TABLE OF CONTENTS

SR.NO TOPIC PG.NO1 ABBREVIATIONS 12 TABLE OF CASES AND STATUTES 13 RESEARCH METHODOLOGY 24 Chapter 1 INTRODUCTION

I EVOLUTION OF E-CONTRACTS

II UNDERLYING PRINCIPLE

III SCHEME AND SCOPE OF TOPIC

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5 Chapter 2 LEGAL FRAMEWORK RELATING TO E-

CONTRACTS

I COMPONENTS OF E-CONTRACTS

II FINE PRINT W.R.T E-CONTRACTS

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6 Chapter 3 ROLE OF JUDICIARY

I CASES19-21

7 Chapter 4 COMPARITIVE STUDY

I DIFFERENCE BETWEEN E-CONTRACTS AND

TRADITIONAL CONTRACTS

II E-CONTRACTS IN INDIA

III E-CONTRACTS IN UNITED STATES OF AMERICA

22-25

8 Chapter 5 CONCLUSIONS & SUGGESTIONS

I CONCLUSION

II SUGGESTION

26-29

9 BIBLIOGRAPHY 30-31

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ABBREVIATIONS

Indian Contract Act, 1872 ICA

Information Technology Act, 2000 IT Act

Versus VS

United Nations Commission on International Trade Law UNICITRAL

Uniform Computer Information Transaction Act UCITA

Civil Procedure Code CPC

TABLE OF CASES

P.R. Transport Agency vs. Union of India and Others

Himachal Joint Venture vs. Pani Peena World Transport

Ratna vs. Vasutech Ltd.

Trimex International FZE Ltd. Dubai VS. Vedanta Aluminum Ltd.

Citi Bank vs. TLC

Cable network vs. CNN

TABLE OF STATUTES

Indian Contract Act, 1872

Information Technology Act, 2000

The Electronic Commerce Act,1998

United Nations Commission on International Trade Law(UNICITRAL), 1996

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RESEARCH METHODOLOGY

RELEVANCE OF THE PROJECTThe subject of Law of Contracts II, which includes studying, analysing and interpreting the

topics of Contractual Agreements. This paper aims to carry out a research study pertaining to E-

Contracts. The topic ‘E-Contracts: Issues and Limitations ' forms a part of this subject. This topic

helps to understand an integral area pertaining to the subject.

OBJECTIVE OF STUDY The Objective of this study is to provide an intensive research and analysis of ‘E-Contracts:

Issues and Limitations' regarding its formation, evolution, types, issues etc. These essential areas

have been studied in depth and briefed up in the project. It aims at exploring all aspects of ‘E-

Contracts’. This project aims at studying the rules and provisions of Indian Contract Act and

Information Technology Act relating to E-Contracts.

RESEARCH HYPOTHESISDuring the study of this project, the researchers seeked to make an attempt to answer the

following questions:

1. What is E-Contract and its forms?

2. What is the current scenario of E-contracts in India?

3. What is the legal framework and issues relating to E-contracts?

4. What are the treaties and conventions relating to E-Contracts?

5. What are the various judicial decisions and interpretations relating to E-Contracts?

6. Difference between E-contracts and Traditional Contracts

7. E-contract Legal framework in various other Countries

LIMITATION OF RESEARCHThis project was subject to a couple of limitations. The project was restricted to a secondary

means of research, conducted only by means of books and the internet, due tto which certain

limitations are bound to creep in. A primary way of research could not be adopted for the same

due to the nature of the topic and due to lack of means and time restrain.

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Chapter 1 : INTRODUCTION

According to Thomas Hobbes, Life in the state of nature was ‘poor’, ‘solitary’; ‘nasty’

and ‘brutish’ he elucidates these postulations in his theory of ‘Social Contract’, Locke

and Rossouaue also have similar postulations about the formation of society. Therefore it

can be stated with fair confidence that it is indubitable that the modern society has its

genesis in a contract. Much like the human race, contracts too, have evolved and adapted

to the changing nature of human life and surrounding conditions. Over the years, many

acclaimed jurists defined the term ‘contract’ in a manner which they deemed fit.

According to Salmond, a contract is "An agreement, creating and defining obligations

between the parties."

According to Pollock, "Every agreement and promise enforceable at a court of law is a

contract." However, a constant is that, a contract has two or more parties, making a

promise and a reciprocal consideration for the fulfillment of that promise.

Contracts play a cardinal role in instituting legally binding relationships between various

business and their customers. A contract consists of numerous activities that have to be

carried out by the involved parties as well as contract clauses that address specific

concerns in the business process interaction.1 Electronic commerce can be defined as

“Electronic buying and selling on the Internet and includes all the activities that a firm

performs, selling and buying services and products using computers and communication

technologies.”2

The need and requirement for electronic form of contract can basically be attributed to

the need for a quick, efficient and time saving mode of contracting. The virtual

cyberspace being time saving and unbound by challenges of distance gives an

opportunity for parties to enter into a contract over internet. In the electronic age, the

whole transaction can be completed in seconds, with both parties simply affixing their

1 E-Contract Modeling and E-Enactment by P.Radha Krishna (Centre for data engineering- IIT Hyderabad)2 SV Joga Rao, Computer Contracts & Information Technology Law (2nd Edition, 2005), pg. 182

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digital signatures3 to an electronic copy of the contract.

