VALIDITY OF ELECTRONIC CONTRACTS

Author: Muskan Pipania Co-Author: Prakhyat Gargasya


INTRODUCTION Advancement of Globalization and the technology has accelerated the presence of e-commerce companies throughout the world. This gave rise to Electronic Contracts, popularly known as E-contracts. These contracts are generally very similar to the paper based traditional contracts, the only difference between the two is that an E-contract takes place through a digital mode of communication which in return eliminates the concept of middlemen. But unlike traditional contacts, E-contracts can be carried out in seconds with both the parties attaching their digital signatures to the electronic copy of the contract.

KINDS OF ELECTRONIC CONTRACTS At present, Contracts are utilized so frequently that sometimes we become unaware of the fact that we have actually entered into a contract. From booking a cab to ordering food online and numerous other transactions comes under the ambit of e-contracts. Electronic Contracts can be characterised into different kinds, viz.- Browse Wrap Agreements: The agreements which are intended to be binding upon the contracting party by use of the website such as Flipkart or Myntra in the form of a “Terms of use” or “User Agreement” or “Terms of service.” Shrink Wrap Contracts: These agreements are the license agreement by which the terms and conditions of the agreement are authorized and enforced upon the contracting parties and are normally present on the plastic or in manuals accompanying with the products which the consumer purchases. Click Wrap Agreements: These agreements require the user to give his consent to the terms and conditions which are known as end user agreements and administers the authorized utilization of the product by clicking "OK" or "I agree" button. There are specific sorts of check which guarantees that the terms of the agreement are binding upon the contracting parties, i.e.- The agreement or the terms of service must be explicitly conveyed on to the party. By simply inserting a link to the terms on the website without drawing any attention of the user will not be considered. If the user keeps on using the website after the intimation of the terms and conditions, it will be considered as the acceptance of the agreement. The terms of the agreement ought not be changed if the user has given his consent for the specific activity. The changes made to the terms and conditions of the agreement must be explicitly insinuated to the user which provides a user to give a new consent for the alterations and modifications in the terms and conditions. In case, the user doesn't consent to the changes then he has the choice to leave the website at that exact moment. EXECUTION OF E-CONTRACTS In India, E-Contracts are regulated and recognised by Indian Contract Act, 1872. In order to constitute a valid Electronic contract, provisions of the Indian Contract Act, 1872 are to be complied with. Similar to traditional paper contracts, Essential Elements of an Electronic Contract are- Object of the contract should be lawful. Consent should be free and unaffected. There should be intention of the parties to form a contract. The consideration should be legal. An offer should be made and accepted. Lastly, the parties should be eligible to enter into a contract. In Addition to the Indian Contract Act, Section 10-A of The Information Technology Act, 2000 (IT Act) gives validity to Electronic Contracts which states that where the communication of proposals, acceptance and revocation are expressed in electronic form, such contract is enforceable in the court of law. The IT Act comprehensively recognises the legalities of digital signature certificates (DSCs). Section 5 of the IT Act, 2000 states that where any law provides that information or any other matter shall be authenticated by affixing the signature or any document, the same shall be signed or bear the signature of any person and in case where such information or matter is authenticated by means of electronic signature affixed in manner prescribed by the Central Government, it will be enforceable. Moreover, Section 65B of the Indian Evidence Act, 1872 stipulates the evidentiary value of e-contracts. Clause (1) of the same section states that any information contained in electronic record, which is printed on paper or stored/recorded or copied in optical and magnetic media produced by a computer shall be deemed to be a document and shall be admissible in any proceedings subject to the conditions enumerated in the said section. VALIDITY OF E-CONTRACTS E-contracts weigh the same value as a contract on paper. The Supreme Court while dealing with the issue of validity of an electronic contract in the case Trimex International FZE Ltd., Dubai v. Vedanta Aluminium Ltd, held that in cases where both the parties agreed to form a contract through the medium of electronic e-mails, it satisfies the provisions of the Indian Contract Act, 1872 of a valid contract. Considering the fact, that the IT Act has recognises e-signatures as legal and binding, the same may also form a strong basis for initiating litigation before a court of law. Similarly, in Tamil Nadu Organic Pvt. Ltd. v State Bank of India, The Madras High Court stated that – “contractual liabilities could arise by way of electronic means and such electronic contract could be enforced through law.” Additionally, in State of Delhi v Mohd. Afzal & Ors., the Delhi High Court while delivering the judgement stated that Electronic records are admissible as Evidence in the court of Law. Therefore, it can be concluded that where steps of a contract have been affected through electronic means, the parties are at consensus-id-idem, such an agreement fulfils all the essentials of a valid contract under the Indian Contract Act, 1872 mentioned above and such contract is valid and legally enforceable in the courts. However, the risk associated with electronic contracts are high, even today for high stake transactions, parties still insist on wet signatures on physical agreements. The mode of an e-contract is the result of a progressive change in the changing global technical know-hows yet it likewise has been discovered that the laws governing such e-contracts are vague in nature and they should be dynamic so as to acknowledge the present changing situations of e-commerce including an e-contract.

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