Limitations And Workarounds To Online Contracts

Introduction

The living standard of people has been subject to large-scale technological advancements. In the present scenario, with the development of online medium, communication knows no bounds as it has surpassed all the geographical limitations to transfer the required information quickly, using a wider medium. The wide-scale emergence and use of business are playing a major role in designing new business models. The factor of rising e-commerce cannot be ignored. E-commerce is giving rise to e-transaction that includes an internet contract that is known as an e-contract.

In unprecedented times like the obnoxious spread of the COVID 19 pandemic and the imposition of temporary and permanent lockdowns, as well as, the creation of work-from-home scenarios, most of the businesses are largely shifting to online working thus, providing a push to the online contracts.

E-contracts and E-signatures

On being formed, an online contract makes use of communication technology that helps in the evolution of different kinds of intermediaries like the Internet Service Providers (ISPs). Usually, if there is a contract being signed, two parties are likely to meet physically at some location, read all the terms and conditions, agree to them and subsequently, sign the contract.

However, when it comes to an e-contract, the parties to the contract make use of electronic means like e-mailing to convey the contract terms and conditions using an electronic agent like the PCU or the laptop program. In some situations, the parties may make use of electronic agents that help in recognizing the contract’s existence.[1]

An e-contract is the one that has been modeled, executed, specified, as well as, deployed in any software system that is being used as a medium for the contract.[2]

The two parties to an e-contract are as follows:

  • Originator – any person who is responsible for generating or transferring any electronic message directly to the second party without having any intermediary with an intention to enter into an e-contract.
  • Addressee – an individual who is intended through an originator to get in touch with any electronic message or record without having any intermediary in between

Owing to the difference between the conduct of a normal contract under the Indian Contract Act of 1872, and the e-contract, the nature of the latter is bound to change. The nature of an e-contract is as follows:

  • No physical meetings or boundaries
  • Use of e-signatures only
  • Involvement of a high-risk factor
  • High jurisdiction issues in case of contract breach
  • Absence of a single authority for the process monitoring

Whenever a proposal for an e-contract is made, it should include the following mentions:

  • Order delivery and mode of payment of the goods
  • Use of product digitization like software in systems
  • Use of different electronic means and services like e-banking, e-signatures, financial aid, and advice, etc.

The Information Technology (Amendment) Act, 2008, defines an electronic signature (e-signature) refers to any data that is present and used in an electronic form. This is logical, in association with other data types that are also in the electronic form and can be used as a signatory to sign any e-contract that is mutually agreed upon.

Essentials of a Valid e-contract

The essentials conditions for an e-contract to be valid are somewhat similar to the essentials laid down for an offline contract under the Indian Contract Act of 1872. The 3 main essentials are offer, acceptance, and lawful consideration, lawful object, free consent.

1. Offer

As per the contract Act, an offer simply means an invitation to treat. Accepting the terms of the invitation does not mean that the contract has been enforced. This merely means that it is an invitation to make an offer by other parties. On the contrary, an offer can be defined as an expression of willingness to enter into a binding contract with an interested party to the contract.

The communication is considered to be complete after the same has been conducted with the help of electronic means of communication. This communication is complete when the offeree has the knowledge that the same has been received and acknowledged by the other party.

However, for the offeror to revoke the offer, it should be done anytime before the offer’s communication. This is stated under Section 5 of the Indian Contract Act and no alterations have been made.

2. Acceptance

Postal acceptance is a rule of exception in the case of e-contracts. As per this, the acceptance of the contract should be communicated to the offeror before its actual existence. The actual acceptance is said to be complete and the contract comes into force once it is posted.

These can be done through electronic means like emails, online agreements, as well as, website forms. All the essentials of a valid e-contract are gearing up to be very essential and acting as proof of record of the contractual agreement being established between the parties.

Limitations, Legal Issues, and Workarounds

The ongoing boom of e-commerce businesses and the different waves of the global coronavirus pandemic have changed how the various contracts are being executed. As per the IT Act 2000, all electronic contracts and records are subject to statutory recognition.

