E-Contracts: The Changing Face of Traditional Contracts

The world is on our fingertips today because of the internet. We send thousands of messages and e-mails across the globe. This is a digital era, so traditional contracts won’t suffice. Rather, now-a-days e-contracts are coming into major play. We enter into many contracts knowingly or unknowingly. The sender sends them and the receiver agrees or disagrees to that and subsequently forms a contract via the computer using broadband. For example, when you register on Internshala and you get selected for the interview, it is now time for you to perform your duty with some obligations.

Although legal capacity is not explicitly dealt by the Information Technology Act, once an online contract is concluded, both the parties are presumed to be competent to do so[1]. Here a contract is made, but not a traditional one. Rather, an E-Contract is made as it is made using the internet. By exchanging information there is an offer and acceptance between the parties and thus, it is completely valid to enforce such types of contracts via a legal electronic recording.

E-contract is one of the divisions of e-commerce or e-business.[2] E-Commerce encompasses all the deals and business conducted via the networks of internet, i.e., online. The technological advancements have thus made these networks a backbone of the economic infrastructure. Several companies are now targeting their clients and customers on a daily web enabled interface. In this digital era, it can be rightly said that the companies who don’t tap their customers using social media are lacking behind and can never expand.

Daily transactions, mergers, negotiations now happen over the electronic mode as it is considered to be the safest and quickest. Also there are agreements wherein a party who wants to use a software enters into an agreement wherein the other party to whom the software belong to has pre decided the terms and conditions and the user who wants to use the software has to click on the “I Agree” button if he is satisfied with those conditions[3]. For example, when you set up a game on your PC, they will first show you excerpts of the license they own to operate in a locality and second slide would be to click on the terms and conditions and only then will the game proceed to setup.

The e-contracts in India are slowly gaining pace now, but the MNCs have been implementing E-Contracts since a very long time in order to facilitate smooth trading process and to match the international standards. A survey pioneered by J. Ali Fazal was conducted in order to incorporate E-Contracts in the Indian Contracts Act, 1872. The outcome was majority of the people voting in favor of E-Contracts.

While dealing with this one should keep in mind that internet is a broad place and many E-Vendors are also entering in order to steal the data. The risks can be avoided if due process of IT law is followed and precautions are taken. Thus, as we talk about our new advancements towards E-contracts, let us understand the types of E-contracts we come across in our day to day life that we enter into knowingly or unknowingly.

1. Browse wrap Agreements– This is the type of agreement which binds the user to the terms and conditions on the website. It is basically a license for the user to use all its materials and content when approaching the website. This agreement is not totally evident on your screen in the form of a dialogue box where you have to click ‘I accept’, rather in this sort of agreement, a small hyperlink appears on the screen stating activation or sometimes it doesn’t appear. The user gives consent to this type of agreement by browsing the website or downloading a picture from that website. You can only see the agreement once you buy the product.

In the case of Hubbert v. Dell corp[4]. The appellate court ruled that the if the hyperlink is shown to the users while purchasing, the users should be expected to read it and thus, they will be bound by those terms and conditions, whether they read it or not. Here the plaintiff had taken no cognizance of the hyperlink which was being displayed continuously thus failed to prove his stance towards the court and let Dell Corporation take the win.

2. Shrink wrap contracts– As the name suggests these types of agreements are mostly wrapped with the products. As a user purchases a product online, the agreement along with the user manuals are dispatched with it.  When the customer uses the product it is to be said that the customer has accepted the contract. The software license agreements are known as end user agreements. 

In the case of ProCD, Inc. v. Zeidenberg[5] the court held that one’s conduct means the acceptance of the agreement. The plaintiff here ordered the database and when the parcel arrived, the cover mentioned that the license was enclosed within. The plaintiff then sought to install the same software on the PC and like it usually happens, he was not allowed to go further unless and until he accepts the terms and conditions. In this case, the plaintiff had time to both read the agreements manually as well as while installing it on the PC. 