It is undisputed that today, e-contracts have an evidentiary value. Not only because of the

sheer number of persons who enter into such contracts on a daily basis but also because

of the magnitude, volume and implications of these contracts. Present day Indian

economy would hobble to a stop if e-contracts were to be cropped from the picture. It is

but obvious that the advent of e-contracts came with the popularization of e-commerce,

however it is a popular misconception that e-contracts are restricted to the online

transactions pertaining to buying and selling of consumable goods, in fact insurance

bought online, educational courses taken, online exams, are all examples of e-contracts.

I .EVOLUTION OF E-CONTRACTS

If the Internet is anything to go by, India's technological and economic advancemnt has

moved into the top gear. In the fiscal year of 2014-2015, india registered a whopping

growth of 200% in the e-commerce sector. However to understand the evolution of e-

contracts it is prudent to take into account the evolution of e-commerce in India.

1. Timeline

Circa 1991: Introduction of E-Commerce

The year 1991 noted a new chapter in the history of the online world where e-commerce

became a hot choice amongst the commercial use of the internet. At that time it was

unanticipated that buying and selling online and online trading would be so rife and

would eventually become a trend in the developed and developing countries, with India

sharing a substantial proportion of this success and progress.

Circa 2002: IRCTC teaches India to Book ticket online

India first came into interaction with E-Commerce via the IRCTC. The Govt. of India

experimented with this online strategy to make it convenient for its public to book train

tickets, Online Passenger Reservation System, which facilitated online booking from 3 Digital Signature Certificates (DSC) are the digital equivalent (that is electronic format) of physical or paper certificates.

Examples of physical certificates are drivers' licenses, passports or membership cards. Certificates serve as proof of identity of an

individual for a certain purpose; for example, a driver's license identifies someone who can legally drive in a particular country.

Likewise, a digital certificate can be presented electronically to prove your identity, to access information or services on the

Internet or to sign certain documents digitally.

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anywhere, anytime. This was a boon to the common man as now, for anyone conversant

with the online system, waiting in long lines is a thing of the past. This can be pegged as

a crucial achievement in the history of India’s internet story as it directly affected the

comman man.

Circa 2003: Introduction of Low Cost Airline with AirDeccan

After the unpredicted success of the IRCTC, the OTBS4 was followed by airlines, like

AirDeccan, Indian Airlines, Spicejet, et cetera Airline agency encouraged, web booking

to save on middle men commission and thus in a way added a number of people in the

country in the E-Commerce loop for the first time.

Circa 2007: The Deep Discounted model of Flipkart

The permeating acceptance of E-commerce by the Indian consumer influenced many

other business players to try this technique for their E-businesses and generate higher

profits.

Though online shopping has been present since the 2000 with only a handful players like

infibeam, indiamart etc, it gained popularity only with deep discount model of Flipkart.

Flipkart re-launched online shopping in India. Soon enough, other portals like Amazon,

Jabong, ebay, Myntra et cetera started the process to set u shop in India as they identifies

it as one of the biggest consumer and potential growth bases in the world.

Graph depcting the rise and comparision of the penetration of internet, user growth and

share of indian users amongst world internet users.5

Graph depcting the rise and comparision of the penetration of internet, user growth and

share of indian users amongst world internet users.6

4 Online Ticket Booking System5 Taken from http://www.internetlivestats.com/internet-users/india/ on 25th July, 15 at 6:11 pm.6 Taken from http://www.internetlivestats.com/internet-users/india/ on 25th July, 15 at 6:11 pm.

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2002 2005 2008 2011 20140.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

Penetration of InternetUser growthShare of World internet users

It can be infered from the above graphical representation that over the years, the

penetration of Internet and hence the number of users have increased phenomenally,

however, eventhogh the percentage increase in user growth has declined, it is because,

between 2002 to 2011, it experienced a somewhat stable level. However the share in world

Internet users has risen steadly indicating a growing trend of population and availablilty of

internet amongst that population.

II .UNDERLYING PRINCIPLE

In the Law of Contracts, the aim and intent is to form a legal relationship between two

parties, i.e. an onus of responsibility upon both the parties to honour the conditions of the

contract and thereby fulfill the contract. The failure to do so by any of the consenting

parties results in non-completion of the said contract. The project will be based on the

underlying principle and will aim to amplify and explain the same. E-contracts being a

modern phenomenon have no direct

The legal maxim which can be applied and interpreted w.r.t this topic is ‘Contractus

legem ex conventione accipiunt’ which means, the agreement of the parties makes the

law of contracts, therefore, it means that, the agreement which the parties have arrived at,

including the conditions which they both have agreed upon will constitute the contract and

the law would be interpreted on the basis of the conditions and terms formulating the

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contract. Another applicable principle is ‘Ubi Jus Ibi Remedium’7. It means, “Where

there is a right there is a remedy”. The basic principle contemplated in the maxim is that,

when a person's right is violated the victim will have an equitable remedy under law. The

maxim also states that the person whose right is being infringed has a right to enforce the

infringed right through any action before a court. All law courts are also guided with the

same principle of Ubi Jus Ibi Remedium.8 This maxim is not specific to e-contracts,

nonetheless it is important as it dictates the justice seeking mechanism that a person can

resort in case of violation of a contract.

