TABLE OF CONTENTS
SR.NO TOPIC PG.NO1 ABBREVIATIONS 12 TABLE OF CASES AND STATUTES 13 RESEARCH METHODOLOGY 24 Chapter 1 INTRODUCTION
I EVOLUTION OF E-CONTRACTS
II UNDERLYING PRINCIPLE
III SCHEME AND SCOPE OF TOPIC
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5 Chapter 2 LEGAL FRAMEWORK RELATING TO E-
CONTRACTS
I COMPONENTS OF E-CONTRACTS
II FINE PRINT W.R.T E-CONTRACTS
9-18
6 Chapter 3 ROLE OF JUDICIARY
I CASES19-21
7 Chapter 4 COMPARITIVE STUDY
I DIFFERENCE BETWEEN E-CONTRACTS AND
TRADITIONAL CONTRACTS
II E-CONTRACTS IN INDIA
III E-CONTRACTS IN UNITED STATES OF AMERICA
22-25
8 Chapter 5 CONCLUSIONS & SUGGESTIONS
I CONCLUSION
II SUGGESTION
26-29
9 BIBLIOGRAPHY 30-31
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ABBREVIATIONS
Indian Contract Act, 1872 ICA
Information Technology Act, 2000 IT Act
Versus VS
United Nations Commission on International Trade Law UNICITRAL
Uniform Computer Information Transaction Act UCITA
Civil Procedure Code CPC
TABLE OF CASES
P.R. Transport Agency vs. Union of India and Others
Himachal Joint Venture vs. Pani Peena World Transport
Ratna vs. Vasutech Ltd.
Trimex International FZE Ltd. Dubai VS. Vedanta Aluminum Ltd.
Citi Bank vs. TLC
Cable network vs. CNN
TABLE OF STATUTES
Indian Contract Act, 1872
Information Technology Act, 2000
The Electronic Commerce Act,1998
United Nations Commission on International Trade Law(UNICITRAL), 1996
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RESEARCH METHODOLOGY
RELEVANCE OF THE PROJECTThe subject of Law of Contracts II, which includes studying, analysing and interpreting the
topics of Contractual Agreements. This paper aims to carry out a research study pertaining to E-
Contracts. The topic ‘E-Contracts: Issues and Limitations ' forms a part of this subject. This topic
helps to understand an integral area pertaining to the subject.
OBJECTIVE OF STUDY The Objective of this study is to provide an intensive research and analysis of ‘E-Contracts:
Issues and Limitations' regarding its formation, evolution, types, issues etc. These essential areas
have been studied in depth and briefed up in the project. It aims at exploring all aspects of ‘E-
Contracts’. This project aims at studying the rules and provisions of Indian Contract Act and
Information Technology Act relating to E-Contracts.
RESEARCH HYPOTHESISDuring the study of this project, the researchers seeked to make an attempt to answer the
following questions:
1. What is E-Contract and its forms?
2. What is the current scenario of E-contracts in India?
3. What is the legal framework and issues relating to E-contracts?
4. What are the treaties and conventions relating to E-Contracts?
5. What are the various judicial decisions and interpretations relating to E-Contracts?
6. Difference between E-contracts and Traditional Contracts
7. E-contract Legal framework in various other Countries
LIMITATION OF RESEARCHThis project was subject to a couple of limitations. The project was restricted to a secondary
means of research, conducted only by means of books and the internet, due tto which certain
limitations are bound to creep in. A primary way of research could not be adopted for the same
due to the nature of the topic and due to lack of means and time restrain.
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Chapter 1 : INTRODUCTION
According to Thomas Hobbes, Life in the state of nature was ‘poor’, ‘solitary’; ‘nasty’
and ‘brutish’ he elucidates these postulations in his theory of ‘Social Contract’, Locke
and Rossouaue also have similar postulations about the formation of society. Therefore it
can be stated with fair confidence that it is indubitable that the modern society has its
genesis in a contract. Much like the human race, contracts too, have evolved and adapted
to the changing nature of human life and surrounding conditions. Over the years, many
acclaimed jurists defined the term ‘contract’ in a manner which they deemed fit.
According to Salmond, a contract is "An agreement, creating and defining obligations
between the parties."
According to Pollock, "Every agreement and promise enforceable at a court of law is a
contract." However, a constant is that, a contract has two or more parties, making a
promise and a reciprocal consideration for the fulfillment of that promise.
Contracts play a cardinal role in instituting legally binding relationships between various
business and their customers. A contract consists of numerous activities that have to be
carried out by the involved parties as well as contract clauses that address specific
concerns in the business process interaction.1 Electronic commerce can be defined as
“Electronic buying and selling on the Internet and includes all the activities that a firm
performs, selling and buying services and products using computers and communication
technologies.”2
The need and requirement for electronic form of contract can basically be attributed to
the need for a quick, efficient and time saving mode of contracting. The virtual
cyberspace being time saving and unbound by challenges of distance gives an
opportunity for parties to enter into a contract over internet. In the electronic age, the
whole transaction can be completed in seconds, with both parties simply affixing their
1 E-Contract Modeling and E-Enactment by P.Radha Krishna (Centre for data engineering- IIT Hyderabad)2 SV Joga Rao, Computer Contracts & Information Technology Law (2nd Edition, 2005), pg. 182
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digital signatures3 to an electronic copy of the contract.