3. Click wrap agreement– This is a type of agreement which allows the user to reject or accept the policy of the product as it appears on the screen via a dialogue box. For instance, when you are downloading a game from playstore, the dialogue box will always appear telling the user to proceed further or return to the previous page. It is not only the policy regarding the product but also involves the privacy policy, terms and conditions, service policy and copyright patent policies. Thus, it is an all-inclusive agreement. Traditionally such a type of policy was called as Contract of Adhesion which refers to no a bargain strategy and which leaves one party to behave according to the rules as dicatated by the other party.

In the case of Feldman v. Google, Inc[6] the court held that as soon as the user signifies his assent by clicking on the agreement, he is bound by all the rules and regulations of that agreement. Here, the plaintiff had ordered advertising from Google and for every click Google was charging him. So the plaintiff took the defendant to the court exercising wrong jurisdiction. Furthermore, the defendant stated that this charge clause was stated explicitly in the terms and conditions and this was later found to be true. Thus, the court ruled in the favor the defendant.

As there are two sides of the coin, similarly the issues faced by E-contracts are as follows:     

1.] Jurisdictional issue– E-contracts are borderless, thus it gets very difficult to determine the court’s jurisdiction when there is breach of contract[7]. Section 13 of the IT Act, 2000 has defined what the place of the business is[8];

 A)  The place of business of the originator will be the place from where the information was dispatched and;

B)  Place of business of the addressee will be deemed to be the place where the information was received.

We can thus infer, this section limits the power provided by Section 20 of Code of Civil Procedure, 1908. As Section 20 (c) specifies that the suit can be instituted in the court within whose local jurisdiction the cause of action has arisen. Now, the cause of action in E-contracts may arise from the place of the originator. In the case of P.R. Transport Agency vs. Union of India & others it was observed by the court that the acceptance of the contract was sent through Email and received in Chandauli (U.P) and principle place of business of the petitioner was at Vanaras (U.P) thus, the place of jurisdiction on the present case lies in Uttar Pradesh[9].

Thus we could clearly make out there is such an ambiguity in the law as it has at present failed to establish that where will the jurisdiction lies in case of a dispute.

2.] Parties to Contract– Two parties to a contract are totally hidden here or a stranger to each other. Section 11 of the Indian Contracts Act, 1872 prohibits certain people from forming a contract. For example, several minors may enter into a contract by the clickwrap agreements displayed on the website. To overcome this problem of Competency of the parties to the contracts various websites have come up with different levels of identifying the person. However, there is still no stringent law to deal with the issue of incompetency of the contracting parties with respect to E-contracts.

3.] Signature authentication– The basic criteria of the E-Contracts is that it should possess a valid digital signature as per the IT act, 2008 amendment. However there are certain agreements wherein the digital signature won’t work which are as follows;

a.) Negotiable instrument except the cheque

b) Powers of attorney

c) Trust Deed

 d) Real Estate Documents

These documents call for a physical presence of the contracting parties owing to their nature.

4.] Technical snags– E-contracts which are entered into by the parties revolve in the virtual world. But, there can be a breach of privacy as the contracts are on the websites which are easily damaged. They can be deleted very easily and it might be very difficult to trace them back. Thus, technical glitches can’t be overlooked.

To surmise, we can rightly say that the technological advancement in each and every nation has offered them to go paperless. But are we really ready?

[1] The Information Technology Act.2008.

[2] http://oaji.net/articles/2017/488-1535975071.pdf.

[3]  Vol-3, issue 5 2017 http://www.onlinejournal.in/.

[4]  Hubbert v. Dell Corp., 359 Ill.App.3d 976, 835 N.E.2d 113 (5th Dist. 2005).

[5] ProCD, Inc. v. Zeidenberg, 86 F.3d1447 (7th Cir. 1996).

[6] Feldman v. Google, Inc. 513 F. Supp. 2d 229 [E.D. Pa 2007].

[7] All that you must know about E-Contracts, available at: https://blog.ipleaders.in/all-that-you-should-know-about-e-contracts.

[8]E-CONTRACT IN INDIA: ISSUES AND CHALLENGES; ISSN 2348-1218 (print); Vol. 7, Issue 1, pp: (597-602), Month: Jan – Mar 2019.

[9] 2005 SCC OnLine All 880.

Divya Dandekar from Narsee Monjee Institute of Management Studies, Navi Mumbai

“Opportunities always knock at the door you just have to open it and let them in”

Editor: vatsala sood

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