In human civilization, we need to exchange goods and services with one another to maintain the cash flow in the economy and to satisfy the needs of the individuals in society. The objective of making a contract is to ensure the Completion of obligations by the consulting parties in the exchange of goods and services subject to the contract. Contracts are not always codified and subjected to implied and expressed forms. One party can express a proposal for an agreement and the other party must accept that proposal. The offer and acceptance must be communicated to both parties in consensus ad idem. Parties exchange goods and services for performing a contract, known as consideration. In the past few years, contracts are turned into paperless agreements, all thanks to technological advancement. Today’s article is staged on the validity of the electronic contract or popularly known as an e-contract. Firstly, we will briefly discuss the validity of the traditional or paper-based contract to have a better understanding of the basics of the contract. Afterward, we will examine the validity of the e-contract.
An agreement between two or more individuals enforceable by law is called a valid contract. The Indian Contract Act, 1872 defines the essential condition to bind two or more parties in a valid contract. Section 2(h) of the Indian Contract Act, 1872 defines the term contract as an agreement enforceable by law. A valid contract arises legal obligations among the parties to the contract. There are essential Conditions to form a valid contract defines under Section 10 of the Indian Contract Act, 1872.
Essential conditions for a Valid Contract
- Two or more parties
A contract is an agreement backed by law between two or more parties recognized in law.
- The intention of the parties to establish a legal relationship
The parties subject to a particular contract must have a bona fide intention to establish a legal relationship. The legal obligation arises in the contracts enforceable in law. In other words, domestic and social contracts are not enforceable by law and do not establish the legal relationship between the parties intended to discharge legal obligations.
- Consensus Ad Idem
The parties involved in a contract must agree on the same thing in the same sense. There is no scope for ambiguity in a valid contract. It is also termed “certainty in the contract” where parties agree to the same subjects in a contract.
- Possibility to perform a contract
A contract is valid only when the performance of the contract is possible. A contract for performing an impossible act is a void contract.
- Free consent of the parties
Free consent of the parties is one of the essential conditions to enter into a valid contract. Consent of the intended parties is not subjected to coercion, misrepresentation, fraud, mistake, and undue influence while making a contract. The parties must be agreed to the same thing in the same sense without any confusion or ambiguity.
- Competency of Parties
The parties are competent to enter into a contract and establish a legal relationship between them. The parties become competent when the individuals subjected to the contract are major. In other words, a minor becomes a major when he attains the age of 18 years or more. Parties are of sound mind and fully understand the terms and conditions mentioned in the contract. Parties to the contract must be qualified by law. An individual is disqualified by law when he is insolvent, a citizen of an alien enemy, a convict, a foreign sovereign, and an ambassador.
- Quid Pro Qua
Quid pro quo means consideration for something or something in return. Consideration in a contract is a foundation of a valid contract and a contract that is not backed by consideration is void. Consideration for a contract might be money, profit, interest, exchange of goods and services, etc. Consideration for a contract must be lawful which means it must not be forbidden by law. Consideration is unlawful when it is immoral and against public policy. When a consideration involves injuries to the person or property and allowing such consideration defeats the purpose of the law, it is termed an unlawful consideration.
An agreement that is not enforceable by law is known as a void contract. A contract doesn’t need to be void from the beginning. A contract is a valid contract in the beginning subsequently it becomes void in due course of time. A contract becomes void through various activities. Some of the contracts are expressly declared void in the Indian Contract Act, 1872. Contracts expressly declared void in the Indian Contract Act, 1872 are contracts for child marriages, restraint in trade and commerce, and restraint of marriage. Contracts with minors, contracts with a lunatic person or a person of unsound mind, restraint in a legal proceeding, contracts without consideration or with unlawful consideration, contracts for performing an impossible act, contracts based on chances of winning which resulted in the loss of someone, uncertain and ambiguous contract are expressly void under Indian Contract Act, 1872.
An agreement is enforceable by law at the option of one or more parties but not enforceable by law at the option of other parties. A voidable agreement is a valid agreement unless the aggrieved parties report the case and ask for justice. A valid contract became voidable without free consent by mistake, undue influence, misrepresentation, fraud, and coercion. A contract is voidable when one of the parties failed to discharge their legal obligation. When a person contracts with another person believing that the person is a competent party to create a legal relationship but ends up finding that the person is minor, such contracts are voidable on the part of one of the parties.