It is undisputed that today, e-contracts have an evidentiary value. Not only because of the
sheer number of persons who enter into such contracts on a daily basis but also because
of the magnitude, volume and implications of these contracts. Present day Indian
economy would hobble to a stop if e-contracts were to be cropped from the picture. It is
but obvious that the advent of e-contracts came with the popularization of e-commerce,
however it is a popular misconception that e-contracts are restricted to the online
transactions pertaining to buying and selling of consumable goods, in fact insurance
bought online, educational courses taken, online exams, are all examples of e-contracts.
I .EVOLUTION OF E-CONTRACTS
If the Internet is anything to go by, India's technological and economic advancemnt has
moved into the top gear. In the fiscal year of 2014-2015, india registered a whopping
growth of 200% in the e-commerce sector. However to understand the evolution of e-
contracts it is prudent to take into account the evolution of e-commerce in India.
1. Timeline
Circa 1991: Introduction of E-Commerce
The year 1991 noted a new chapter in the history of the online world where e-commerce
became a hot choice amongst the commercial use of the internet. At that time it was
unanticipated that buying and selling online and online trading would be so rife and
would eventually become a trend in the developed and developing countries, with India
sharing a substantial proportion of this success and progress.
Circa 2002: IRCTC teaches India to Book ticket online
India first came into interaction with E-Commerce via the IRCTC. The Govt. of India
experimented with this online strategy to make it convenient for its public to book train
tickets, Online Passenger Reservation System, which facilitated online booking from 3 Digital Signature Certificates (DSC) are the digital equivalent (that is electronic format) of physical or paper certificates.
Examples of physical certificates are drivers' licenses, passports or membership cards. Certificates serve as proof of identity of an
individual for a certain purpose; for example, a driver's license identifies someone who can legally drive in a particular country.
Likewise, a digital certificate can be presented electronically to prove your identity, to access information or services on the
Internet or to sign certain documents digitally.
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anywhere, anytime. This was a boon to the common man as now, for anyone conversant
with the online system, waiting in long lines is a thing of the past. This can be pegged as
a crucial achievement in the history of India’s internet story as it directly affected the
comman man.
Circa 2003: Introduction of Low Cost Airline with AirDeccan
After the unpredicted success of the IRCTC, the OTBS4 was followed by airlines, like
AirDeccan, Indian Airlines, Spicejet, et cetera Airline agency encouraged, web booking
to save on middle men commission and thus in a way added a number of people in the
country in the E-Commerce loop for the first time.
Circa 2007: The Deep Discounted model of Flipkart
The permeating acceptance of E-commerce by the Indian consumer influenced many
other business players to try this technique for their E-businesses and generate higher
profits.
Though online shopping has been present since the 2000 with only a handful players like
infibeam, indiamart etc, it gained popularity only with deep discount model of Flipkart.
Flipkart re-launched online shopping in India. Soon enough, other portals like Amazon,
Jabong, ebay, Myntra et cetera started the process to set u shop in India as they identifies
it as one of the biggest consumer and potential growth bases in the world.
Graph depcting the rise and comparision of the penetration of internet, user growth and
share of indian users amongst world internet users.5
Graph depcting the rise and comparision of the penetration of internet, user growth and
share of indian users amongst world internet users.6
4 Online Ticket Booking System5 Taken from http://www.internetlivestats.com/internet-users/india/ on 25th July, 15 at 6:11 pm.6 Taken from http://www.internetlivestats.com/internet-users/india/ on 25th July, 15 at 6:11 pm.
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2002 2005 2008 2011 20140.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
Penetration of InternetUser growthShare of World internet users
It can be infered from the above graphical representation that over the years, the
penetration of Internet and hence the number of users have increased phenomenally,
however, eventhogh the percentage increase in user growth has declined, it is because,
between 2002 to 2011, it experienced a somewhat stable level. However the share in world
Internet users has risen steadly indicating a growing trend of population and availablilty of
internet amongst that population.
II .UNDERLYING PRINCIPLE
In the Law of Contracts, the aim and intent is to form a legal relationship between two
parties, i.e. an onus of responsibility upon both the parties to honour the conditions of the
contract and thereby fulfill the contract. The failure to do so by any of the consenting
parties results in non-completion of the said contract. The project will be based on the
underlying principle and will aim to amplify and explain the same. E-contracts being a
modern phenomenon have no direct
The legal maxim which can be applied and interpreted w.r.t this topic is ‘Contractus
legem ex conventione accipiunt’ which means, the agreement of the parties makes the
law of contracts, therefore, it means that, the agreement which the parties have arrived at,
including the conditions which they both have agreed upon will constitute the contract and
the law would be interpreted on the basis of the conditions and terms formulating the
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contract. Another applicable principle is ‘Ubi Jus Ibi Remedium’7. It means, “Where
there is a right there is a remedy”. The basic principle contemplated in the maxim is that,
when a person's right is violated the victim will have an equitable remedy under law. The
maxim also states that the person whose right is being infringed has a right to enforce the
infringed right through any action before a court. All law courts are also guided with the
same principle of Ubi Jus Ibi Remedium.8 This maxim is not specific to e-contracts,
nonetheless it is important as it dictates the justice seeking mechanism that a person can
resort in case of violation of a contract.