III .SCOPE & SCHEME OF TOPIC

Conventional concept of contract, developed over the years provides for fundamental

principles governing all aspects (formation discharge, remedies et cetera) of different types

of contracts. The legal rules governing various facets of a convetional contract are quite

clear. However, owing to the ways in which e-comerce differs from traditional commerce,

it raises some novel technical and legal challenges, which leads to the the scope of the

topic being widned. From the standpoint of law, it is the most appropriate time to

understand the structural changes, that are possible in this new world because of the

change in dynamics of business relationships, and the legal issues arising out of them.

Some exceedingly challening and intriguing questions have been posed, the project seeks

to answer these questions in relative unambigious manner and provide relevant

information w.r.t to the same. The questions are

i. The formation and consequent conclusion of E-contracts.

ii. Validity and enforceabilty of such contracts.

iii. Extent of applicabilty of established principles of law of contracts to e-contracts.

iv. Study of past cases so as to function as a Judicial precedent.

In response to recent escalating growth witnessed by the e-commerce sector and the

resultant rise in the number of contracts which are being entered into online, some

commentrators have suggersted that the formulation of a formal law governing these

contracts is imperative. It is undubitable that legal and economic institutions will have to

7 Taken from http://definitions.uslegal.com/ on March 2, 2015 at 12:11 pm8 Taken from http://www.oxfordreference.com/ on March 2, 2015 at 12:13 pm.

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undergo a substantial technological and organizational revolutionzation in order to keep up

with the technology. Other experts have taken a skeptical stand, arguing that recent

positions are rather viewed as changes of degree rather than kind, and can be accomodated

by extending and modfying existing arrangements in a revolutionary and all encompassing

manner.

The scheme of the project will be reletively linear and will touch upon the formation,

completion and breach of e-contracts, it will then go on to explore various cases and the

interpretations and judicial implications of the same.

Minimal Involvement of Contracting Parties

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Chapter 2 LEGAL FRAMEWORK RELATING TO E-CONTRACT

The Indian Contract Act, 1872 governs the manner in which contracts are made and

executed in India. It governs the way in which the provisions in a contract are

implemented and codifies the effect of a breach of contractual provisions.

Within the framework of the Act, parties are free to contract on any terms they choose.

Indian Contract Act consists of limiting factors subject to which contract may be entered

into, executed and breach enforced.

It only provides a framework of rules and regulations that govern formation and

performance of contract. The rights and duties of parties and terms of agreement are

decided by the contracting parties themselves. The court of law acts to enforce

agreement, in case of non- performance.

With the growing importance and value of e-contract in India and across the world, the

different stakeholders are continuously identifying and evaluating the nuances of legal

outline relating to it.

The participation of different service providers in the transaction of e-contract, which

includes a payment gateway, the main website, the bank or card verification website, the

security authorisation website and the final service provider which can also comprise

the shipping agent has made the E-contract business more complex.

Therefore, the need for amendable it has augmented. In India, till date there are no

definite legislations or guidelines protecting the buyers and sellers of goods and services

over the electronic medium.

Statute Governing E-Contracts

Information Technology Act,

2000

Information Technology

Amendment Act, 2008

Indian Contract Act,1872

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However, several laws acting in unification are trying to regulate the business

transactions of E-contract. They are as follows,

i. Indian Contract Act, 1872

ii. Consumer Protection Act, 1986

iii. Information Technology Act, 2000

iv. Indian Copyright Act 1957

Like any other types of business, E-contract business also works on the basis of

contracts. It is therefore, structured by the Indian Contract Act, 1872. Any valid and

legal E-contracts can be designed, completed, and enforced as parties replace paper

documents with electronic parallels. The contracts are move in between the service

providers or sellers and buyers.

Earlier, there was no definite law to regulate the intermediaries such as verification

service providers and shipping service providers to safeguard that the product or service

is actually delivered. However, the government has recently acquainted the Information

Technology (Intermediaries Guidelines) Rules 2011.

The actual scope of the security provided under these regulations would only be known

after judicial interpretation of the provisions. However, now it has been explained that

even foreign intermediaries delivered to provide service could be sued in India.

The payment gateways which footing a very important position as the primary processor

of the payment for the merchants were brought into the legal framework after

proclamation of the Payment and settlement Systems Act, 2007 (PSS Act, 2007). The

PSS Act, 2007 as well as the Payment and Settlement System Regulations, 2008 made

under the Act came into effect from August 12, 2008. Further, the Reserve Bank of

India issued additional guidelines initiating all such gateways and payments processors

to register under the said act.

The authority of the transactions of E-contract is established under the Information

Technology Act, 2000 (IT Act, 2000). It explains the reasonable mode of acceptance of

the offer. IT Act, 2000 also rules the revocation of offer and acceptance. However,

definite provisions that regulate E-contract transactions conducted over the Internet,

mobile phones, et cetera are vague. With numerous cross border transactions also being

conducted over the Internet, specific law guarding the Indian customers and Indian

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businesses are essential and Indian laws are gravely insufficient on this issue.

In a bid to safeguard security, the government has made digital signatures necessary in

several E-contract transactions mainly in the government to government (G2G) or

government to business (G2B) framework with a view to safeguarding the identity of

the transacting parties. E-contracts transactions on these modes require digital signatures

as essential parts. They are used for the verification of the electronic contracts. These

are controlled by the IT Act, 2000 which provides the outline for digital signatures, their

issues and verification.

