Validity of e-contracts

Validity of e-contracts

With the advent of technology, the way of executing documents has also changed. Electronic agreements and electronic signatures are gaining momentum in recent times owing to the increasing demand for modern as well as convenient methods for entering into business relationships and binding transactions. Technological developments have not only changed the ways in which these transactions are entered into but the execution process has also revolutionized drastically. But are they legally valid? To explore the answer for the same, we need to go through the relevant laws.

However, before interpreting the legal provisions, firstly, it is required to know that what is e-contract? Therefore, lets’ have a glance at the general meaning of the e-contracts.

What are e-contracts?              

E-contracts are those contracts that are not paper-based; rather these are entered into through electronic form. These are generally made for speedy entering into a contract or for the ease of the parties. They are best made between the parties who live in two different parts of the world and have to enter into an agreement. In this proliferating world, it is the most convenient method to enter into a contract without being physically exhausted. Basically, there are two parties involved in the e-contract i.e., originator and addressee.

According to IT Act, 2008, an originator is a person who sends, generates, stores, or transmits any electronic message to be sent, generated, stored, or transmitted to any other person and it does not include the intermediary. On the other hand, an addressee is a person who is intended by the originator to receive the electronic record but does not include any intermediary.

Types of e-contracts: –

E-contracts can be broadly divided into three categories. These categories are discussed below: –

Browse Wrap Agreement: – These types of agreements are intended to be binding upon the contracting party by use of the website. Generally, these agreements include the user policies and terms of services of the websites. To illustrate, the links named with “terms of use”, “user agreement”, and “terms of use” given at one corner or bottom of the website are called browse-wrap agreements.

Shrink Wrap Agreement: – These contracts are in the form of a license wherein the terms and conditions of the contracts are enforced upon the contracting parties. The terms and conditions of these contracts are present on the plastic or in manual accompanying with the software products which the customer buys.

Click Wrap Agreement: – Under this category, the user is required to give his/her consent to the terms and conditions which are known as “end-user agreement” and govern the licensed usage of the software by clicking “Ok” or “I agree” button. However, such user agreement must be specifically conveyed to the party and any changes made to the terms and conditions must also be specifically intimated to the user.

Validity of e-contracts under Indian Laws: –

E-contracts are very well recognized in various laws including Information Technology Act, 2000 and the Indian Evidence Act, 1872. The IT Act recognizes the basic characteristics of the e-contracts like communication of proposal and acceptance, revocation of the proposal as the case may be which could be expressed either in electronic form or through means of an electronic record.

Further, e-contracts are also recognized under the Indian Evidence Act, according to which, the term “document” includes any information contained in an electronic record that is printed on paper, stored, recorded, or copied in optical or magnetic media produced by a computer. Such information is in conformity with the conditions of Section 65B of the Act which shall be admissible in any proceedings, even without any further proof or producing the original document.

Moreover, on perusal of Section 10 of the Contract Act, it also throws light on basic principles required for an agreement to make it a valid one. Here are the contents of Section 10 of the Contract Act: –

“All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.”

Therefore, contracts executed electronically are also governed by the basic principles provided in the Contract Act, which mandates that a valid contract should have been entered into with free consent and for a lawful consideration between two majors. Hence, there is no provision in the Indian Contract Act, which prohibits the enforceability of e-contracts.

However, free consent is considered the main essence of a valid contract. As far as e-contracts are concerned, an option is always given to the party either to accept or reject the same.

-Kiranpreet Kaur

Associate at Aggarwals & Associates, S.A.S. Nagar, Mohali