing, an electronic record
satisfies the law
 (d) If a law requires a signature, an electronic signature satisfies
the law.

 UETA ; Section 15 states that:
 An electronic record is sent when it:
 (1) is addressed properly or otherwise directed properly to an
information processing system that has designated or uses for
the purpose of receiving electronic records or information of
the type sent and from which the recipient is able to retrieve
the electronic record;
 (2) enters an information processing system outside the
control of the sender or of the person that sent the electronic
record on behalf of the sender.

 UETA ; Section 15 states that:
 An electronic record is received when:
 (1) it enters an information processing system that the
recipient has designated or uses for the purpose of
receiving electronic records or information of the type
sent and from which the recipient is able to retrieve the
electronic record; and
 (2) It is in a form capable of being processed by that
system.

EU Approach on E-contract
 The EU has created a coherent regulatory
framework for electronic commerce. This framework
is known Electronic Commerce Directive.
 The E-Commerce Directive is designed to facilitate
the provision of electronic commerce services.
 Articles 9, 10 and 11 deal with electronic contracts in
business-to-consumer (“B2C”) transactions.
 The E-Commerce Directive adopts a minimalist
approach, requiring a service provider to set out all
the necessary steps so that consumers can have no
doubt as to the point at which they are committed to

 Electronic contracts are just as legal and enforceable
as traditional paper contracts that are signed in ink
within the EU.
 Article 9 of the E- Commerce Directive requires
Member States to ensure that electronic contracts
are rendered valid and to remove any prohibition or
restriction on the use of electronic contracts.
 The E-Commerce Directive stipulates extensive prior
information requirements to enter a contract.
 Prior information requirements refer to information
that must be provided by a service provider “prior to

 Prior information requirements:
 The Service Provider must provide information on
 (a) the different technical steps that a consumer must follow to conclude
a contract,
 (b) the technical means for identifying and correcting errors prior to the
placing of the order, and
 (c) the languages offered for the conclusion of the contract.
 (d)Contracts and general conditions must be made available in a way that
would allow the consumer to store and reproduce them.
 The contractual terms should appear on the screen before making any
purchase.

 Prior information requirements:
 Purpose:
 To enable the consumer to evaluate both the
product and the offer before the contract is
concluded.
 It establishes the confidence of consumers and
enterprise in e-commerce.
 To identify the genuineness and reliability of the
seller.

 Confirmation of contracts: Article 11
 “In cases where the recipient of the service places
his order through technological means, the service
provider has to acknowledge the receipt of the
recipients order without undue delay and by
electronic means.”
Whether the product has been offered at the right
price or not.
 Thus, a contract is concluded in B2C transactions
only when the recipient of the service has received
an electronic acknowledgement of the recipient’s

E contracting in india

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