The Act thus tries to safeguard that trust between both the parties is maintained through

verification of identities and help prevent cybercrimes and ensure cyber security

practices.

In the light of the above discussion, it is to be said that the present laws in respect of the

guidelines of E-contract and its related operations are not suitably serving the purpose.

Propagation of laws is creating confusion in the smooth procedures of the E-contract

accomplishments.

Further, the present laws are salient on features of e-contract such as payment

instrument and delivery instrument and present standard practices which have been

settled by the industry. The Reserve Bank of India, however, has tried to support the

electronic payment mechanism through various orders, but such orders can only act as a

stopgap procedure.

The most important order in this regard was the application of second factor verification

in all Indian Payment Gateways. Commonly recognised as Verified by Visa or

MasterCard Secure Code, this had made card transactions on the Internet moderately

more secure.

I .COMPONENTS OF AN E-CONTRACT

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1. Offer

(1) The law already recognizes contracts formed using facsimile, telex and other similar

technology. An agreement between parties is legally valid if it satisfies the

requirements of the law regarding its formation, i.e. that the parties intended to

create a contract primarily.

(2) This intention is evidenced by their compliance with three classical cornerstones i.e.

offer, acceptance and consideration. One of the early steps in the formation of a

contract lies in arriving at an agreement between the contracting parties by means of

an offer and acceptance.

(3) An advertisement on website may or may not constitute an offer, as offer and

invitation to offer are two distinct concepts. Being an offer to unspecified person, it

is probably an invitation to treat, unless a contrary intention is clearly expressed.

(4) The test is of intention whether by supplying the information, the person intends to

be legally bound or not. When consumers respond through e-mail or by filling in an

online form, built into the web page, they make an Offer. The seller can accept this

offer either by express confirmation or by conduct.

2. Acceptance

(1) Unequivocal unconditional communication of acceptance is required to be made in

terms of the offer, to create a valid e-contract. The critical issue is when acceptance

takes effect, to determine where and when the contract comes into existence.

(2) The general receipt rule is that acceptance is effective when received. For

contracting no conclusive rule is settled. The applicable rule of communication

depends upon reasonable certainty of the message being received.

(3) When parties connect directly, without a server, they will be aware of failure or

partial receipt of a message. Such party realizing the fault must request re-

transmission, as acceptance is only effective when received.

(4) When there is a common server, the actual point of receipt of the acceptance is

crucial in deciding the jurisdiction in which the e-contract is concluded. If the server

is trusted, the postal rule may apply, if however, the server is not trusted or there is

uncertainty concerning the e-mail’s route, it is best not to apply the postal rule.

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When arrival at the server is presumed insufficient, the ‘receipt at the mail box’ rule

is preferred.

3. Consideration and Performance

(1) Contracts result only when one promise is made in exchange for something in

return. This something in return is called ‘consideration’. The present rules of

consideration apply to e-contracts.

(2) There is concern among consumers regarding Transitional Security over the

Internet. The e-directive on Distance Selling tries to generate confidence by

minimizing abuse by purchasers and suppliers. It specifies the following,

(i) A list of key points, must be supplied to the consumer in ‘a clear and

comprehensible manner.’

(ii) Written confirmation, or confirmation in another durable medium available and

accessible to the consumer, of the principle points.

(iii) The right of withdrawal enabling consumers to avoid deals entered into

inadvertently or without sufficient knowledge, providing for seven-day cooling-off

period free from penalty or reason to return the goods or reimburse the cost of

services.

(iv) Performance should be delivered within thirty days of order unless otherwise

expressly agreed.

(v) Reimbursement of sums lost to fraudulent use of credit cards. It places the risk of

fraud on the credit card Company, requiring them to take steps to protect their

position.

(vi) On the other hand, there is also need to protect sellers from rogue purchasers.

For this, the provision of ‘charge-back clauses’ and encouragement of pre-payment

by buyers is recommended.

(vii) Thus, this Directive adequately protects rights of consumers against unknown

sellers and sellers against unknown buyers.

4. Liability And Damages

(1) A party that commits breach of an agreement may face various types of liability

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under contract law. Due to the nature of the systems and the networks that

business employ to conduct e-commerce, parties may find themselves liable for

contracts which technically originated with them but, due to programming error,

employee mistake or deliberate misconduct were executed, released without the

actual intent or authority of the party.

(2) Sound policies dictate that parties receiving messages be able to rely on the legal

expressions of the authority from the sender’s computer and this legally be able

to attribute these messages to the sender.

(3) In addition to employing information security mechanisms and other controls,

techniques for limiting exposure to liability include the following,

Trading partner and legal technical arguments

Compliance with recognized procedures, guidelines and practices

Audit and control programmers and reviews.

Technical competence and accreditation

Proper human resource management

Insurance

Enhance notice and disclosure mechanisms

Legislation and regulation addressing relevant secure electronic

commerce issuing.

