Introduction:
“What a lighted matchstick is to a barrel of gunpowder, is the same as what an acceptance is to an offer”, by this statement Sir William Anson described an analogy between two important events in the making of a contract. A valid offer and an acceptance are the two most important events leading to the formation of a valid contract. The essential constituents of a valid contract are a valid offer, an acceptance of the offer, a consideration, a legal objective, eligible capacity, and consensus ad idem of the parties to the contract. Contracts can be written or oral or even a combination of both forms.
With the boom in the e-commerce industry, there has been a rapid growth in the number of online transactions, which has led to a rise in the number of contracts made via email. Since the Covid-19 pandemic struck the world, email contracts have become a better and efficient method of communicating offers and acceptance. However, one of the major reasons for concern over such contracts is that place of contract is very vague and cannot be determined. The place of a contract helps to decide about the jurisdiction of courts over the matter.
The Indian Contract Act, 1872 has not talked about offer and acceptance via email clearly but has not even restricted the formation of contracts via this mode. It can be inferred that email contracts are identical to other forms of contract and are regulated by the provisions of the Indian Contract Act, 1872. Email contracts are legally binding and valid in India, to the extent they satisfy all the essential conditions of a valid contract as per the Indian contract Act, 1872.
Essential Conditions
Email contracts are legally binding and valid in India, to the extent they satisfy all the essential conditions of a valid contract as per Section 10 of the Indian contract Act, 1872.
- Valid offer: There must be a lawful offer made by one party to another. Once accepted, an offer becomes a proposal.
- Unconditional and absolute acceptance: Acceptance of proposal must be absolute and unconditional. It must be communicated to the offeror.
- At Least 2 parties: There should be at least 2 parties. One party is the one that makes the offer and the other which accepts it.
- Consensus ad-idem: Two parties must accept the offer in the same sense. And the parties must have an intention to create a legally binding relationship with each other.
- Capacity to contract: According to Section 11 of the Indian Contract Act, 1872 every person who is not a minor, not of unsound mind, and not disqualified by law, is competent to contract.
- Quid Pro Quo: There must be a lawful consideration for a valid contract.
- Consent must be free: The parties to a contract must not be under any influence, force, etc.
- Must not be expressly declared to be void.
The Postal Rule
The postal rule refers to the traditionally accepted rule regarding an offer and acceptance. According to this rule, the acceptance of an offer becomes valid at the time of its posting. In Adams v. Lindsell[1] it was held that the acceptance of an offer was valid not at the receipt, but the moment of posting it. This rule was upheld in the case of Household Fire and Carriage Accident Insurance v. Grant[2] and Brinkibon Ltd v Stahag Stahl[3].
However, modern modes of communication such as email do not align with the traditional postal rule. This is because these modes are instantaneous. The problems of delay and lag in the receipt of acceptance do not exist in the instantaneous modes. Email is an instantaneous mode of communication and the postal rule does not apply to it[4].
Information Technology Act, 2002
According to Section 10A of the Information Technology Act, 2002 wherever in the process of formation of a contract, the communication or revocation or the acceptance of an offer is communicated by the means of an electronic medium, such a contract cannot be held unenforceable only because such communication was via an electronic form.
Thus, the IT Act, 2002 has declared email contracts to be legally binding and valid. Such contracts cannot be declared invalid based on their electronic mode of communication.
Electronic Signature
Section 5 of the Information Technology Act, 2002 gives statutory recognition to electronic signatures. It states that electronic signatures are considered to be the same as handwritten signatures. This concept was based on the UNCITRAL Model Law on Electronic Signatures, 2001[5].
Section 3 of the Information Technology Act, 2002 states that electronic records can be authenticated using an electronic signature. This means that the offer and acceptance of contracts via email can be authenticated with an electronic signature. This reduces the scope of ambiguity and further issues related to the contract. Provisions related to offenses such as identity theft, fraudulent objective, misrepresentation of important information, etc., are also provided for under the Information Technology Act, 2005.
