Introduction:
The robust rise in the e-commerce industry has led to an increasing need for a proper legislative framework to govern Electronic contracts or E-contracts in India. E-contracts are contracts based on industrial transactions carried out electronically and formed via an exchange of emails and online agreements. [i]The law pertaining to E-contracts that determines its validity is The Indian Contract Act, 1872, The Information Technology Act, 2000, and The Indian Evidence Act, 1872. There are a lot of issues surrounding E-contracts such as free consent, capacity to contract, jurisdiction, applicable law, and cyber hacking. The paper aims to critically analyze the validity of E-contracts concerning legislation, execution, and enforceability. It will highlight the challenges faced by the lawmakers due to the advent rise in technology. The paper will further provide a comparative analysis of E-contract’s law with that of the United States. In the end, it will offer some solutions and recommendations to the existing challenges and issues.
Different types of Digital Agreements
There are three kinds of online agreements which are as follows:
- Browse Wrap Agreement: This agreement is intended to be binding on the contracting party by the use of a website. This includes user policies such as “terms of service” or “terms of use”, which can be used as the hyperlinks at the bottom or corner of the website.
- Shrink Wrap Contracts: This is a license agreement that enforces the terms and conditions of the contracting party. This is usually present on the plastic or manuals accompanying the computer software products or merchandise that the consumer buys.
- Click Wrap Agreements: This agreement is known as an end-user agreement as it requires the users to provide their consent to the terms and conditions of their respective websites or software by pressing the “I agree” or “Ok” button.[ii]
Validity and enforceability of E-contracts
The validity of E-contracts is determined by three major legislations, The Indian Contract Act, 1872, The Information Technology Act, 2000, and The Indian Evidence Act, 1872.
The Indian Contract Act, 1872
The act governs the law regarding all contracts as long as it fulfills all the requisite conditions. It provides that a contract is deemed to be valid if it is entered into by competent parties out of free consent for a lawful object and consideration. The communication of offer and acceptance can be made verbally, or in writing or by conduct. [iii]Hence, an E-contract that is formed through the exchange of emails where all the elements of a contract are fulfilled will result in a valid contract. It is important to maintain these electronic records of communication in order to show a valid agreement between the parties.
The Information Technology Act, 2000
The act provides statutory recognition to the E-contracts under Section 10-A. It clearly states that a contract cannot be deemed to be invalid or unenforceable solely because it was formed through “communication of proposals, acceptance of proposals, revocation of proposals or acceptances” in an electronic form. The Act further recognizes “digital signatures” to authenticate or verify electronic records under section 3. Hence, an E- contract can be validated by digital signatures and is recognized by the laws in India.[iv]
The Indian Evidence Act, 1872
The act recognizes electronic documents under section 65-A and lays down the procedure for furnishing it as evidence under section 65-B. Section 65-B states that any electronic information created by a computer in printed, stored, or copied form will deem to be a document and can be admissible as evidence without any further proof of the original in any proceedings. The admissibility of such a document is subject to certain conditions laid down in section 65-B. It is required that the electronic information or document produced from a computer was regularly used by a person having lawful control over the system at the time; the electronic information or document was regularly fed into the computer in the ordinary course of time; the said computer was operating properly and did not affect the accuracy of the electronic data recorded. Hence, any email or other electronic communication is considered as valid evidence in the court of law.[v]
Comparison with the law of the United States
The Uniform electronic transaction act (UETA) and the E-Sign are the governing statutes for the enforcements of electronic contracts in the USA. The acts are procedural and are subject to existing substantive law. UETA provides that a contract will not be deemed invalid on the ground that it was created in an electronic form. Similarly, It states that a record or signature will not be deemed to be unenforceable only because it is in electronic form. Therefore, the form in which a record, signature, or contract is created does not affect its legal validity.
However, UETA and E-Sign only applies when the parties agree to hold transactions via electronic means. The parties can also agree to negotiate between themselves that the contract will be executed in electronic form and will come into existence once both the parties have assented to it.
E-Sign offers protection to customers by providing them with an option where they can choose not to accept it an electronic contract and can ask for a paper copy instead, then it must be provided in that form. Customers also need to informed of the procedure to withdraw their consent from an electronic contract and have notices sent by mail. E-Sign deals must be confirmed by the computer to show that the customer has understood the rules applying to the contract. All notices have to arrive by email to ensure that the company can confirm that the customer’s system can open the electronic envelopes.