III .SCOPE & SCHEME OF TOPIC
Conventional concept of contract, developed over the years provides for fundamental
principles governing all aspects (formation discharge, remedies et cetera) of different types
of contracts. The legal rules governing various facets of a convetional contract are quite
clear. However, owing to the ways in which e-comerce differs from traditional commerce,
it raises some novel technical and legal challenges, which leads to the the scope of the
topic being widned. From the standpoint of law, it is the most appropriate time to
understand the structural changes, that are possible in this new world because of the
change in dynamics of business relationships, and the legal issues arising out of them.
Some exceedingly challening and intriguing questions have been posed, the project seeks
to answer these questions in relative unambigious manner and provide relevant
information w.r.t to the same. The questions are
i. The formation and consequent conclusion of E-contracts.
ii. Validity and enforceabilty of such contracts.
iii. Extent of applicabilty of established principles of law of contracts to e-contracts.
iv. Study of past cases so as to function as a Judicial precedent.
In response to recent escalating growth witnessed by the e-commerce sector and the
resultant rise in the number of contracts which are being entered into online, some
commentrators have suggersted that the formulation of a formal law governing these
contracts is imperative. It is undubitable that legal and economic institutions will have to
7 Taken from http://definitions.uslegal.com/ on March 2, 2015 at 12:11 pm8 Taken from http://www.oxfordreference.com/ on March 2, 2015 at 12:13 pm.
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undergo a substantial technological and organizational revolutionzation in order to keep up
with the technology. Other experts have taken a skeptical stand, arguing that recent
positions are rather viewed as changes of degree rather than kind, and can be accomodated
by extending and modfying existing arrangements in a revolutionary and all encompassing
manner.
The scheme of the project will be reletively linear and will touch upon the formation,
completion and breach of e-contracts, it will then go on to explore various cases and the
interpretations and judicial implications of the same.
Minimal Involvement of Contracting Parties
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Chapter 2 LEGAL FRAMEWORK RELATING TO E-CONTRACT
The Indian Contract Act, 1872 governs the manner in which contracts are made and
executed in India. It governs the way in which the provisions in a contract are
implemented and codifies the effect of a breach of contractual provisions.
Within the framework of the Act, parties are free to contract on any terms they choose.
Indian Contract Act consists of limiting factors subject to which contract may be entered
into, executed and breach enforced.
It only provides a framework of rules and regulations that govern formation and
performance of contract. The rights and duties of parties and terms of agreement are
decided by the contracting parties themselves. The court of law acts to enforce
agreement, in case of non- performance.
With the growing importance and value of e-contract in India and across the world, the
different stakeholders are continuously identifying and evaluating the nuances of legal
outline relating to it.
The participation of different service providers in the transaction of e-contract, which
includes a payment gateway, the main website, the bank or card verification website, the
security authorisation website and the final service provider which can also comprise
the shipping agent has made the E-contract business more complex.
Therefore, the need for amendable it has augmented. In India, till date there are no
definite legislations or guidelines protecting the buyers and sellers of goods and services
over the electronic medium.
Statute Governing E-Contracts
Information Technology Act,
2000
Information Technology
Amendment Act, 2008
Indian Contract Act,1872
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However, several laws acting in unification are trying to regulate the business
transactions of E-contract. They are as follows,
i. Indian Contract Act, 1872
ii. Consumer Protection Act, 1986
iii. Information Technology Act, 2000
iv. Indian Copyright Act 1957
Like any other types of business, E-contract business also works on the basis of
contracts. It is therefore, structured by the Indian Contract Act, 1872. Any valid and
legal E-contracts can be designed, completed, and enforced as parties replace paper
documents with electronic parallels. The contracts are move in between the service
providers or sellers and buyers.
Earlier, there was no definite law to regulate the intermediaries such as verification
service providers and shipping service providers to safeguard that the product or service
is actually delivered. However, the government has recently acquainted the Information
Technology (Intermediaries Guidelines) Rules 2011.
The actual scope of the security provided under these regulations would only be known
after judicial interpretation of the provisions. However, now it has been explained that
even foreign intermediaries delivered to provide service could be sued in India.
The payment gateways which footing a very important position as the primary processor
of the payment for the merchants were brought into the legal framework after
proclamation of the Payment and settlement Systems Act, 2007 (PSS Act, 2007). The
PSS Act, 2007 as well as the Payment and Settlement System Regulations, 2008 made
under the Act came into effect from August 12, 2008. Further, the Reserve Bank of
India issued additional guidelines initiating all such gateways and payments processors
to register under the said act.
The authority of the transactions of E-contract is established under the Information
Technology Act, 2000 (IT Act, 2000). It explains the reasonable mode of acceptance of
the offer. IT Act, 2000 also rules the revocation of offer and acceptance. However,
definite provisions that regulate E-contract transactions conducted over the Internet,
mobile phones, et cetera are vague. With numerous cross border transactions also being
conducted over the Internet, specific law guarding the Indian customers and Indian
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businesses are essential and Indian laws are gravely insufficient on this issue.
