E-Contract India’s present legal framework and next steps

Introduction

The order of the day has significantly changed pursuant to the government’s mission of “Digital India” due to rapid digitalization and globalization. The COVID-19 pandemic has also acted as an impetus and accelerated the growth of the digital market. The legal sector across the world has undergone extensive digital reality adaption, whether it be the virtual mode of delivering justice by the judiciary or the conducting of business transactions of any shape and size. Electronic contracts, or “E-contracts,” in the present economy became ubiquitous due to the rapid development of the internet

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Meaning Of An E-Contract

E-contracts are agreements made electronically instead of physical meetings between the parties involved in the transaction.  E-contract forms a significant part of E-commerce. E-contracting is a fragment of e-business.  Contracts entered verbally or digitally are subject to the same fundamental principles of contract law. E-contracts must contain all these necessary elements in order to be enforceable and legally binding in India. E-contracts are becoming increasingly important in today’s world of rapid digitalization and e-commerce to execute a significant number of business transactions in a variety of industries.

E-Contracts Under Information and Technology Act, 2000

The Information Technology Act, 2000, Section 10A, focuses on the legality of agreements made using electronic methods. It specifies that a contract is legitimate if the proposal/acceptance is created, communicated, and repudiated electronically or via digital records. Forming an e-contract in a digital form or with the aid of electronic technology will not render it unenforceable. Any agreement must be signed by all parties to show that they have read and agree to the terms and conditions. An e-contract involves the application of a digital signature. Additionally, Section 4 of the IT Act gives electronic records statutory standing.

E-Contracts Under the Evidence Act, 1872

According to the Evidence Act of 1872, an electronic contract has equal legal validity as a paper-based contract.  Section 3 of the Evidence Act gives the word “evidence” a broader interpretation that encompasses all documents—including digital information for the Court’s review as documentary proof or evidence.

Essential Elements Of E-Contracts

E-contracts should adhere to the main requirements outlined in the Indian Contract Act, 1872, as well as take into account the peculiarities of digital instruments as envisioned by the Information Technology Act, 2000, in order to be legitimate.

Consequently, the following components need to be present in a legal e-contract:

·        A legitimate offer must be made.

·        The proposal must be explicitly accepted.

·        A lawful consideration must be there.

·        Intention to establish legitimate legal relations. the party entering the contract needs to be competent. Voluntary, uncompelled, and fully knowledgeable consent is required.

·        There must be both assurance and performance capability.

·        The contract’s substantive matter must be made very clear. The length of the electronic agreement must be clearly stated, together with its predetermined start date.

·        The signatories must acknowledge their approval of any duties and responsibilities contained in the contract, and they must all have legitimately signed the contract.

·        There should be a non-repudiation clause, which states that no party may alter the terms of the agreement once they have been signed.

Types of E-Contracts

E-contracts are currently often utilized online, and there are various sorts of e-contracts available to achieve various goals. E-contracts can be divided into the below categories according to widespread usage:

1. Click-Wrap Contracts

These are online agreements that call for permission to be given by selecting the check boxes next to the words “I Accept,” “Agree,” or other similar wording. These contracts get their designation from the premise that you typically must tap a logo on a window to confirm them. Examples of this kind of agreement include the terms and conditions for accessing any e-commerce website, for downloading software, for purchasing tickets etc.

Users who refuse to abide by these terms and conditions might not be allowed to utilize the platform or purchase goods from that digital marketplace. Normally, non-acceptance leads in half or complete denial, denying the other side the chance to object or bargain.

2. Shrink wrap contracts

The provisions of these contracts are concealed within the box or product and are immediately binding on the customer upon unpacking the product. Such agreements are typically included in licence agreements for software products.

If the items (and subsequently the legal contract) can solely be read by the consumer who buys it, this sort of contract typically involves items that are wrapped or encased in shrink wrap (plastic wrap). In general, it contains terms and conditions related to the item or transaction, such as the cost of the goods, guarantees, rights to use and instructions, restrictions, and permits as applicable.

The agreement comes in effect as when the customer opens the box containing the software item, and the customer is then bound by its terms. Any inappropriate use of the software may subject the customer to liability for claims of copyright or other intellectual property rights violations brought by the producer. The producer of the commodity or service is protected by the shrink-wrap agreement.

3. Browse-wrap agreements

The terms and conditions governing the use of the contents on a webpage may be found in a browse-wrap contract that takes the shape of a hyperlink or website.

Web pages employ these contracts to bind users. The customer is considered to have accepted the terms and conditions of service as well as any updates by continuing to access the webpage. The user is responsible for staying informed regarding the terms and conditions and for providing their full permission.