II .FINE PRINT W.R.T E-CONTRACTS

1. General Requirements

Forms of E-Contracts

Exchange of E-mail Website Forms

E-ticketing, software etc

Online agreements

Web Wrap, Click Wrap & Browse Wrap

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Enforceability of electronic contracts will generally require:

(1) Sufficient notice of terms (particularly onerous terms specifically brought to attention)

(2) Sufficient opportunity of the user to consider terms and to decline

(3) Evidence of acceptance of terms that is sufficiently clear and positive as to

demonstrate actual consent to be bound by terms

(4) The absence of terms that are unconscionable or greatly unfair

B) Specific actions to take and avoid to achieve enforceability

(1) Presentment & review of terms and conditions:

(i) Web site operators should ensure that notice of the existence of user terms

and conditions are clearly presented to potential users of the web site

(ii) Do not rely solely on legal terms that are merely posted on the web site

(whether by hypertext link on the home page or otherwise buried on pages

deeper in the site) and require the user to find and/or review on their own

initiative (i.e. so-called “browse-wrap”)

(iii) Users should not be able to agree to terms and conditions and/or be

permitted to access and use the site and/or obtain products and services

available through the site without having been presented with the terms of the

proposed agreement and agreeing to such terms of use

(iv) Ensure that the user’s ability to review terms and conditions is as simple

and straightforward as possible – if terms are multiple pages, user should be

able to easily navigate back and forth

(v)  All terms and conditions governing access and use (e.g. user terms, privacy

policies, etc.) should be consistent and work together in a coherent manner

(vi) The terms and conditions should always be accessible to the user (i.e.

before, during and after the review and acceptance process) and be capable of

being retained by the user – consider automatically emailing terms to end user

confirming terms and conditions immediately after users' agreement to same

C) Compliance with Legislation & Laws:

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(1)  Adherence to electronic commerce legislative requirements concerning formal

requirements of electronic contracts (e.g. statutory obligations concerning

writing, signatures, record retention, use of electronic agents, etc.).

(2) If the law requires specific agreement or consent to a particular type of term (e.g.

privacy legislation), the format of the consent / consent process should comply

with that legal requirement

(3)  Avoid terms and conditions that are unconscionable or greatly unfair (also

includes avoiding practices / contracting processes and structures that might also

be considered to be unconscionable or particularly onerous)

(4) If some terms and conditions are, or could be construed as, unusual, unfair or

unduly onerous, use efforts to highlight such terms and conditions (bold

typeface, capital letters, etc.)

D) Third Parties:

(1)  It is not unusual for many web site operators to use the services of third parties

in the performance of some web site services that is transparent to the user. Often

the user ends up (unbeknownst to the user) on a third party site that remains

branded by the original web site operator, but which has the different terms and

conditions of the third party service provider, resulting in a potential contractual

conflict of terms.  Therefore ensure the design of the web site contemplates this

issue when using third party sites.

E) Acceptance of Terms

(1) Evidence of acceptance of terms that is sufficiently clear and positive as to

demonstrate actual consent to be bound by terms (e.g. clicking a button or icon or

typing in the specified words of agreement or rejection)

(2) Examples of clear words of agreement include  "I agree," "I accept," "I consent,"

or "I assent."

(3)  Do not use vague or ambiguous phrases such as "OK", "Continue," "Next"

"Submit," or "Enter."

(4)  Together with the mechanism for indicating acceptance (icon, button, words,

etc.) include a statement that indicates the consequences of acceptance. For

example: "By clicking on the “Yes'” button you acknowledge and confirm that

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you have read, understand and agree to be bound by the terms and conditions set

out above".

(5) Consider requiring the user to type their name or provide some other (legal) form

of unique identifier to assist in confirming identity and intent to be bound by the

terms and conditions

(6)  Avoid “acceptance by conduct” – depending on the structure and circumstances,

such manner of acceptance creates significant risk of non-enforceability

(7) The acceptance process should provide a reasonable method to avoid, or to detect

and correct, errors that could be made by the user in the review and acceptance

process

F) Changes and Records (1) If circumstances warrant (significant transactions / risk) consider logging

mechanism that tracks specific users assent to terms and conditions

(2) Consider version control issues concerning changes to the terms and conditions

over time (i.e. so you can be certain which specific version of the terms and

conditions a user will have agreed to)

(3) Avoid rights of one party to unilaterally amend the terms and conditions

(4) Ensure a notice mechanism of proposed changes to the terms and conditions exits

and that provides means for ensuring the user’s acceptance of the proposed

changes

(5) Compliance with legal requirement for record keeping and form of records (as

noted above) if records to be kept in electronic format.

G) Consequences of Non Acceptance:

(1) If the user does not agree with the presented terms, such non-agreement should

result in the user being denied access to whatever the click-through agreement is

granting the user (i.e. without agreement to the terms, the user should not be able

to complete the transaction).

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Chapter 3 ROLE OF JUDICIARY

I .CASES

1. Landmark case

P.R. Transport Agency vs. UOI & Ors. AIR 2006

In The High Court Of Allahabad

(1) Appellants: P.R. Transport Agency through its partner Sri Prabhakar Singh Vs.

Respondent: Union of India (UOI) through Secretary, Ministry of Coal, Bharat

Coking Coal Ltd. through its Chairman, Chief Sales Manager Road Sales, Bharat

Coking Coal Ltd. and Metal and Scrap Trading Corporation Ltd. (MSTC Ltd.)

through its Chairman cum Managing Director

(2) Background of the case

(i) Bharat Coking Coal Ltd (BCC) held an e-auction for coal in different lots. P.R.