In a bid to safeguard security, the government has made digital signatures necessary in
several E-contract transactions mainly in the government to government (G2G) or
government to business (G2B) framework with a view to safeguarding the identity of
the transacting parties. E-contracts transactions on these modes require digital signatures
as essential parts. They are used for the verification of the electronic contracts. These
are controlled by the IT Act, 2000 which provides the outline for digital signatures, their
issues and verification.
The Act thus tries to safeguard that trust between both the parties is maintained through
verification of identities and help prevent cybercrimes and ensure cyber security
practices.
In the light of the above discussion, it is to be said that the present laws in respect of the
guidelines of E-contract and its related operations are not suitably serving the purpose.
Propagation of laws is creating confusion in the smooth procedures of the E-contract
accomplishments.
Further, the present laws are salient on features of e-contract such as payment
instrument and delivery instrument and present standard practices which have been
settled by the industry. The Reserve Bank of India, however, has tried to support the
electronic payment mechanism through various orders, but such orders can only act as a
stopgap procedure.
The most important order in this regard was the application of second factor verification
in all Indian Payment Gateways. Commonly recognised as Verified by Visa or
MasterCard Secure Code, this had made card transactions on the Internet moderately
more secure.
I .COMPONENTS OF AN E-CONTRACT
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1. Offer
(1) The law already recognizes contracts formed using facsimile, telex and other similar
technology. An agreement between parties is legally valid if it satisfies the
requirements of the law regarding its formation, i.e. that the parties intended to
create a contract primarily.
(2) This intention is evidenced by their compliance with three classical cornerstones i.e.
offer, acceptance and consideration. One of the early steps in the formation of a
contract lies in arriving at an agreement between the contracting parties by means of
an offer and acceptance.
(3) An advertisement on website may or may not constitute an offer, as offer and
invitation to offer are two distinct concepts. Being an offer to unspecified person, it
is probably an invitation to treat, unless a contrary intention is clearly expressed.
(4) The test is of intention whether by supplying the information, the person intends to
be legally bound or not. When consumers respond through e-mail or by filling in an
online form, built into the web page, they make an Offer. The seller can accept this
offer either by express confirmation or by conduct.
2. Acceptance
(1) Unequivocal unconditional communication of acceptance is required to be made in
terms of the offer, to create a valid e-contract. The critical issue is when acceptance
takes effect, to determine where and when the contract comes into existence.
(2) The general receipt rule is that acceptance is effective when received. For
contracting no conclusive rule is settled. The applicable rule of communication
depends upon reasonable certainty of the message being received.
(3) When parties connect directly, without a server, they will be aware of failure or
partial receipt of a message. Such party realizing the fault must request re-
transmission, as acceptance is only effective when received.
(4) When there is a common server, the actual point of receipt of the acceptance is
crucial in deciding the jurisdiction in which the e-contract is concluded. If the server
is trusted, the postal rule may apply, if however, the server is not trusted or there is
uncertainty concerning the e-mail’s route, it is best not to apply the postal rule.
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When arrival at the server is presumed insufficient, the ‘receipt at the mail box’ rule
is preferred.
3. Consideration and Performance
(1) Contracts result only when one promise is made in exchange for something in
return. This something in return is called ‘consideration’. The present rules of
consideration apply to e-contracts.
(2) There is concern among consumers regarding Transitional Security over the
Internet. The e-directive on Distance Selling tries to generate confidence by
minimizing abuse by purchasers and suppliers. It specifies the following,
(i) A list of key points, must be supplied to the consumer in ‘a clear and
comprehensible manner.’
(ii) Written confirmation, or confirmation in another durable medium available and
accessible to the consumer, of the principle points.
(iii) The right of withdrawal enabling consumers to avoid deals entered into
inadvertently or without sufficient knowledge, providing for seven-day cooling-off
period free from penalty or reason to return the goods or reimburse the cost of
services.
(iv) Performance should be delivered within thirty days of order unless otherwise
expressly agreed.
(v) Reimbursement of sums lost to fraudulent use of credit cards. It places the risk of
fraud on the credit card Company, requiring them to take steps to protect their
position.
(vi) On the other hand, there is also need to protect sellers from rogue purchasers.
For this, the provision of ‘charge-back clauses’ and encouragement of pre-payment
by buyers is recommended.
(vii) Thus, this Directive adequately protects rights of consumers against unknown
sellers and sellers against unknown buyers.
4. Liability And Damages
(1) A party that commits breach of an agreement may face various types of liability
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under contract law. Due to the nature of the systems and the networks that
business employ to conduct e-commerce, parties may find themselves liable for
contracts which technically originated with them but, due to programming error,
employee mistake or deliberate misconduct were executed, released without the
actual intent or authority of the party.
(2) Sound policies dictate that parties receiving messages be able to rely on the legal
expressions of the authority from the sender’s computer and this legally be able
to attribute these messages to the sender.
(3) In addition to employing information security mechanisms and other controls,
techniques for limiting exposure to liability include the following,
Trading partner and legal technical arguments
Compliance with recognized procedures, guidelines and practices
Audit and control programmers and reviews.
Technical competence and accreditation
Proper human resource management
Insurance
Enhance notice and disclosure mechanisms
Legislation and regulation addressing relevant secure electronic
commerce issuing.
