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ELECTRONIC CONTRACTS

“Good laws make easier to do right and harder to do wrong”.

Contracts have become part and parcel of our everyday lives. We enter into numerous contracts every day. Contracts are entered by us in various parts of the day like hiring a taxi or a self-driven vehicle (example-Zoom car or Bounce), online shopping of things. We knowingly or unknowingly become part of it.

An electronic contract is an agreement created and signed in electronic form no paper and pen are used. When parties enter into a contract with each other and they are interacting face to face, it is easy to avoid mistakes than when they are at distance and contracting through the medium of the internet. When a contract is entered through the internet it’s just done with a tick at bottom of the page which is done within seconds.

A contract defined under Section-2(h) of The Contract Act, 1872 means “any agreement which is enforceable by law”. Section 10 of the Act, states conditions that are required for a contract to be valid. Offer: Firstly, there must be an offer from either party, without an Offer a contract cannot arise. However, in some cases, this principle could not be applied. For instance, Mulla talks about a situation in which offer and acceptance could not be traced, for instance, a commercial agreement reached after multiple rounds of negotiations.

Acceptance of the offer: Secondly, the Offer must be accepted and accepted by the person to whom it was intended. So, an offer by A to B has to be accepted by B only. Acceptance in ad-idem: Thirdly, though acceptance is important, there must be “Consensus ad-idem”. Consensus ad-idem means the meeting of minds. It means that parties to the contract should accept the terms of the contract in the “same sense”. Thus, parties to the contract must have the same understanding of the terms of the contract.

For a contract to become a valid electronic signature comes into play. Digital agreements have different characteristics than traditional contracts. For an electronic contract to be legal, there are five basic requirements i.e., authenticity- identification of contracting the parties, offer- an indication of the subject of a contract, non-repudiation – nobody can change the contract after it is signed, writing and signature- the contract should include valid signature and date of activation and confidentiality is the ultimate one.
The electronic contract takes many forms. For example- an email conversation of clear offer and acceptance can be considered as a binding contract. This also means that the terms of a contract are stated in an email conversation, messages, etc., between both parties. Electronic contracts have their importance, some of them are-

  1. Smooth – For drafting a contract companies generally hire lawyers. After that companies explain their requirements, terms, and conditions, and then the whole contract is created in written form. All this process is time-consuming. However, if companies choose e-contracts over this tedious process then contracting becomes a smooth process.
  2. Time-saving – The traditional contracting process requires both the contracting parties to be physically present then a discussion about the agreement and signing. This takes a lot of time as discussions may sometimes lose coordination too.
  3. Saves other expenses – E-contracts saves cost for materials. When we use paper-based contracts it requires paper, ink, a printer, and electricity. Also, along with this labor cost is added. Thus, using e-contracts this kind of expense is saved.
  4. Easy to Manage – Not just saving money and time. It is also easy to save, store, and manage documents. Using a filing methodology makes searching for specific documents tiring and difficult. Management requires a lot of physical storage.
  5. Electronically signing – One problem about the traditional contracting system is it requires both parties to be physically present during the signing of the contract. Or sometimes the document is even shipped from one place to another to get signed. That may involve documents being misplaced or terms and conditions being changed.
  6. Improving customer service – Electronic contracts allow many companies to provide documents for their customers faster. Many of the websites offer an autofill option it’s easy for customers to do all procedures in a jiffy.

However, using e-contracts saves from fraud and misplacement of contracts. There are many cases related to electronic contracts.
In Mehta v J Pereira Fernandes S.A case. There was an appeal against a District Court judgment which awarded the plaintiff company JPF a sum of nearly £25,000. The amount was awarded because the defendant Mehta had personally guaranteed the amount. Mehta appealed because the alleged guarantee was not enforceable since it did not comply with the requirements of the Statute of Frauds. The alleged guarantee arose from an email sent by Mehta to JPF’s solicitors.

The email was in the following terms: “I would be grateful if you could kindly consider the following. If the hearing of the Petition can be adjourned for 7 days subject to the following: A Personal Guarantee to be given for £25,000 in favor of your client – together with a list of my assets provided to you by my solicitor.” The email was unsigned but the headers indicated that it was from Nelmehta@aol.com. This email address also appeared on other, signed, emails sent to JPF’s solicitors. Mehta acknowledged that the email had been sent, with his authority, by an employee. JPF’s solicitors telephoned Mr. Mehta and accepted the proposal. Although they also sent him a written agreement, this was never signed by Mr. Mehta. Thus, it was held that the offer sent through unsigned e-mail communication is not sufficient and the e-mail address of the defendant cannot be deemed as his signature.
Clickwrap agreements are a part of electronic contracts. Clickwrap agreement also known as click-through, sign-in wrap, shrink wrap agreements in which the user signifies his or her acceptance by clicking a button or checking a box that states “I agree”. Its digitally capturing acceptance of the contract. Courts have treated clickwrap agreements as valid and enforceable contracts.

Rudder v. Microsoft Corporation- The plaintiffs commenced a class-action lawsuit alleging a breach by Microsoft of certain payment-related terms of Microsoft’s MSN Member Agreement. The Member Agreement was an on-line “click-wrap” agreement that required each prospective member to scroll down through several pages of terms and conditions and then indicate their agreement to the terms by clicking on the “I Agree” button before being provided with access to the services.
Although the plaintiffs wished to rely on several terms of the Member Agreement, in bringing the action the plaintiffs disputed the choice of law and forum selection clauses that the defendant Microsoft sought to enforce. The plaintiffs asserted that because not all of the Member Agreement was visible at one time, they did not receive adequate notice of such provisions and that as a consequence they were not enforceable. Courts in India have confirmed the validity of e-contracts from time to time.