Transport Agency’s (PRTA) bid was accepted for 4000 metric tons of coal from

Dobari Colliery.

(ii) The acceptance letter was issued on 19th July 2005 by e-mail to PRTA’s e-mail

address. Acting upon this acceptance, PRTA deposited the full amount of Rs.

81.12 lakh through a cheque in favour of BCC. This cheque was accepted and

encashed by BCC.

(iii) BCC did not deliver the coal to PRTA. Instead it e-mailed PRTA saying that the

sale as well as the e-auction in favour of PRTA stood cancelled "due to some

technical and unavoidable reasons".

(iv) The only reason for this cancellation was that there was some other person

whose bid for the same coal was slightly higher than that of PRTA. Due to

some flaw in the computer or its programme or feeding of data the higher bid

had not been considered earlier.

(v) This communication was challenged by PRTA in the High Court of Allahabad.

[Note: Allahabad is in the state of Uttar Pradesh (UP)]

(vi) BCC objected to the “territorial jurisdiction” of the Court on the grounds that no

part of the cause of action had arisen within U.P.

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(3) Issue raised by BCC

(i) The High Court at Allahabad (in U.P.) had no jurisdiction as no part of the

cause of action had arisen within U.P.

(4) Issues raised by PRTA

(i) The communication of the acceptance of the tender was received by the

petitioner by e-mail at Chandauli (U.P.). Hence, the contract (from which the

dispute arose) was completed at Chandauli (U.P). The completion of the

contract is a part of the “cause of action”.

(ii) The place where the contract was completed by receipt of communication of

acceptance is a place where 'part of cause of action' arises.

(5) Points considered by the court

(i) With reference to contracts made by telephone, telex or fax, the contract is

complete when and where the acceptance is received. However, this principle

can apply only where the transmitting terminal and the receiving terminal are

at fixed points.

(ii) In case of e-mail, the data (in this case acceptance) can be transmitted from

anywhere by the e-mail account holder. It goes to the memory of a 'server'

which may be located anywhere and can be retrieved by the addressee

account holder from anywhere in the world. Therefore, there is no fixed point

either of transmission or of receipt.

(iii) Section 13(3) of the Information Technology Act has covered this difficulty

of “no fixed point either of transmission or of receipt”. According to this

section “...an electronic record is deemed to be received at the place where

the addressee has his place of business."

(iv) The acceptance of the tender will be deemed to be received by PRTA at the

places where it has place of business. In this case it is Varanasi and Chandauli

(both in U.P.)

(6) Decision of the court

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(i) The acceptance was received by PRTA at Chandauli / Varanasi. The contract

became complete by receipt of such acceptance.

(ii) Both these places were within the territorial jurisdiction of the High Court of

Allahabad. Therefore, a part of the cause of action had arisen in U.P. and the

court had territorial jurisdiction.

2. Other Judicial Decisions:

(1) Delhi High Court recently in the case of Himachal Joint Venture vs. Pani

Peena World Transport has described email contracts to be valid for all

purposes. This case law has followed the earlier decision of Hon’ble Delhi High

Court itself, in Ratna vs. Vasutech Ltd. The verdict of Hon’ble Supreme Court in

Citi Bank vs. TLC (Manu / SC / 3879 / 2007)9 and the Hon’ble supreme court

has also said in the case of Cable network vs. CNN that in case of email contracts

it is the duty of the parties to prove that everything is bonafied and genuine and

nothing has been concealed and no fraud or any other kind of technical or

electronic mistake has been committed.

(2) The Supreme Court in Trimex International FZE Ltd. Dubai VS. Vedanta

Aluminum Ltd. has held that e-mails exchanges between parties regarding

mutual obligations constitute a contract.

9 AIR 2008 SC 118

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Chapter 4 : COMPARATIVE STUDY

I .DIFFERENCE BETWEEN E-CONTRACTS AND TRADITIONAL

CONTRACTS

In e-commerce, the meaning and role of contract did not change, but the form of it

undergone a great change:

1. Change in business environment – The contractual environment being different,

fundamentals differ in traditional and E-contracts. Traditional contracts take place in

the real world, where the two sides can deal face-to-face. However electronic

contracts take place in the virtual space, the two parties to a contract seldom meet

each other. Their identity is established by the password, or any other mechanism for

authentication, identification or certification.

2. Adopts a different form – A traditional contract undergoes various changes when it

takes the form of an e-contract. Offer and commitment to the time of dispatch and

receipt of the contract is much lesser compared to the traditional complex procedure

of formulating a contract. Even something as fundamental as paper work which can

later provide for evidence of the contract is missing, however in case of an E-contract

the substitute to paperwork is text which is communicated and agreed upon by both

the contracting parties.

3. Divorce from traditional method – Electronic contract information is contained in

the data message; there is no distinction between originals and copies. Traditional

methods to sign and seal cannot be due to the lack of physical involvement of a

human.

4. The rights and obligations of parties to the contract differ – In an electronic

contract, not only are the rights and obligations of the entity determined by the

clauses of the contract, but also, there is a special form of the contract arising from

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the formal rights and obligations, such as digital signatures and legal relationships. In

the substantive rights and obligations of legal relations, some in traditional contracts

do not attach great importance to the rights and obligations. In the electronic contract,

those are very important, such as information disclosure obligations, protection of

privacy obligations.

