Online Contracting: Position in INDIA vs the US

E Contract: Position in INDIA vs the US

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“The rule of instantaneous communication is different from the rule about the post. The contract is only complete when the acceptance is received by the offerer and the contract is made at the place where the acceptance is received”[1]

Introduction

With the advent of the modern era, the use of e-contract is surging. E-contract is one of the most popular sectors of E-business. The only difference between E contract from the traditional contract is that it can access through digital means. In this system, sellers are able to reach consumers without the interference of the middleman. These electronic contracts are highly suitable in terms of speed, accessibility, and efficiency. It saves time since who can complete the whole contract in minutes. The concept of the digital signature is also supporting this concept of e-contract.

However, just like in the physical world, offer and acceptance play an important role in E-contracts. There are numerous methods to form an e-contract in the digital world. Offer and acceptance can be exchanged through an email or through a website.  By clicking “I accept” for software or by clicking “I agree” for signing up for an email, the user enters into an e-contract.

In general, e-contract can be of two types, Shrinkwrap and Clickwrap Agreements.  Under clickwrap, the consent of the user can be obtained by asking him to click ‘I-agree’ or ‘I -accept’. Users, before using the software has to agree with the terms and conditions of it. On the other hand, shrink-wrap agreements are generally used for buying commodities.

Legitimacy of E-contracts

Indian courts govern e-contracts by using basic principles of the Indian Contract Act, 1872, which mentions the vital conditions for making a contract valid. There must be proper terms of conditions that should be provided to the contracting party. IT Act, 2000 also deals with the fortification of e-contracts. The requirement of the signature of contracting parties in the contracts is fulfilled by the concept of electronic signatures. IT Act also associates the electronic signatures[2] with the physical one[3]. However, apart from this, it is virtually impossible to check one of the contracting conditions as provided by the Contract Act, is to check the age of a person who is entering into an agreement.

Position In India

India does not have a well-developed jurisprudence for governing e-contracts. Certain provisions under the contract act provide rules for such e-contracts. In Bhagwan Goverdhandas Kedia v. Girdharilal Parshotthamdas & Co[4]., it was held that “contracts would be completed at the place where the acceptance is communicated”. In general, the burden of proof lies in such a person who is in a position to dominate the will of another.[5]

In modern times, the Internet eliminates the need to contract into a physical world. But, however, the concept of E-commerce is still loaded with numerous security issues. Misuse of electronic signatures, a threat to data privacy, identity theft, impersonation are some common issues people face in general while using e-contracts. IT act and IPC provides for punishment of such offenses. However, India has notified many rules for protecting data privacy such as ” The Information Technology(Reasonable Security Practices and Procedures and Sensitive Personal Data) Rules, 2012.

Position in the US

On various occasions, the U.S. courts have knocked down the terms of contracts because they were unconscionable. The  Federal Electronic Signature in Global and National Commerce Act (The E-Sign Act) and the Uniform Electronic Transactions Act (UETA), are the two main act In the US which deals with the concept of Electronic signatures and Electronic contracts. The E-Sign Act also deals with transactions between the states of the US and foreign states. Under UETA and E-Sign act :

  • a signature may not be void  solely because it is in electronic form;
  • a contract may not be void only because it is in the form of electronic record
  • Electronic signatures and Electronic records will be valid in court for submission.

Sources:

[1] Entores Ltd. V. Miles Far East Corporation(1952) 2 QB 327

[2] Section(2)(1)(ta) Of IT Act 2000

[3] Section 5 of the IT Act,2000

[4] AIR 1996 SC 543

[5] Section 16(3) of the Indian Contract Act

This blog is written by Riddhi Chadha, Fairfield Institute of Management & Technology.

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