In the case of Trimex International FZE Ltd. Dubai vs. Vedanta Aluminium Ltd. wherein the offer and acceptance had been conveyed by the parties through email in the absence of signed documents, the Hon’ble Supreme Court of India had observed that once a contract is concluded orally or in writing, the mere fact that a formal contract has to be prepared and initiated by the parties would not affect either the acceptance or implementation of such contract.
CHALLENGES OF E-CONTRACTING IN CYBERSPACE- Inventions and the spread of new Information Technologies brought about by computers, the internet and cyberspace widen the scientific horizon but pose new challenges and created problems for the legal world in all aspects of the law. The challenges that we are facing today are not just confined to any single traditional legal system but in almost all major categories of law such as contract law, criminal law, Law of torts, etc.

In India, the Information Technology Act, 2000 (ITA) and amendment in several existing laws through ITA does enforce and control a level of cyber-related problems. However, it has shown the inadequacy of law while dealing with information technology itself.
The ITA in many ways falls short of international standards. Therefore, in the era of information technology, such loopholes in the legal framework cannot be ignored and can lead to some impairment for individuals as well as the nation.
New provisions added through the Information Technology (Amendment) Act, 2008 could be a way out from all these challenges but several changes are still needed for the act to ensure both functional equivalence and technological neutrality. Hence, there is an urgent need to redefine the cyber laws in India as per International standards. There are few major areas in cyberspace in which many challenges have been cropped up on the legal front. These areas are inherent challenges, Legal Challenges, technological challenges, Political and social challenges.
Inherent Challenges: In many countries, the laws related to cyberspace have already been developed. The U.S. and the West drafted their legislation by either adapting their existing laws in the context of cyberspace or creating new laws in respect thereof. Determining jurisdiction and formation of e-contracts are two key issues on which traditional legal principles have been largely applied by Courts India enacted its first law on IT through the IT Act, 2000 based on the principles Elicit dated in the UNCITRAL Model Law of e-commerce.

Legal Challenges- Jurisdiction -Jurisdiction is the authority of a court to hear a case and resolve a dispute. The issue of Jurisdiction is highly conflicting and debatable in cyberlaw as to the maintainability of any suit which has been filed. It becomes more complicated largely because the internet is borderless. The notion of jurisdiction is rooted in territoriality from the point of view of both the court which can properly assert jurisdiction and from the point of view of the law that should be applied while deciding the dispute.
In domestic transactions, a court will always have the jurisdiction to enforce their respective laws within their physical, geographical, and political boundaries but the enforcement issues throw up several challenges when it comes to international transactions due to constant change in technology in borderless cyberspace. There have been various principles and tests that lay down by the court in the U.S. and U.K. which elaborated the scope of jurisdiction and the same is being followed by the Indian Court.

However, the act still does not deal with some major legal issues such as Jurisdiction, protection of domain name, infringement of copyright law, etc. which led to various challenges before the Indian Legal system. Examples-Therefore, a practical approach is required to minimize the difficulties and for resolving all cyber disputes, happening in our cyberspace. The researcher has found out social media & Indian cyber law approach that, In India, there has been a lot of controversy over the last few months over Section 66A of the Indian Cyberlaw being the amended Information and technology act.

In K V Rao case, two men K.V. Rao and Mayank from Mumbai were arrested for allegedly posting offensive comments against some leaders on their Facebook group. With the advent of the internet, the transmission of information, and the transacting of business across borders, various issues related to cyberspace have cropped up on the legal front. Some of the major issues are the determination of jurisdiction, cybercrime, intellectual property, cyber forensic, E-commerce, Electronic Evidence, privacy, and contract.
One of the greatest lacunas for resolving these issues is the absence of comprehensive law anywhere in the world. The problem is further aggravated due to the disproportional growth ratio of the Internet and cyber law. Though a beginning has been made by the enactment of I.T. Act and Amendment made to Indian Penal Code, Indian Evidence Act, etc, the problems associated with regulation of cybercrime continues to persist.

Contracts are well suited to facilitate the re-engineering of business processes occurring at many firms involving a composite of technologies, processes, and business strategies that aids the instant exchange of information. The e-contracts have their own merits and demerits. On the one hand, they reduce costs; saves time, fasten customer response, and improve service quality by reducing paperwork, thus increasing automation. With this, E-commerce is expected to improve the productivity and competitiveness of participating businesses by providing unprecedented access to an online global marketplace with millions of customers and thousands of products and services.
On the other hand, since in electronic contracts, the proposal focuses not on humans who make decisions on specific transactions, but on how risk should be structured in an automated environment. Therefore, the object is to create default rules for attributing a message to a party to avoid any fraud and discrepancy in the contract.
Thus, the determination of territorial jurisdiction for e-contracts becomes complicated in the absence of geographical or national boundaries for the execution and implementation of such contracts. Since in electronic contracts, the proposal focuses not on humans who make decisions on specific transactions, but on how risk should be structured in an automated environment. Therefore, the object is to create default rules for attributing a message to a party to avoid any fraud and discrepancy in the contract.

AUTHOR:

SHOHNI T A
BMS COLLEGE OF LAW