Current Legal Issues

E-contracts are not covered by a discrete set of laws in India; instead, several different laws interact with one another e.g. the IT Act, Indian Stamp Act, and Indian Contract Act. A major part of a law that governs E-contracts, along with various contracts and agreements, is the Indian Contract Act of 1872. It’s important to observe how the crucial element of “free consent by the parties” functions in the setting of e-contracts because there is no room for bargaining or negotiating. The idea of “take it or leave it” is typically the foundation of electronic agreements. It is challenging to assess the responding parties’ eligibility to sign the agreement and conformity with the rigorous norm of free consent due to the contractual character of e-contracts. A third concern regarding the legality of E-contracts is raised by the idea of “informed consent,” which is added to the mix because receiving entities seldom possess the essential knowledge to understand the technical language of one-sided partial E-contracts. Another obstacle is the reliability of the conditions when deciding if the offer was ultimately “accepted,” considering the possibility of numerous digital communications.

The established idea of the mirror image rule, which states that a proposal must be acknowledged in its whole for an agreement to be valid, is an additional legal component. Any recommended changes would be considered a “counter-proposal.” Therefore, in situations where conversations have occurred, acceptance that is not unconditional increases the ambiguity of the terms and calls into dispute the entire legitimacy of the e-contract.

Landmark Judgements

As a result of one party’s use of undue predominance, the Indian judiciary has determined in several situations that the contract was invalid. The party who is dissatisfied with the contract, however, will have the responsibility of proving unreasonable control, an essential component, or the element of not giving the impacted party any alternative options. When determining whether a contract is legitimate circumstances, it is crucial to consider the parties’ negotiating strengths.

The Hon’ble Supreme Court of India in the case of LIC India v. Consumer Education and Research Center (1995) held that “In dotted line contracts there would be no occasion for a weaker party to bargain as to assume to have equal bargaining power. He has either to accept or leave the service or goods in terms of the dotted line contract. His option would be either to accept the unreasonable or unfair terms or forgo the service forever.”

The Delhi High Court ruled that digital records can be used as proof in the judgment of the State of Delhi vs. Mohd. Afzal and Others (2003). In a different case, Societe Des Products Nestle S.A and Anr Vs Essar Industries and Ors., the Delhi High Court cleared the path for the instant incorporation of Sections 65 A and 65 B into the Indian Evidence Act, 1872 pertaining to the permissibility of computer-generated substantiation in a way that practically removes objections to electronic evidence.

Additionally, in the instance of Trimex International FZE Ltd..Dubai vs. Vedanta Aluminium Ltd. (2010), the offer and acceptance were communicated by email in the absence of signature documents. The Honorable Supreme Court ruled unequivocally that once a contract is reached verbally or in writing, the notion that a formal agreement must be created and attested by the sides would in any case have no bearing on its validity or execution.

Way Forward

E-contracts are frequently used because of their built-in efficiency. The use of e-contracts has the potential to streamline company procedures, reduce time, and do away with issues related to location and territory. E-contracts, though, offer advantages and disadvantages of their own nature. By eliminating documentation, they help to lower expenses, save time, expedite discussions, and improve deliveries. However, technology has a price because it eliminates the human aspect and puts a barrier in the way of less industrialized and underdeveloped communities and economies. Again, executing e-contracts demands public knowledge and technical literacy because they raise issues with privacy protection, transaction secrecy, and computer security. The elimination of such problems can take a long period.

However, there is no denying that e-contracts will significantly boost production and result in the conservation of valuable resources. With metaverses and digital data resources like cryptocurrency and NFTS, the electronic or, rather, digital world heralds an assault on transactions and related legal issues. Given the current situation, India, a dynamically developing economy, must be ready for the legal difficulties of the future. Even though there have been considerable advancements in both the legal and data technology fields, there is still plenty to be accomplished in the area of electronic compliances and e-contracts. To remove uncertainties and difficulties faced by parties, India must establish a strong legislative structure for E-contracts in accordance with international advancements.

To increase the usability of E-contracts and smart agreements and to ensure the rights of the concerned parties, issues with compliance and certification need to be resolved. Additionally, it is the responsibility of administration specialists to educate the public on proper digital behavior and its implementation.

A focused and uniform legal framework across India will advance the interests of parties to transactions and elevate India to the league of well-regulated, technologically advanced nations. As a result, business and industry will develop and pave the way to India’s route to a trillion-dollar economy.

Author: Pratham Bagani, A Student Of  DES Navalmal Firodia Fergusson Law College Pune, in case of any queries please contact/write back to us at support@ipandlegalfilings.com or   IP & Legal Filing.