II .FINE PRINT W.R.T E-CONTRACTS
1. General Requirements
Forms of E-Contracts
Exchange of E-mail Website Forms
E-ticketing, software etc
Online agreements
Web Wrap, Click Wrap & Browse Wrap
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Enforceability of electronic contracts will generally require:
(1) Sufficient notice of terms (particularly onerous terms specifically brought to attention)
(2) Sufficient opportunity of the user to consider terms and to decline
(3) Evidence of acceptance of terms that is sufficiently clear and positive as to
demonstrate actual consent to be bound by terms
(4) The absence of terms that are unconscionable or greatly unfair
B) Specific actions to take and avoid to achieve enforceability
(1) Presentment & review of terms and conditions:
(i) Web site operators should ensure that notice of the existence of user terms
and conditions are clearly presented to potential users of the web site
(ii) Do not rely solely on legal terms that are merely posted on the web site
(whether by hypertext link on the home page or otherwise buried on pages
deeper in the site) and require the user to find and/or review on their own
initiative (i.e. so-called “browse-wrap”)
(iii) Users should not be able to agree to terms and conditions and/or be
permitted to access and use the site and/or obtain products and services
available through the site without having been presented with the terms of the
proposed agreement and agreeing to such terms of use
(iv) Ensure that the user’s ability to review terms and conditions is as simple
and straightforward as possible – if terms are multiple pages, user should be
able to easily navigate back and forth
(v) All terms and conditions governing access and use (e.g. user terms, privacy
policies, etc.) should be consistent and work together in a coherent manner
(vi) The terms and conditions should always be accessible to the user (i.e.
before, during and after the review and acceptance process) and be capable of
being retained by the user – consider automatically emailing terms to end user
confirming terms and conditions immediately after users' agreement to same
C) Compliance with Legislation & Laws:
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(1) Adherence to electronic commerce legislative requirements concerning formal
requirements of electronic contracts (e.g. statutory obligations concerning
writing, signatures, record retention, use of electronic agents, etc.).
(2) If the law requires specific agreement or consent to a particular type of term (e.g.
privacy legislation), the format of the consent / consent process should comply
with that legal requirement
(3) Avoid terms and conditions that are unconscionable or greatly unfair (also
includes avoiding practices / contracting processes and structures that might also
be considered to be unconscionable or particularly onerous)
(4) If some terms and conditions are, or could be construed as, unusual, unfair or
unduly onerous, use efforts to highlight such terms and conditions (bold
typeface, capital letters, etc.)
D) Third Parties:
(1) It is not unusual for many web site operators to use the services of third parties
in the performance of some web site services that is transparent to the user. Often
the user ends up (unbeknownst to the user) on a third party site that remains
branded by the original web site operator, but which has the different terms and
conditions of the third party service provider, resulting in a potential contractual
conflict of terms. Therefore ensure the design of the web site contemplates this
issue when using third party sites.
E) Acceptance of Terms
(1) Evidence of acceptance of terms that is sufficiently clear and positive as to
demonstrate actual consent to be bound by terms (e.g. clicking a button or icon or
typing in the specified words of agreement or rejection)
(2) Examples of clear words of agreement include "I agree," "I accept," "I consent,"
or "I assent."
(3) Do not use vague or ambiguous phrases such as "OK", "Continue," "Next"
"Submit," or "Enter."
(4) Together with the mechanism for indicating acceptance (icon, button, words,
etc.) include a statement that indicates the consequences of acceptance. For
example: "By clicking on the “Yes'” button you acknowledge and confirm that
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you have read, understand and agree to be bound by the terms and conditions set
out above".
(5) Consider requiring the user to type their name or provide some other (legal) form
of unique identifier to assist in confirming identity and intent to be bound by the
terms and conditions
(6) Avoid “acceptance by conduct” – depending on the structure and circumstances,
such manner of acceptance creates significant risk of non-enforceability
(7) The acceptance process should provide a reasonable method to avoid, or to detect
and correct, errors that could be made by the user in the review and acceptance
process
F) Changes and Records (1) If circumstances warrant (significant transactions / risk) consider logging
mechanism that tracks specific users assent to terms and conditions
(2) Consider version control issues concerning changes to the terms and conditions
over time (i.e. so you can be certain which specific version of the terms and
conditions a user will have agreed to)
(3) Avoid rights of one party to unilaterally amend the terms and conditions
(4) Ensure a notice mechanism of proposed changes to the terms and conditions exits
and that provides means for ensuring the user’s acceptance of the proposed
changes
(5) Compliance with legal requirement for record keeping and form of records (as
noted above) if records to be kept in electronic format.
G) Consequences of Non Acceptance:
(1) If the user does not agree with the presented terms, such non-agreement should
result in the user being denied access to whatever the click-through agreement is
granting the user (i.e. without agreement to the terms, the user should not be able
to complete the transaction).
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Chapter 3 ROLE OF JUDICIARY
I .CASES
1. Landmark case
P.R. Transport Agency vs. UOI & Ors. AIR 2006
In The High Court Of Allahabad
(1) Appellants: P.R. Transport Agency through its partner Sri Prabhakar Singh Vs.
Respondent: Union of India (UOI) through Secretary, Ministry of Coal, Bharat
Coking Coal Ltd. through its Chairman, Chief Sales Manager Road Sales, Bharat
Coking Coal Ltd. and Metal and Scrap Trading Corporation Ltd. (MSTC Ltd.)
through its Chairman cum Managing Director
(2) Background of the case
(i) Bharat Coking Coal Ltd (BCC) held an e-auction for coal in different lots. P.R.