Therefore, the US law provides a comprehensive system to ensure justice to the parties entering into an E-contract. The statutes provide complete clarity regarding the formation of the contract and its enforceability. The requirement that the customer must confirm the contract by computer promotes certainty to the consumer as to whether there is a contract or not. It is a better system as it takes into account all the important factors with respect to the safety and security of users.[vi]
Challenges faced by Lawmakers
Free consent
Free consent is one of the most important elements of a valid contract as per the Indian Contract Act, 1872. There is no scope for negotiation in case of online contracts as compared to a physical contract. The user is only provided with a “take it or leave it” option which proves to be rather detrimental at times. The user can either accept the unreasonable or unfair terms of the contract or forgo the service forever. Hence, the user needs to be very prudent while consenting to an online contract in order to avoid future problems. [vii]
Capacity to contract
The capacity to contract is also a major pre-requisite for a valid contract as contracts entered into by non-competent individuals are declared void. Hence, it becomes difficult to determine whether the person clicking on the “I agree” button is legal or not as no proof of ID is asked. It is pertinent for the service provider to ensure that the person entering into the electronic contract has the legal capacity to do so.
Jurisdiction
The question of jurisdiction in ordinary contracts is either governed by CPC or a contractual clause determining the territorial jurisdiction of courts. The nature of E-contracts makes it difficult to determine the jurisdiction due to the absence of geographical and national boundaries for the execution of such contracts. Section 13 of the IT act, addresses the issue to an extent by providing the time and place of dispatch and receipt of an electronic record. It states that the place where the cause of action arises would be deemed to be where the originator has his place of business and where the addressee has his place of business. However, it is recommended that parties to the electronic agreement provide for a specific jurisdictional clause since the provision is subject to the mutual agreement of the contracting parties with respect to the agreed place of contract.[viii]
Applicable law
The governing law can either be decided by the parties or the court of law. The parties can choose the law by mutually agreeing through a contractual clause. In the absence of it, the court can decide the law of the country which it is most closely connected to. There is no restriction stating that an Indian party could not be subject to foreign jurisdiction or a foreign law cannot be applied. However, it is wiser to have a contractual clause determining the governing law in order to avoid any confusion.
Solutions and Recommendations
- The IT Act, 2000 needs to be amended to include more elaborate provisions to clarify the issue of formation, enforceability, and jurisdiction of E-contracts.
- It is very crucial to authenticate the E-records as they are very easy to be tempered with. E-evidence should only be admissible after corroboration, unless there are genuine reasons to admit without corroboration.
- There should be the training of law officers and judges to comprehend the admissibility of digital signatures on a case by case basis as the e-evidence in India may not be considered adequate due to incompetence of the judges to understand it.
- E-court or an online dispute resolution mechanism should be established to deal with e-commerce disputes with well-trained professionals.
- It is important to raise technological awareness among people on how to use it, the benefits of it, and the misuses to avoid. [ix]
Conclusion
Taking into account the above discussion, it can be said that an E-contract is like any other valid contract as long as it fulfills all the required conditions given under the Indian Contract Act, 1872. The validity of the E-contracts is governed by the said legislation but the advancement in technologies does bring in challenges to the lawmakers. It is recommended that the parties to the contract mutually pre-decide the contractual clauses for jurisdiction and the governing law due to the lack of clear provisions in this aspect. It is important to bring in necessary amendments to the existing statutes in order to correct the lacuna in the law. the law regarding E-contracts in the United States is more elaborate and comprehensive as compared to India and should be taken as a basis to improve the existing legislation. Law needs to be regularly updated to keep up with the ever-changing and evolving technology.
References:
[i]Sethuram, D. (2018). E-contracts in India: The Legal Framework, Issues and Challenges. International Journal Of Emerging Innovations In Science And Technology, 4(2), 13-15. Retrieved 25 July 2020.
[ii] ibid
[iii] ibid
[iv] Jhingan, S., & Yadav, N. (2016). E-contracts – Legal Validity And Jurisdiction – Corporate/Commercial Law – India. Mondaq.com. Retrieved 25 July 2020, from https://www.mondaq.com/india/contracts-and-commercial-law/544404/E-contracts–legal-validity-and-jurisdiction.
[v] Sethuram, D. (2018). E-contracts in India: The Legal Framework, Issues and Challenges. International Journal Of Emerging Innovations In Science And Technology, 4(2), 13-15. Retrieved 25 July 2020.
[vi] ibid
[vii] ibid
[viii] Jhingan, S., & Yadav, N. (2016). E-contracts – Legal Validity And Jurisdiction – Corporate/Commercial Law – India. Mondaq.com. Retrieved 25 July 2020, from https://www.mondaq.com/india/contracts-and-commercial-law/544404/E-contracts–legal-validity-and-jurisdiction.
[ix] Electronic Contracts. Lawteacher.net. (2020). Retrieved 25 July 2020, from https://www.lawteacher.net/free-law-essays/contract-law/electronic-contracts.php.
0 Comments