This Article is written by Girraj Sharm a Second-Year Law Student of Jaipur National University

INTRODUCTION:

We are living in the 21st century, the era of technology. After the innovation of INTERNET, everything has become digital. The Internet has made the lives of individuals easy and fast. Technology has brought significant changes in all fields, such as law, business, etc. One of the important changes has been in electronic contracts, or E-contracts, which are another form of traditional contract. Contacts used to be made in conventional pen-and-paper format, but after the rise of technology, especially after COVID-19, contracts are made through electronic means, which are known as E-CONTRACT. In this article, we will discuss about the E-Contract.

E-contract:

The Indian Contract Act, of 1872 defines the term “Contract” under Section 2(h)[1] As “An agreement enforceable by law”. In other words, a contract is an agreement that can be enforced by the law. E-contracts are similar to contracts, but the main difference between them is that E-contracts are agreements that are created, negotiated, signed, and executed using digital methods, without any involvement of paper.

In a paper contract, parties meet each other physically to create and sign the contract, but in an E-Contract, the parties communicate and create the contract through the internet or telephone. Also, in E-Contracts, all the transactions are made online. This has made doing business convenient for parties since they do not have to travel and meet each other.

Legality of E-Contracts:

After the pandemic, the use of E-contracts has increased exponentially throughout the world. In India, people prefer E-contracts instead of pen-and-paper contracts. Still, in India, there is no specific law governing E-contracts. Even the act governing contracts in India, “The Indian Contract Act 1872,” does not mention the E-contract, which raises questions regarding the legality of E-contracts in India. The Information Technology Act, in some aspects, does validate E-contracts in India.

The Information Technology Act (2000):

Section 10A of the Information Technology Act is about the legality and validity of contracts formed through electronic means in India. According to Section 10A[2] Of ITA, all contracts in which communication, acceptance, and revocation are expressed in electronic form or by electronic records are valid.

The section 3[3] Of the IT Act validates some aspects of an E-contract, since it authenticates the electronic record by affixing a digital signature.

United Nations Commission on International Trade Law (UNCITRAL):

In 1996, UNCITRAL's Model Law on Electronic Commerce was introduced. It recognizes e-commerce, including E-contracts, as a valid means of transaction, just like a traditional paper-based transaction. It provides rules that are accepted by international entities. In simple words, it provides a legal framework for E-commerce and e-contracts.

Case laws

Trimex International Fze Limited v. Vedanta Aluminium Limited[4]

In this case, the communication for offer and acceptance was made via email by the parties for the 5 shipments of bauxite from Australia to India. Even though a written contract was drafted, it was never formalized. After the first shipment, the contract was cancelled by Trimex. In this case, the question was whether there was any valid contract between the parties in the absence of any formal contract.

The Supreme Court held that all the elements of a valid contract were present. The parties had communicated via email about price, quantity, product specifications, delivery and payment terms, discharge port, shipment lots, demurrage rate, quality benchmark, applicable arbitration laws, etc. The court held that the approval made by digital means holds the same value as written forms of approval.

Tamil Nadu Organic Private Ltd v. State Bank of India[5], this case also legalizes and validates E-contracts.

Essential elements of e-contracts

As mentioned above, e-contracts are similar to traditional contracts, and because of that, the elements are also similar to those of traditional contracts. The essential elements are outlined in Section 10[6] of the Indian Contract Act (ICA), 1872. These fundamentals follow:

· Offer

· Acceptance

· A legal object

· A legal consideration

· Parties must be competent

· Free consent.

Without any of these elements, an electronic contract will be considered null and void.

Types of e-contracts

Shrink-wrap contracts

This is the type of contract in which, when the buyer or consumer opens or unwraps the product or software, they are said to accept the terms and conditions of the contract. In this contract, all the paperwork, such as instructions, warranty, price tag, etc., comes inside the box or wrap of the product. In a Shrink-wrap contract, the consumer cannot negotiate once he or she opens the product or software. An example is the End User License Agreement.

Click-wrap contracts

In this contract, the individual is said to give consent once they click on the "I Accept" or "Click to Accept" option in the terms and conditions of the online platform. In this case, the buyer can only buy or receive the services after clicking on “I accept, I agree or ok” or something similar. In this contract, the user or consumer is asked to read the terms and conditions carefully before giving his/her consent. Similar to shrink-wrap contracts, click-wrap contracts also do not have the option of negotiation after accepting the terms and conditions. Examples of Click-wrap contracts are LinkedIn, Facebook, Instagram and others.