Transport Agency’s (PRTA) bid was accepted for 4000 metric tons of coal from
Dobari Colliery.
(ii) The acceptance letter was issued on 19th July 2005 by e-mail to PRTA’s e-mail
address. Acting upon this acceptance, PRTA deposited the full amount of Rs.
81.12 lakh through a cheque in favour of BCC. This cheque was accepted and
encashed by BCC.
(iii) BCC did not deliver the coal to PRTA. Instead it e-mailed PRTA saying that the
sale as well as the e-auction in favour of PRTA stood cancelled "due to some
technical and unavoidable reasons".
(iv) The only reason for this cancellation was that there was some other person
whose bid for the same coal was slightly higher than that of PRTA. Due to
some flaw in the computer or its programme or feeding of data the higher bid
had not been considered earlier.
(v) This communication was challenged by PRTA in the High Court of Allahabad.
[Note: Allahabad is in the state of Uttar Pradesh (UP)]
(vi) BCC objected to the “territorial jurisdiction” of the Court on the grounds that no
part of the cause of action had arisen within U.P.
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(3) Issue raised by BCC
(i) The High Court at Allahabad (in U.P.) had no jurisdiction as no part of the
cause of action had arisen within U.P.
(4) Issues raised by PRTA
(i) The communication of the acceptance of the tender was received by the
petitioner by e-mail at Chandauli (U.P.). Hence, the contract (from which the
dispute arose) was completed at Chandauli (U.P). The completion of the
contract is a part of the “cause of action”.
(ii) The place where the contract was completed by receipt of communication of
acceptance is a place where 'part of cause of action' arises.
(5) Points considered by the court
(i) With reference to contracts made by telephone, telex or fax, the contract is
complete when and where the acceptance is received. However, this principle
can apply only where the transmitting terminal and the receiving terminal are
at fixed points.
(ii) In case of e-mail, the data (in this case acceptance) can be transmitted from
anywhere by the e-mail account holder. It goes to the memory of a 'server'
which may be located anywhere and can be retrieved by the addressee
account holder from anywhere in the world. Therefore, there is no fixed point
either of transmission or of receipt.
(iii) Section 13(3) of the Information Technology Act has covered this difficulty
of “no fixed point either of transmission or of receipt”. According to this
section “...an electronic record is deemed to be received at the place where
the addressee has his place of business."
(iv) The acceptance of the tender will be deemed to be received by PRTA at the
places where it has place of business. In this case it is Varanasi and Chandauli
(both in U.P.)
(6) Decision of the court
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(i) The acceptance was received by PRTA at Chandauli / Varanasi. The contract
became complete by receipt of such acceptance.
(ii) Both these places were within the territorial jurisdiction of the High Court of
Allahabad. Therefore, a part of the cause of action had arisen in U.P. and the
court had territorial jurisdiction.
2. Other Judicial Decisions:
(1) Delhi High Court recently in the case of Himachal Joint Venture vs. Pani
Peena World Transport has described email contracts to be valid for all
purposes. This case law has followed the earlier decision of Hon’ble Delhi High
Court itself, in Ratna vs. Vasutech Ltd. The verdict of Hon’ble Supreme Court in
Citi Bank vs. TLC (Manu / SC / 3879 / 2007)9 and the Hon’ble supreme court
has also said in the case of Cable network vs. CNN that in case of email contracts
it is the duty of the parties to prove that everything is bonafied and genuine and
nothing has been concealed and no fraud or any other kind of technical or
electronic mistake has been committed.
(2) The Supreme Court in Trimex International FZE Ltd. Dubai VS. Vedanta
Aluminum Ltd. has held that e-mails exchanges between parties regarding
mutual obligations constitute a contract.
9 AIR 2008 SC 118
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Chapter 4 : COMPARATIVE STUDY
I .DIFFERENCE BETWEEN E-CONTRACTS AND TRADITIONAL
CONTRACTS
In e-commerce, the meaning and role of contract did not change, but the form of it
undergone a great change:
1. Change in business environment – The contractual environment being different,
fundamentals differ in traditional and E-contracts. Traditional contracts take place in
the real world, where the two sides can deal face-to-face. However electronic
contracts take place in the virtual space, the two parties to a contract seldom meet
each other. Their identity is established by the password, or any other mechanism for
authentication, identification or certification.
2. Adopts a different form – A traditional contract undergoes various changes when it
takes the form of an e-contract. Offer and commitment to the time of dispatch and
receipt of the contract is much lesser compared to the traditional complex procedure
of formulating a contract. Even something as fundamental as paper work which can
later provide for evidence of the contract is missing, however in case of an E-contract
the substitute to paperwork is text which is communicated and agreed upon by both
the contracting parties.
3. Divorce from traditional method – Electronic contract information is contained in
the data message; there is no distinction between originals and copies. Traditional
methods to sign and seal cannot be due to the lack of physical involvement of a
human.
4. The rights and obligations of parties to the contract differ – In an electronic
contract, not only are the rights and obligations of the entity determined by the
clauses of the contract, but also, there is a special form of the contract arising from
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the formal rights and obligations, such as digital signatures and legal relationships. In
the substantive rights and obligations of legal relations, some in traditional contracts
do not attach great importance to the rights and obligations. In the electronic contract,
those are very important, such as information disclosure obligations, protection of
privacy obligations.