  • The Act also states that no contract shall be deemed to be unenforceable on the ground that electronic means of communication have been used for acceptance and revocation of the proposal.
  • The Act also gives full recognition to the electronic or digital signatures and also recognizes the validity of the authentication of all records through electronic means using such signatures.
  • The contents of such records are also backed by the evidence of parties as stated under the Indian Contract At, 1872, provisions.
  • Any e-contract that is being concluded through electronic means has also been recognized under the Act, as well as, the Indian court. A similar judgment has been passed by the Honourable Supreme Court of India and held that e-mails are an accepted means of communication to bring a valid contract into force. [3]

Online contracts or e-contracts provide a widespread extension of different activity reasons that emerge in various topographies and geographical areas. Also, the large-scale development of the various online and web-based companies pan India, permits the target audience to make a purchase of their valuables and merchandise through online means. The target audience is being moved and is developing a large quantum of comfort in online shopping of their daily essentials and need. But, the above stated issues like risks related to leaks and misuse of data are still prevalent to people opting for online contracts.

Types of online contracts

1. Click wrap contracts

In these, the party to whom the invitation has been made on the site or software for the demonstration of their consent placed in front of them. If they agree to the invitation and tend to make an offer, they have to click on the ‘I Agree’ symbol and in case, if they wish to decline, they have to click on the ‘I disagree’ option. This should be done before accepting the product or service offered by the offering party.

2. Online wrap contracts

Any offer that initiates to have software in any shop with the help of any e-mail or through the web has resulted in bringing a considerable amount of the specific kind of authorizing agreements. If the purchaser wants to avoid the contract and turns down the opportunity of buying the product or service offered, restoration of the item should be done before opening anything that makes a difference to the working of the product.

Conclusion

The major agenda of an online or e-contract is to decrease the difference between a buyer and the seller and establish a smooth way of communication and transactions. The Indian Contract Act 1872, has proper control over the way the plans are completed along with an understanding of the orders and the effect of a break in the due course of action. Online or e-contracts are an excellent development and it clearly shows that we have come a long way from the time when the validity of a contract was entirely dependent on an Act and its articles. The customary laws are not enough to resolve the challenges that are related to online business and transactions.

For the approval, acceptance, and handling of the online contracts, along with the Contract Act, the Information Technology Act of 2000 was important and is helping such contracts be enforced and implemented. Hence, with an honest approach, these contracts have been developed to understand the responsibility to guarantee the approaches that are associated with the contracts. These online contracts are one step ahead to have a digitized country that will help to further help the economy grow and compete at an international scale.

References:

  1. https://www.academia.edu/3796810/Formation_of_Contract_Through_Emails_in_India_A_Case_Comment_on_Trimex_v_Vedanta
  2. http://www.legalserviceindia.com/articles/ecta.htm
  3. https://definitions.uslegal.com/e/e-contract/
  4. https://www.upcounsel.com/online-contracts

[1] https://definitions.uslegal.com/e/e-contract/

[2]https://www.google.com/search?q=Vasudha+Tamrakar+%26+Pratibha+Pal%2C+E+contracts+and+its+legality%2C+legal+Service+India%2C+http%3A%2F%2Fwww.legalserviceindia.com%2Farticles%2Fecta.htm%2C+last+seen+on+12%2F02%2F2017.&oq=Vasudha+Tamrakar+%26+Pratibha+Pal%2C+E+contracts+and+its+legality%2C+legal+Service+India%2C+http%3A%2F%2Fwww.legalserviceindia.com%2Farticles%2Fecta.htm%2C+last+seen+on+12%2F02%2F2017.&aqs=chrome..69i57.1014j0j7&sourceid=chrome&ie=UTF-8

[3]https://www.academia.edu/3796810/Formation_of_Contract_Through_Emails_in_India_A_Case_Comment_on_Trimex_v_Vedanta

This article has been written by Tulika Gupta, 1st year LLB student at RCL, Punjab University, Chandigarh.

Also Read – What Is Proposal or Offer? Explain Its Various Characteristics

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