Navigating the Legal Landscape: Understanding E-Contracts in India’s Digital Economy

Introduction

Technology advancements around the world have led to robust development in trade and commerce. E-commerce has become one of the most lucrative industries in the world. The internet acts as an agent through no conscious of its own and initiates agreements between parties. The Information Technology Act 2000, The Indian Contract Act 1872, and The Evidence Act 1872 determine the validity and enforceability of e-contracts in the country. The pandemic has also acted as an impetus and increased the growth of the digital market. The legal sector across the world has undergone extensive digital reality adaption, whether it be the virtual mode of delivering justice by the judiciary or the conducting of business transactions of any shape and size.

E-contracts are defined as an agreement which is made electronically instead of physical meetings between the parties involved in the process of the transaction. E-contract forms a significant part of e-commerce. E-contracting is a fragmenting of e-business. The Contracts which are entered by the parties orally or digitally are subject to the same fundamental principles of Contract law. These contracts must include all these important elements in respect to get them enforceable and legally binding in India. In today’s world, they are becoming increasingly important with rapid digitalization and e-commerce to execute a significant number of business transactions in a variety of industries.

E-contract under the Information and Technology Act, 2000

The IT Act gives legislative authority to e-contracts under Section 10 of the act. To make any contract valid signatures from both parties are needed. In e-contracts, digital signatures come into play when section 2 (p) of the IT Act defines electronic signatures used in e-contracts. These signatures are very important in several contracts like in government to government and in government to business.

There are always two parties which are involved in e-contracts, the originator and the addresses both of which are defined by the act. In the case of Trimex International FZE Ltd. Dubai vs. Vedanta Aluminium Ltd., the Supreme Court held that where the parties had communicated their offer and acceptance through email in the absence of signed documents, once a contract is concluded orally or in writing, the fact that a formal contract must be prepared and initiated by the parties would not affect the contract.[1] 

Therefore, the IT Act safeguards the interests of the parties which are maintained through its various provisions. The High Court of Madras had applied the provisions of the IT Act to an e-auction in Tamil Nadu Organic Private Ltd. Vs. State Bank of India, finding that the contractual duties which might arise through electronic methods and such contracts might be enforced under the law. Section 10A of the IT Act certifies that contracts are established with electronic means and Section 10B of the IT Act permits the use of electronic records and electronic methods for contract conclusion as long as the contract complies with the Indian Contract Act, 1872.[2]

In the case of Ambala Sarabhai Enterprise Limited v. KS Infraspace LLP Limited, the Supreme Court examined the validity of agreements entered into by parties using a combination of communications over email and Whatsapp. The key contention was the nature and language of the correspondence, which did not directly equate to affirmation, and therefore the agreement was invalid. Further, the court has accepted and said that agreements may be executed electronically, so long as they meet all the criteria of the Contract Act and IT Act which includes agreements entered into through mail as well as Whatsapp.[3]

E-contract under Indian Evidence Act, 1872

It is regarded as a necessity that the court should accept the electronic mode of contracts as evidence. This statement contended in the case of Société des products Nestlé S.A v. Essar Industries &Ors, which introduces Section 65A and Section 65B in the Indian Evidence Act related to the admissibility of computer-generated devices.[4]

Similarly, in the case of RavindraSingh@Kaku vs the State of Punjab, it was observed by the Supreme Court that a certificate under section 65B(4) of the Indian Evidence Act, 1872 is important to produce electronic evidence and that only giving of oral evidence in place of such certificate will not be sufficient.[5] This step was taken to minimize the challenges related to e-contracts and other electronic evidence. In another case of State vs Mohd Afzal and Ors, it was held that electronic devices are acceptable in court.[6]

Types of e-contracts

1. Click-Wrap Agreements- This Agreement is created when there is an online buyer or user clicks on the “I AGREE” button on a webpage to download some application. It is derived from the fact that most such agreements include selecting an on-screen icon to express approval.
2. Shrink-Wrap Agreements- These types of contracts are mostly used for software licensing. In this reference, the terms and conditions which are used to access such software items must be enforced by the person who is purchasing it, starting with the packing up of the software product.
3. Browse-Wrap Contracts- This agreement is also known as an agreement that is intended to bind two or more two parties through the use of a website. In case of an agreement done while browsing, any common user, of that particular website, needs to accept the terms and conditions as well as other website rules to continue using the website.