Browse-wrap contracts

These contracts are often used by websites. In this contract, once the user or buyer opens the website or downloads the software through the website, they are said to give their consent to all the terms and conditions. It is mostly used through the "Hyperlink”. Unlike the click-wrap contract, in the browse-wrap contract, one does not need to expressly accept the terms and conditions of the contract; only by downloading the application or accessing the website does the user acknowledge and accept the terms and conditions outlined in the contract. In browse-wrap contracts as well, there is no opportunity for negotiation.

Scroll Wrap Agreements

Just as the name suggests, in this contract the users accept or give acknowledgment of the content only by scrolling through the License Agreements, and at the end of the page, they agree to the terms and conditions by clicking on accept. Scrolling through the content, indicating their acknowledgment of the terms and conditions, and before providing their consent or refusal. The scroll wrap contract is mostly similar to the clickwrap contract.

Advantages of E-Contract

· Easy to Form:

E-contracts provide a significant advantage in their ease of creation. Unlike traditional contracts, in E-contracts, parties do not have to meet each other physically to form a contract. E-contracts are formed through digital means, which makes the creation of contracts easy for the parties who are from different countries.

· Time and Cost-Effective:

In a traditional pen-and-paper contract, parties have to meet physically to create, negotiate, and sign a contract, which can be time-consuming and expensive. Also, sometimes it requires middlemen and labour to form a contract. Since traditional contracts are formed on paper, it increases the cost of materials such as paper, printing, etc. In contrast, E-contracts, which are entirely based on the Internet and formed through online meetings between parties, significantly reduce time and financial expenditures.

· Environmentally Friendly:

E-Contracts are environmentally friendly, they eliminate the need for paper in contracts since they are agreements that are created, negotiated, signed, and executed using the digital method, without any involvement of paper.

· Worldwide Accessibility:

E-contracts allow parties to enter into agreements from any part of the world. In times like the COVID-19 global pandemic, e-contracting has become the primary method of conducting business.

The disadvantages of E-Contract:

Even if E-Contracts are the best method of creating a contract it has their disadvantages which are the following:

· Legality of E-contract:

Even if E-contracts are widely recognized and used still it lacks specific legislation governing the E-contracts. This issue arises particularly in cross-border transactions where E-contracts are formed between parties from different countries. The absence of a legal framework can create jurisdictional challenges during disputes between parties.

· Lack of Personal Interaction and Authentication of parties:

Traditional contracts involve face-to-face negotiations, which can help build trust between parties and eliminate authenticity concerns. E-contracts, which are formed through digital means, lack personal interaction, which can lead to trust issues between parties and also increase doubt of authenticity. Since in E-contracts, parties do not meet face-to-face, it is difficult to ensure that the individuals or entities entering into a contract are who they claim to be. It also increases data security concerns since e-contracts sometimes require personal information such as email, address, mobile number, and even biometric information.

Furthermore, E-contracts also increase the chances of misunderstanding and miscommunication between parties.

· Risk of Unauthorized Access:

In an E-contract, all the data of parties and contracts, whether personal or professional, is stored on digital platforms and cloud systems, which increases the chance of Unauthorized Access. There is a potential chance that these digital platforms can be hacked or breached, which can compromise the confidentiality of sensitive contract information.

· Technical Issues:

E-contracts solely rely upon technology which creates many problems such as server downtime, internet connectivity problems, or software glitches which may delay the process of forming a contract.

Conclusion

To summarize, electronic contracts have transformed the way contracts are made by providing efficiency, convenience, and global accessibility. E-contracts and made with less effort than traditional contracts and they may save time and expense for parties but they come with their challenges. Issues like lack of personal interaction, authentication concerns, and data security risks come with E-contracts, and the biggest challenge that E-contracts face is the lack of legislation or proper legal framework for cross-border transactions. As technological advancements continue, methods for ensuring the validity and protection of e-contracts will likely improve. Nevertheless, it remains crucial for involved parties to stay alert and knowledgeable about both the benefits and possible risks associated with e-contracts. Striking this balance will help ensure that electronic contracts remain a valuable tool in our digital era while minimizing potential drawbacks.

References

[1] An agreement enforceable by law is a contract.

[2] Where in a contract formation, the communication of proposals, the acceptance of proposals, the revocation of proposals and acceptances, as the case may be, are expressed in electronic form or by means of an electronic record, such contract shall not be deemed to be unenforceable solely on the ground that such electronic form or means was used for that purpose.

[3] (1) Subject to the provisions of this section any subscriber may authenticate an electronic record by affixing his digital signature.

[4] 2010 (1) SCALE 574

[5] W.P.No.31046 of 2013

[6] 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.