II .E-CONTRACTS IN INDIA
Contracts have become so common in daily life that most of the time an individual
does not even realize that he/she has entered into one. Right from hiring a cab,
shopping at the local grocer, signing up for a music class, to buying airline tickets
online, innumerable things in our daily lives are governed by contracts. Therefore it
is important to study the law of contracts relevant in India.
1. The Indian Contract Act, 1872
It governs the manner in which contracts are formulated and executed in India. It
governs the way in which the provisions in a contract are implemented and codifies
the effect of a breach of contractual provisions.
It provides a framework of rules and regulations, which governs formation, and
performance of contract. The contracting parties themselves decide the rights and
duties of parties and terms of agreement. The court of law acts to enforce agreement,
in case of non-performance.
2. Electronic contracts
Taking an example of a contract in which the two contracting parties are an Indian
exporter and an American importer. One option would be that one party first draws
up two copies of the contract, signs them and couriers them to the other, who in turn
signs both copies and couriers one copy back. The other option is that the two parties
meet somewhere and sign the contract.
In the electronic age, the whole transaction can be completed in seconds, with both
parties simply affixing their digital signatures10 to an electronic copy of the contract.
10 Digital Signature Certificates (DSC) are the digital equivalent (that is electronic format) of physical or paper certificates. Examples of physical certificates are drivers' licenses, passports or membership cards. Certificates serve as proof of identity of an individual for a certain purpose; for example, a driver's license identifies someone who can legally drive in a particular country. Likewise, a digital certificate can be presented electronically to prove your identity, to access information or services on the
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There is no need for delayed couriers and additional travelling costs in such a
scenario.
Initially, there was a certain level of apprehension amongst the legislatures to
recognize this modern technology. However, now, mostly because of the necessity,
which arose due to the increasing number of E-contracts being entered into, many
countries have enacted laws to recognize electronic contracts. The conventional law
relating to contracts is not sufficient to address all the issues that arise in electronic
contracts.
As far as India is concerned, the conventional law relating to contracts i.e. The Indian
Contract Act 1872 was quite unequipped to deal with the issue of Electronic
Contracts. The ‘Information Technology Act, 2000’ was enacted by the Indian
Parliament to resolve some peculiar issues which mushroomed in the process of
formulation and authentication of Electronic Contracts.
III .ELECTRONIC CONTRACT IN UNITED STATES OF AMERICA
1. The growth in electronic commerce has proportionally increased the use of electronic
contracts. Between 1998 and 2002 most countries adapted their domestic commercial
legislation to recognize electronic contracts and signatures as legally valid
instruments. However, some under-developed countries are still in the process of
accomplishing this task. Even so, despite the inexorable expansion of e-commerce
and the promulgation of laws protecting e-commerce contracts, many businesses and
Internet users do not know precisely what law applies to their e-commerce
contracts.
2. The following laws constitute the basic legal framework of electronic contracts in the
United States. In addition to these specific laws, there are some international laws
that may well apply to electronic contracts if the contractual parties decide to abide
by them.
(1) The Uniform Electronic Transactions Act (UETA) – It is an important U.S.
legislation applicable to electronic contracts. UETA, as expressly defined in Articles
Internet or to sign certain documents digitally.
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3 and 4, only applies to transactions related to business, commercial, and government
matters; and to transactions conducted by electronic means.
(2) The U.C. Electronic Signatures in Global and National Commerce Act (E-Sign Act) ,
2001 – The Act recognizes the validity of contracts entered electronically, and where
electronic signatures have been incorporated. The main purpose of this Act was to
bestow on electronic contracts, the same authority as its paper-base counterpart.
(3) Uniform Computer Information Transaction Act (UCITA) – It is a relevant U.S. set
of proposed model rules applicable to the formation of electronic contracts, especially
to those e-contracts on electronic materials, or "computer information transactions"
as the Act calls them. UCITA has not been adopted by many states and several of the
states that have adopted UCITA have included multiple amendments to the original
UCITA text. Thus, when dealing with licensing or transfer of computer software
within the United States, it is important to check whether UCITA"s rules have been
adopted by the state legislator of the jurisdiction at hand.
The General Dilemma
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Chapter 5 : CONCLUSIONS & SUGGESTIONS
I .Conclusion
The Law of Contract is the Bedrock on which the whole superstructure is built on.
Business, trade, and commerce can flourish only when the law of the land is definite and
clear in the minds of the parties. This element of certainty should exist across all forms
of contract, whether they be negotiated in conventional form of postal communication
or the modern way of electronic communication.
Electronic contracts facilitate transactions and agreements electronically without the
parties meeting each others. This means that the traditional contract process of offer,
acceptance and agreement to transact through electronic mode than physical mode of
paper.
E-Commerce to succeed such contracts need to be validated legally an alternate mode of
transaction through online using the latest technological developments. This is aimed at:
1. For creating a secure atmosphere of transacting online with alternate mode to paper
and writing.
2. To create an electronic documentation system which will safeguard the contracting
parties on par with the traditional mode of contracts.
3. To create statutory status and monitoring/verifying authorities for such electronic
transaction.