Maharashtra E-Registration and E-Filing Rules, 2013[6]
These rules make the attaching of electronic signatures mandatory. It further gives statutory recognition and validity to e-signature. Other Acts such as The Indian Penal Code, Banker’s Book of Evidence Act 1891, and Reserve Bank of India Act, 1934 also contain provisions related to electronic contracts which contain digital signatures.
Indian Evidence Act, 1872
Section 65B of the Indian Evidence Act,1872 is concerned with the admissibility of electronic records. It states that any information in an electronic record that is produced by a computer shall be a document. It will also be admissible as valid evidence in legal proceedings.
Section 85A of the Indian Evidence Act, 1872 talks about a presumption that every electronic record which claims to be an agreement containing the electronic signature of the parties is concluded when the electronic signature of the parties is attached with it. This means that every offer and acceptance communicated by electronic means leads to legally binding contracts and the same is admissible as valid evidence in the court of law.
Section 85B, 85C, 90A, and 88A also relate to presumptions related to electronic records under the Indian Evidence Act, 1872.
Trimex International Fze Limited, Dubai V. Vedanta Aluminum Limited[7]
An offer by email was made by the petitioner which was accepted by the respondent after an exchange of further emails, via email. The petitioner sent a formal contract that contained a detailed arbitration clause to the respondent by email. This was accepted and returned to him. A dispute regarding the validity of such an agreement over email arose. The question was whether an exchange via email giving proof of the parties’ agreement to arbitrate a dispute related to a contract creates a legally binding agreement[8]. The Supreme Court had held in this case that the parties, by exchange of emails, entered into a binding contract, which contained the arbitration clause, even though no formal contract was signed by the parties.
Remedy for Breach of Contract Formed Via Email
The remedy for breach of the contract formed via email is dealt with under Section 73 and Section 74 of the Indian Contract Act. An aggrieved person can bring an action for damages or compensation for the loss suffered.
Avoiding Contractual Obligation
To avoid contractual obligations while communicating about an offer or acceptance via email, the parties can place appropriate disclaimers in the email. These disclaimers can state relevant facts about the legal validity, intention of the parties, etc. This is to prevent the communication from being admissible in the court of law as a piece of evidence against a party.
Conclusion
It can be concluded that offer and acceptance via email are legally valid and binding to the extent to which they conform with the essentials of a valid contract under the Indian Contract Act, 1872. However, there is not much clarity regarding email contracts under the statutes, whatever laws are made are not sufficient for a smooth procedure of forming contracts via email. Even though essential elements such as an electronic signature are recognized under the Information Technology Act of 2002 there is still a large scope of developing a system strictly governing email contracts. Especially in the current situation of the world, wherein due to Covid-19 people are preferring to indulge in e-commerce transactions and contracts via email, a set of rules focused on communication of offer and acceptance via email is the need of the hour. Awareness workshops should be conducted so that people can better understand the relevance of contracts via email.
References:
[1] [1818] EWHC KB J59; (1818) 1 B & Ald 681; 106 ER 250.
[2] (1878-79) LR 4 Ex D 216.
[3] [1983] 2 AC 34.
[4]All Answers ltd, ‘Postal Acceptance Rule and Modern Communication‘ (Lawteacher.net, July 2021) https://www.lawteacher.net/free-law-essays/contract-law/postal-acceptance-rule-and-modern-communication-contract-law-essay.php?vref=1 (last visited 17 July 2021).
[5] ‘UNCITRAL Model law on Electronic Signatures with guide to Enactment 2001’, 8 United Nations Publication (2001), https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/ml-elecsig-e.pdf (last visited 17 July, 2021).
[6] http://igrmaharashtra.gov.in/writedata/PDF/e-Registration%20and%20e-Filing%20Rules%202013.pdf.(last visited 17July, 2021)
[7] 2010 (1) SCALE 574.
[8] B.C. Thiruvengadam, Case notes- spring, India Law News, India Committee of the American Bar Association’s Section of International Law (2010), https://indialawnews.org/2010/03/01/case-notes-spring-2011/ (last visited: 17 July 2021).
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