Jurisdiction of the Courts under e-contract

Jurisdiction is the power of the court to hear a case means to take cognizance of the case and make legal decisions and judgments. It is defined as the legal authority of the court that resolves the dispute. E-contracts involve instant communication of offer and acceptance. Wherein, the contract is complete at the end of the originator where the acceptance is received. In the case of  BhagwandasGoverdhandasKedia vs Girdhari Lal Parshottamdas&Co, the Supreme Court contended that the place where the acceptance is received shall have the jurisdiction of enforcement of contracts who are entered into using computer internet.[7]

If there is any issue between the parties which belong to the same jurisdiction related to e-contract, then such dispute will be resolved similarly to the traditional contract disputes. There are some challenges that arise when the parties to E-contract belong to different countries. Section 13 of the IT Act specifically deals with the time and place of despatch and receipt of electronic records and electronic contracts.

Issues faced by the E-contracts

1. Judicial Issue– E-contract is a paperless transaction that is borderless, so it becomes difficult to examine the jurisdiction. The Information Technology Act 2000 explains that:
2. The place of business of the originator will be regarded as a place where the information was dispatched, and
3. The place of business of the addressee will be deemed to place where the information was received.

 This means that the location of computer sources through which it was dispatched and received, places no role in determining the jurisdiction of the case. However, this section limits the power by Section 20 of the Code of Civil Procedure, 1908. As Section 20 (c) explains that the suit can be instituted in the court within whose local jurisdiction the cause of action has aroused. Therefore, a question comes over the jurisdiction of the courts as the cause of action may arise in e-contract at the place where the electronic information was dispatched, irrespective of the facts of the principal place of business.

In the case of P.R. Transport Agency vs Union of India & others, the Allahabad High Court dealt with the question of jurisdiction and held that the acceptance of the contract was sent through email and received in Chanduali (U.P) and the principal place of business of the petitioner was at Varanasi (U.P) thus, the place of jurisdiction on the present case lies in U.P.[8]

• Parties to Contract– Electronic contract transactions are between parties that are strangers to each other. It puts all the contracting parties at risk. An e-contract is a paperless transaction that is borderless, so the jurisdiction’s scope of the court’s limit on any argument or appeal at the time of breach of e-contracts becomes difficult to assess.
• Signature authentication-The Indian Contract Act acknowledges both oral and written contracts and thus, the parties don’t need to sign a binding contract under his statute. In conventional contracts, the signature represents the party’s intention to constitute the contract and, in the eyes of the law, has a more legal meaning.
• Loss due to technical error-The world’s stored information, such as paper transactions, does not have protection. However, it is believed that everything that enters the digital environment still survives and never gets lost, yet there are no organizational, legal, or judicial regulations on the scenario in which any or part of the data is lost due to a technical error.

Conclusion

E-contracts have emerged as powerful tools that transform businesses, offering speed, efficiency, and cost-saving advantages. They enable parties from different parts of the world to form agreements simultaneously, eliminating geographical barriers. By minimizing paperwork and boosting productivity, e-commerce is poised to revolutionize the realms of business, law, and technology. However, there is a significant gap in the implementation of e-contracts due to the lack of comprehensive legislation.

The existing laws primarily cater to the needs of originators and service providers, leaving gaps in protecting the interests of all parties involved. It is crucial to enact concrete legislation that safeguards not only the originators but also the addresses in e-contract transactions. Only with proper and comprehensive legal frameworks can the full potential of e-contracts be realized.

FAQs

[1]Trimex International FZE Ltd. Dubai vs. Vedanta Aluminium Ltd, 2010 (2) AWC 1170 (SC).

[2]Tamil Nadu Organic Private Ltd. Vs. State Bank of India, AIR 2014 Mad 103.

[3]Ambala Sarabhai Enterprise Limited v. KS Infraspace LLP Limited, Civil Appeal No(s). 9346 of 2019.

[4]Société des products Nestlé S.A v. Essar industries &Ors, 2016 SCC OnLine Del 4279

[5]RavindraSingh@Kaku vs State of Punjab, Criminal Appeal No. 1307 of 2019.

[6] State vs Mohd. Afzal and Ors, 107 (2003) DLT 285.

[7]BhagwandasGoverdhandasKedia vs Girdhari Lal Parshottamdas&Co,AIR 1966 SC 543.

[8]P.R. Transport Agency vs Union of India & others, AIR 2006 All 23.

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