4. To check frauds intentional or unintentional transactions to promote and build
confidence in genuine online transactions.
5. To create necessary legal structures to oversee such transactions.
6. To establish standard rules and regulation for smooth functioning of online
transactions.
7. To make Digital signature legally valid and incorporating the same with the existing
legal regime of contracts, sale of goods, evidence and consumer acts.
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Hence, such electronic transactions will depend on the appropriate legal framework,
which recognizes ‘electronic records’ or ‘writings’ or ‘digital signatures’. It should
facilitate for a secure system of such transactions and should create evidentiary value of
such records.
It can finally be deduced that,
1. Electronic form of contracting has emerged as a major form of formation of
contracts and its value has increased significantly over the period of time.
2. The Indian Legislature in order to control the rights and liabilities of parties in
case of Electronic Contracts has passed the IT Act,2000 and the Electronic
Commerce Act,1998. The provisions of these acts validate the formation of
electronic contracts. The offer and acceptance given in form of data messages
will be held valid.
3. However the provisions of the act are to be read in consistency with the Indian
Contract Act,1872 and the aim and objectives of the contract should not be in
contravention to the provisions of the Contract Act.
4. We have also seen from various judicial decisions that offer and acceptance
given in form of E-Mails would be held as valid and the contract thus formed
would be binding.
5. The Electronic Contracts are an amalgamated form of Cyber Law and
Contractual law and thus it derives its authority from both.
II .SUGGESTIONS
Although, e-contracts are gaining acceptance in large numbers,due to the lack of clarity
in some aspects, there may arise, infuture some disputes.it is advisable that there should
be a policy to promote e-contracts. Below are some suggestions which will help
promotion and acceptance of e-contracts with the general public as well as business
community:
1. The government should conduct training classesfor judicial officers as wel as other
officers of the govt. to appreciate the forensic aspects of computers and the internet.
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Many a times, the judicial officers do not know the intricacies of the new
technology, and thus the quality of the judgement may suffer, and there may be
delays in judgement.
2. The Indian Contract Act requires that for an enforceable contract,the parties to the
contract must be above 18 years of age. However, the basic problem in electronic
sphere is that there is no full proof way of knowing the correct age of the customer.
Thus, in a recent case filed in the Delhi High Court, the bench asked orally as to
how minor persons are registering with online sites such as Fcaebook, Orkut, when
they do not fulfil the requirement of being above the age of 18 years. The
government must frame a policy whereby online service providers should try to
ascertain the age of the customer before such customers are registered on their sites.
Failure to ensure this can lead to information, privacy and money of minor
customers being used and abused.
3. Presently, electronic communication is still regulated by the Indian Telegraph Act.
This Act was framed at a time when there was no idea of the internet or the modern
communications systems we have today. Therefore, to suit today’s exigencies, the
ancient law is being stretched beyond imagination. There is an urgent requirement
to codify the laws relating to electronic communication as well as e-contract and
bring them into harmony with each other. We should also take inspiration from the
various international treaties and standards regarding contracts and electronic
communication so that there is no hurdle to international commerce and business
with India. Particularly, the model laws framed by UNICITRAL are very helpful in
this regard.
4. Since the electronic and communications field is very dynamic and fast-changing
area, many of the definitions and concepts provided for the lawws become very
soon outdated. Therefore, to obviate the possibility of injustice, the courts should
give high value to the evidence of experts in the computer field, who will be having
knowledge of the latest trends.
5. Idealy the parties to the contract should have freedom of contract, that is, the terms
of the contract should me mutually agreed and accepted upon by the parties. Such
acceptance can come only from open bargaining and negotiation. Unfortunately, in
e-contracts, the seller is highly advantageous situation, and he employs it to impose
unfair terms on the buyer. There is a need to regulate the imposition of such unfair
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terms so that the intersts of the consumers are not harmed. Therefore, Consumer
ProtectionAct, 1986 and Competition Act, 2002 need a re-look.
The question of jurisdiction is very important as regards to e-contract. The Supreme
Court of India in a famous case held that there would be instantaneous communication
when transactions are conducted over telephone. However, later developments like the
introduction of the Information Technology Act, 2000 have seriously impacted the
instantaneous communication rule since the Information Technology provides that email
communication is deemed to be complete when the email goes out of the computer of the
sender. Therefore, there is a serious need to revise and update the laws regarding
jurisdiction under e-contracts.
The Fine Print: Often Ignored…only to be regretted later.
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BIBLIOGRAPHY
BOOKS
Pollock, Principles of Contract (13th ed., 1950)
Treitel, The Law of Contract, (9th ed., 1995)
SV Joga Rao, Computer Contracts & Information Technology Law(2nd
Edition,2005), pg. 182
P. Radha Krishnan, E-Contract Modeling and E-Enactment
Legal Aspects of Electronic Contracts, Micheal Giesler,Markus Gruenz
C.M. Abhilash, E Commerce laws in Developing countries: An Indian Perspective
Karnika Seth, IT Act 2000 vs 2008
Dr. Gokulesh Sharma, Various aspects of E-Mail Contracts
Sarabdeen Jawahitha, Noor Raihan Ab Hamid; E-Contract and the Legal
Environment
UNICITRAL Model Law on Electronic Commerce,1996
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