II .E-CONTRACTS IN INDIA

Contracts have become so common in daily life that most of the time an individual

does not even realize that he/she has entered into one. Right from hiring a cab,

shopping at the local grocer, signing up for a music class, to buying airline tickets

online, innumerable things in our daily lives are governed by contracts. Therefore it

is important to study the law of contracts relevant in India.

1. The Indian Contract Act, 1872

It governs the manner in which contracts are formulated and executed in India. It

governs the way in which the provisions in a contract are implemented and codifies

the effect of a breach of contractual provisions.

It provides a framework of rules and regulations, which governs formation, and

performance of contract. The contracting parties themselves decide the rights and

duties of parties and terms of agreement. The court of law acts to enforce agreement,

in case of non-performance.

2. Electronic contracts

Taking an example of a contract in which the two contracting parties are an Indian

exporter and an American importer. One option would be that one party first draws

up two copies of the contract, signs them and couriers them to the other, who in turn

signs both copies and couriers one copy back. The other option is that the two parties

meet somewhere and sign the contract.

In the electronic age, the whole transaction can be completed in seconds, with both

parties simply affixing their digital signatures10 to an electronic copy of the contract.

10 Digital Signature Certificates (DSC) are the digital equivalent (that is electronic format) of physical or paper certificates. Examples of physical certificates are drivers' licenses, passports or membership cards. Certificates serve as proof of identity of an individual for a certain purpose; for example, a driver's license identifies someone who can legally drive in a particular country. Likewise, a digital certificate can be presented electronically to prove your identity, to access information or services on the

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There is no need for delayed couriers and additional travelling costs in such a

scenario.

Initially, there was a certain level of apprehension amongst the legislatures to

recognize this modern technology. However, now, mostly because of the necessity,

which arose due to the increasing number of E-contracts being entered into, many

countries have enacted laws to recognize electronic contracts. The conventional law

relating to contracts is not sufficient to address all the issues that arise in electronic

contracts.

As far as India is concerned, the conventional law relating to contracts i.e. The Indian

Contract Act 1872 was quite unequipped to deal with the issue of Electronic

Contracts. The ‘Information Technology Act, 2000’ was enacted by the Indian

Parliament to resolve some peculiar issues which mushroomed in the process of

formulation and authentication of Electronic Contracts.

III .ELECTRONIC CONTRACT IN UNITED STATES OF AMERICA

1. The growth in electronic commerce has proportionally increased the use of electronic

contracts. Between 1998 and 2002 most countries adapted their domestic commercial

legislation to recognize electronic contracts and signatures as legally valid

instruments.  However, some under-developed countries are still in the process of

accomplishing this task. Even so, despite the inexorable expansion of e-commerce

and the promulgation of laws protecting e-commerce contracts, many businesses and

Internet users do not know precisely what law applies to their e-commerce

contracts.  

2. The following laws constitute the basic legal framework of electronic contracts in the

United States.  In addition to these specific laws, there are some international laws

that may well apply to electronic contracts if the contractual parties decide to abide

by them. 

(1) The Uniform Electronic Transactions Act (UETA) – It is an important U.S.

legislation applicable to electronic contracts. UETA, as expressly defined in Articles

Internet or to sign certain documents digitally.

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3 and 4, only applies to transactions related to business, commercial, and government

matters; and to transactions conducted by electronic means.   

(2) The U.C. Electronic Signatures in Global and National Commerce Act (E-Sign Act) ,

2001 – The Act recognizes the validity of contracts entered electronically, and where

electronic signatures have been incorporated.  The main purpose of this Act was to

bestow on electronic contracts, the same authority as its paper-base counterpart. 

(3) Uniform Computer Information Transaction Act (UCITA) – It is a relevant U.S. set

of proposed model rules applicable to the formation of electronic contracts, especially

to those e-contracts on electronic materials, or "computer information transactions"

as the Act calls them.  UCITA has not been adopted by many states and several of the

states that have adopted UCITA have included multiple amendments to the original

UCITA text.  Thus, when dealing with licensing or transfer of computer software

within the United States, it is important to check whether UCITA"s rules have been

adopted by the state legislator of the jurisdiction at hand. 

The General Dilemma

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Chapter 5 : CONCLUSIONS & SUGGESTIONS

I .Conclusion

The Law of Contract is the Bedrock on which the whole superstructure is built on.

Business, trade, and commerce can flourish only when the law of the land is definite and

clear in the minds of the parties. This element of certainty should exist across all forms

of contract, whether they be negotiated in conventional form of postal communication

or the modern way of electronic communication.

Electronic contracts facilitate transactions and agreements electronically without the

parties meeting each others. This means that the traditional contract process of offer,

acceptance and agreement to transact through electronic mode than physical mode of

paper.

E-Commerce to succeed such contracts need to be validated legally an alternate mode of

transaction through online using the latest technological developments. This is aimed at:

1. For creating a secure atmosphere of transacting online with alternate mode to paper

and writing.

2. To create an electronic documentation system which will safeguard the contracting

parties on par with the traditional mode of contracts.

3. To create statutory status and monitoring/verifying authorities for such electronic

transaction.