The Judgment related to the validity of the Contract
Lalman Shukla V. Gauri Dutt: When the plaintiff did not know the fact and had no acceptance of the offer announced by the defendant before performing the act. The act was performed by the plaintiff without acceptance of the offer. Hence, the defendant is not liable to pay any rewards to the plaintiff.
Bawlf Grain V. Ross: When a party is intoxicated and entered into a contract with another party. It turns into a valid contract, not a voidable contract.
Mohd. Hussain V. Fida Hussain (1951): An agreement is voidable at the discretion of the party whose consent is obtained by coercion, fraud, misrepresentation, mistake, and undue influence. Such contracts are voidable as per Sections 19 and 19A of the Indian Contract Act, 1872.
In the State of Delhi V. Mohd. Afzal and Ors. (2003), the court held that it would be an arbitrary decision to hold an electronic contract as a void contract Since the contract was expressed through an electronic medium. Therefore, an electronic contract (e-contract) is a paperless legally enforceable agreement binding on both parties under Indian Contract Act, 1872. E-contract draws its legal authority from Section 10A of the Information Technology Act, 2000. An electronic contract follows essential conditions that we discussed in the sub-topic of a valid contract. Today, electric contracts are way more advanced as compared to traditional paper-based contracts.
Electronic contracts offer easy and quick access to the contracts’ terms and conditions without being worried about the physical existence of documents. It allows individuals to form legally enforceable contracts remotely between the parties residing miles away from each other. These contracts are a speedy and convenient form of the contract dealing majorly in commercial transactions, freelance work, purchasing licensed software, and accessing websites and applications. An electronic Contract is used as a valid piece of evidence in a court of law. Electronic contracts are the latest version of legal contracts which ensure quick and easy enforcement of law and discharge of legal obligation between competent parties.
Validity of Electronic Contract
Electronic contracts hold similar recognition as paper-based contracts in law. The validity of electronic contracts governs under the Indian Contract Act, of 1872. The validity of electronic contracts examines through the formation of e-contracts, end-user license agreements, e-mail, and websites.
An electronic contract is formed after expressing an offer by one party and acceptance of that offer by another party. The agreement is binding on both parties. It creates a legal obligation to discharge their respective assigned functions or duties.
You must have come across an End-User License Agreement while browsing the internet. However, you might ignore it, without giving it much attention. An End-User License Agreement is a pop-up message which asks individuals to either accept or reject the following terms given in the electronic contract to install an application or visit a webpage. I would like to draw the readers’ attention to the fact that several times, the End User License Agreement does not allow individuals to read the contract. Similarly, Internet users are too engaged in internet browsing. In that case, they would rather ignore and accept the conditions than read the terms. Practically reading every electronic contract while visiting a webpage or installing an application is not feasible.
One of the most authentic methods to form an electronic contract between parties is through e-mail by exchanging offers and acceptance for a legally enforceable agreement. E-mail ensures transparency and accountability in valid contracts expressed through electronic mediums.
Another legitimate method to form an electronic contract is the use of a digital form on the website. We often fill out google forms while applying for internships, jobs, or apprenticeships. Similarly, while attending online meetings and seminars, we are required to fill out a digital form to attend a particular event. When you fill you filled in the required detail and are ready to submit your form. You must have noticed a check box at the end of the form mentioning “I agree to the terms and conditions”. It is required to be “ticked” to proceed with your application. The click on the check box is an electronic contract between the parties.
Challenges with Electronic Contracts
Electronic Contracts have certain limitations that bring legal action against the individual party to the contract. Knowingly or unknowingly, we enter into contracts through online mediums in our daily life. You are binding to a contract while shopping on e-commerce websites, visiting webpages by accepting cookies, and installing applications. Your single click on ‘I agree’ might be used to sue you in a court of law. Webpages and Corporations intentionally clip the “End-User License Agreement” and cautiously force individuals to consent to terms and conditions, or they will restrict users. Since the webpages and corporations do not allow users to read the terms and conditions of the contract and consequently ask for users’ consent to the contract. Therefore, the court observed that consent given by the users to the terms and conditions of an e-contract is immaterial.
Indian Contract Act, 1872 defines the kind of contracts and conditions to create a legal obligation between the parties. The validity of the contracts ensures one party should not be exploited by the other party. A contract may declare void to prevent society from immoral acts and violating the rule of law. Contracts between parties involve legal obligations, and failure to discharge those legal obligations results in liability for breaching the contract. It ensures the smooth functioning of businesses and other activities by securing the conduct of the parties in law. Electronic contracts deliver the same purpose using advanced techniques such as convenience, convenient and remote access, and timely enforcement of the contract.