- May 19, 2021
- Posted by: Maestro Legal
In modern era the internet has changed the way of communicating among the people. A new way of doing business has emerged among the people through the online platform. It has established a new kind of trade known as e-commerce. With the rising number of internet users and the penetration of internet worldwide, e-commerce has gained more importance. With just a few clicks on the device we can order anything sitting in the corner of the room. Electronic contracts are generally known to majority of us because they are entered daily by one way or the other. These are those contracts which are paperless and are made to fulfil the need of speed, ease and efficiency. The most common contracts are “End User License Agreement” or the EULA where the installation of software or terms/conditions/ user agreement on the Website requires a click on the “I agree” button.
Recognition of E-contracts
Section 10 of the IT Act, 2008 gives legislative authority to E-contracts. According to this section, “Where in a contract formation, the communication of proposals, the acceptance of proposals, the revocation of proposals and acceptances, as the case may be, are expressed in electronic form or by means of an electronic record, such contract shall not be deemed to be unenforceable solely on the ground that such electronic form or means was used for that purpose.”
For a contract to be legally enforceable, signatures of both the parties are needed. But in case of an e-contract the electronic signatures play an important role. According to Section 2(p) of Information Technology Act, an electronic signature is the authentication of any electronic record by a subscriber by means of the electronic technique specified in the second schedule and it includes a digital signature. Moreover Section 5 of Information Technology Act provides that where any law requires that information or any other matter be authenticated by affixing a signature or any document signed by or bear the signature of any person, then such requirement shall be deemed to have been satisfied. As per Section 85 c of Indian Evidence Act, the courts also assume that the information given in a certificate is true and correct which is digitally signed. Thus, electronic signature has equal importance same as the handwritten signature.
The two main parties in the e-contract are- The Originator and the Addressee.
Originator according to the IT Act, 2008 is a person who sends, generates, stores or transmits any electronic message to be sent, generated, stored or transmitted to any other person and does not include an Intermediary. (In the present context, the person who initiates the process of making an e-contract to send it to the other party.)
An Addressee according to the IT Act, 2008 is a person who is intended by the originator to receive the electronic record but does not include any Intermediary. (In the present context, the party which receives the e-contract made by the other party).
According to the second schedule of Information Technology Act, there are some contracts which are required to be executed physically in order to be valid and enforceable and are not governed by e-contracts. The list of these contracts are:
- Negotiable instruments (other than cheques) as defined under the Negotiable Instruments Act, 1881
- Power of attorneys as defined under the Powers of Attorney Act, 1882
- Trusts under the Indian Trusts Act, 1882
- Wills/testamentary dispositions as defined under the Indian Succession Act, 1925
- Any contract for sale/conveyance of immovable property or any interest in such property
Legal Position of e-contracts in India
In State of Delhi v. Mohd. Afzal and Ors Delhi High Court held that, ‘Electronic records are admissible as evidence and if someone challenges the correctness of a computer evidence or electronic record on the grounds of misuse of system then the person challenging it will have to prove the same beyond reasonable doubt’. The Apex Court in Harpal Singh and Ors. v. State of Punjab, has emphasized that any electronic record in the form of secondary evidence cannot be accepted in evidence unless the requirements of Section 65B are satisfied. In Trimex International FZE Ltd. Dubai v. Vedanta Aluminium Ltd. the Supreme Court observed that a contract existed where offer and acceptance were given on mails even if there was absence of the signed documents. In Tamil Nadu Organic Private Ltd v. State Bank of India, the case revolved around an online auction, the Madras High Court observed that the contractual liabilities can also arise from electronic means and therefore such contracts can be enforceable by law. The shift of courts towards the e-contracts can be clearly seen from the judgments given by them in the respective cases.
As we all know that neither the Indian Contract Act, 1872 nor the Information Technology Act were enacted taking into account the enforceability of e-contracts. They were enacted to fulfil the traditional purposes only. One of the biggest challenges in the era of online contracts are jurisdiction related issues. The majority contracts that are entered online, the provision of jurisdiction is absent there, in that case the jurisdiction is voluntarily agreed by both of the parties. Therefore, there is a need to have a proper legislation to resolve the challenges that we face to execute the e-contracts. The current trend of demonetizing and digitalization is becoming a necessity, and we hope that the government will take suitable action in this regard and would take all possible steps to end all the uncertainties that become hurdle in the enforceability of e-contracts.