4. To check frauds intentional or unintentional transactions to promote and build

confidence in genuine online transactions.

5. To create necessary legal structures to oversee such transactions.

6. To establish standard rules and regulation for smooth functioning of online

transactions.

7. To make Digital signature legally valid and incorporating the same with the existing

legal regime of contracts, sale of goods, evidence and consumer acts.

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Hence, such electronic transactions will depend on the appropriate legal framework,

which recognizes ‘electronic records’ or ‘writings’ or ‘digital signatures’. It should

facilitate for a secure system of such transactions and should create evidentiary value of

such records.

It can finally be deduced that,

1. Electronic form of contracting has emerged as a major form of formation of

contracts and its value has increased significantly over the period of time.

2. The Indian Legislature in order to control the rights and liabilities of parties in

case of Electronic Contracts has passed the IT Act,2000 and the Electronic

Commerce Act,1998. The provisions of these acts validate the formation of

electronic contracts. The offer and acceptance given in form of data messages

will be held valid.

3. However the provisions of the act are to be read in consistency with the Indian

Contract Act,1872 and the aim and objectives of the contract should not be in

contravention to the provisions of the Contract Act.

4. We have also seen from various judicial decisions that offer and acceptance

given in form of E-Mails would be held as valid and the contract thus formed

would be binding.

5. The Electronic Contracts are an amalgamated form of Cyber Law and

Contractual law and thus it derives its authority from both.

II .SUGGESTIONS

Although, e-contracts are gaining acceptance in large numbers,due to the lack of clarity

in some aspects, there may arise, infuture some disputes.it is advisable that there should

be a policy to promote e-contracts. Below are some suggestions which will help

promotion and acceptance of e-contracts with the general public as well as business

community:

1. The government should conduct training classesfor judicial officers as wel as other

officers of the govt. to appreciate the forensic aspects of computers and the internet.

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Many a times, the judicial officers do not know the intricacies of the new

technology, and thus the quality of the judgement may suffer, and there may be

delays in judgement.

2. The Indian Contract Act requires that for an enforceable contract,the parties to the

contract must be above 18 years of age. However, the basic problem in electronic

sphere is that there is no full proof way of knowing the correct age of the customer.

Thus, in a recent case filed in the Delhi High Court, the bench asked orally as to

how minor persons are registering with online sites such as Fcaebook, Orkut, when

they do not fulfil the requirement of being above the age of 18 years. The

government must frame a policy whereby online service providers should try to

ascertain the age of the customer before such customers are registered on their sites.

Failure to ensure this can lead to information, privacy and money of minor

customers being used and abused.

3. Presently, electronic communication is still regulated by the Indian Telegraph Act.

This Act was framed at a time when there was no idea of the internet or the modern

communications systems we have today. Therefore, to suit today’s exigencies, the

ancient law is being stretched beyond imagination. There is an urgent requirement

to codify the laws relating to electronic communication as well as e-contract and

bring them into harmony with each other. We should also take inspiration from the

various international treaties and standards regarding contracts and electronic

communication so that there is no hurdle to international commerce and business

with India. Particularly, the model laws framed by UNICITRAL are very helpful in

this regard.

4. Since the electronic and communications field is very dynamic and fast-changing

area, many of the definitions and concepts provided for the lawws become very

soon outdated. Therefore, to obviate the possibility of injustice, the courts should

give high value to the evidence of experts in the computer field, who will be having

knowledge of the latest trends.

5. Idealy the parties to the contract should have freedom of contract, that is, the terms

of the contract should me mutually agreed and accepted upon by the parties. Such

acceptance can come only from open bargaining and negotiation. Unfortunately, in

e-contracts, the seller is highly advantageous situation, and he employs it to impose

unfair terms on the buyer. There is a need to regulate the imposition of such unfair

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terms so that the intersts of the consumers are not harmed. Therefore, Consumer

ProtectionAct, 1986 and Competition Act, 2002 need a re-look.

The question of jurisdiction is very important as regards to e-contract. The Supreme

Court of India in a famous case held that there would be instantaneous communication

when transactions are conducted over telephone. However, later developments like the

introduction of the Information Technology Act, 2000 have seriously impacted the

instantaneous communication rule since the Information Technology provides that email

communication is deemed to be complete when the email goes out of the computer of the

sender. Therefore, there is a serious need to revise and update the laws regarding

jurisdiction under e-contracts.

The Fine Print: Often Ignored…only to be regretted later.

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BIBLIOGRAPHY

BOOKS

Pollock, Principles of Contract (13th ed., 1950)

Treitel, The Law of Contract, (9th ed., 1995)

SV Joga Rao, Computer Contracts & Information Technology Law(2nd

Edition,2005), pg. 182

P. Radha Krishnan, E-Contract Modeling and E-Enactment

Legal Aspects of Electronic Contracts, Micheal Giesler,Markus Gruenz

C.M. Abhilash, E Commerce laws in Developing countries: An Indian Perspective

Karnika Seth, IT Act 2000 vs 2008

Dr. Gokulesh Sharma, Various aspects of E-Mail Contracts

Sarabdeen Jawahitha, Noor Raihan Ab Hamid; E-Contract and the Legal

Environment

UNICITRAL Model Law on Electronic Commerce,1996

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