Updated: Dec 30, 2019
Under the provisions of the Information Technology Act, 2000 particularly Section 10-A, an electronic contract is valid and enforceable.
The only essential requirement to validate an electronic contract is compliance with the necessary pre-requisites provided under the Indian Contract Act, 1872.
Also, the courts in India give due regard to electronic contracts under the provisions of the Indian Evidence Act, 1872.
The provisions of the Information Technology Act, 2000 (IT Act) give legal recognition to an electronic (E -Contract) particularly section 10-A of the IT Act which states:
"Section 10-A: Validity of contracts formed through electronic means. -
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."
The above provision was introduced by the Information Technology (Amendment Act), 2008 after recognizing the growing dependence on electronic means to reach commercial agreements. This applies where contract formation, communication of the proposal and acceptance is carried out electronically.
How E - Contracts Can Be Entered Into:
E-Contracts can be entered into through modes of communication such as e-mail, internet and fax. The only essential requirement to validate an E-Contract is compliance with the necessary pre- requisites provided under the Indian Contract Act, 1872. Which are:
1. Offer and Unconditional Acceptance - Which may be made online or by e-mail communication.
2. Lawful Purpose and Consideration - A contract is enforceable by law only when it is made for a lawful purpose and for some consideration. It must not defeat any provision of law and must not be fraudulent in nature.
3.Capacity of Parties and Free Consent - Parties to a contract are capable of entering into a contract, if they satisfy the requirements of Section 11 and 12 of the Indian Contract Act, 1872 (capacity to contract), and consent of the parties must be free as per Section 13 of the Indian Contract Act, 1872.
The simplicity of the execution of an E-Contract being confounding, many sometimes wonder about its validity, especially when compared to a traditional written contract. The simple truth lies in the fact that the Indian Contract Act, 1872 has not specifically laid out any specific way of communicating an offer and what constitute its acceptance. The same can be achieved verbally, in writing or even through conduct. This shows that even in its simplicity, an E-Contract is as valid as a traditional written contract; the only condition/ requirement being that an E-Contract should possess all the essentials of a valid contract as mentioned above.
Jurisdiction of Courts under E-Contracts.
Given the nature of e-contracts, one question which often comes to fore is – which court would have territorial jurisdiction to try disputes arising out of such e-contracts?
The Code of Civil Procedure, 1908 ("CPC") prescribes the manner of determining the jurisdiction of civil courts in India, based on two fundamental principles:
(i) the place of residence of the defendant; and
(ii) the place where the cause of action arises.
Subject to the above, while the parties remain free to determine the choice of courts to adjudicate their disputes, they can choose only such court(s) which is/are not barred from exercising jurisdiction, i.e. parties cannot confer jurisdiction upon a court which does not have jurisdiction to entertain their case.
Ordinarily, contracts contain a specific provision with respect to the place of execution thereof, and the courts of such a place would have territorial jurisdiction to entertain and try the disputes arising under such contracts if in accordance with the CPC as aforesaid.
However, since e-contracts are not physically signed/executed and are concluded in a virtual space, simply imposing the traditional principles of jurisdiction, applicable to physical contracts, to such transactions can prove to be challenging.
The jurisdictional issues of e-contracts have, however, been addressed to an extent under the IT Act. Section 13 of the IT Act governs the provisions relating to time and place of dispatch and receipt of an electronic record, and addresses the issue of deemed jurisdiction in electronic contracts,
In view of the foregoing , the place of contract in an e-contract for the purposes of determining jurisdiction (i.e., the place where the cause of action arose) would be deemed to be where , the place of contract in an e-contract for the purposes of determining jurisdiction (i.e., the place where the cause of action arose) would be deemed to be where the originator has his place of business and where the addressee has his place of business. However, since Section 13 of the IT Act is subject to the mutual agreement of the contracting parties with respect to the agreed place of contract, it is recommended that all parties in their electronic contracts provide for a specific clause on jurisdiction.
Types of Online Contract
Online contracts can be of three types as underneath:
1. Shrink-wrap agreements
Shrink wrap contracts are usually a licensing agreement for software purchases. In the case of shrink-wrap agreements, the terms and conditions for access to such software products shall be enforced by the person buying it, with the initiation of the packaging of the software product.
2. Click or web-wrap agreements
3. Browse-wrap agreements
A browsing wrap agreement can be called an agreement which is to be binding on two or more parties through the use of the website. In case of an agreement on browsing, an ordinary user of a given Website is to accept the terms and conditions of use and other website policies for continuous use.