Author: Mohammed Yaqzan Ajwad, a student at ICFAI Law School-IFHE University
ABSTRACT
The advent of e-contracts has transformed the legal agreements environment in a time of digital transformation. This blog explores the complexities of electronic contracts, looking at their importance, advantages, drawbacks, and the changing legal landscape surrounding them.
The article starts by explaining electronic contracts, how they work, and the technology used to create and execute them. It looks at how e-contracts, as opposed to traditional paper-based contracts, simplify the contracting process and provide unmatched speed, simplicity, and cost-effectiveness.
In addition, the article explores the additional security features included in e-contracts, answering issues with confidentiality, integrity, and authentication. It examines digital signatures, blockchain technology, and encryption protocols, explaining how these tools increase confidence and reduce risks that are present in online transactions.
Additionally, the article posts about the legal environment that governs electronic contracts, breaking down important rules, guidelines, and legal jurisdictions. It addresses whether e-contracts may be enforced, detailing significant decisions and court rulings that have influenced their legitimacy and adoption in legal systems across the globe.
Notwithstanding the numerous benefits, the site recognizes the difficulties and factors that come with implementing e-contracts. It examines matters including jurisdictional disputes, data privacy, and the requirement for standardized formats and protocols to promote interoperability among various platforms and systems.
INTRODUCTION
In the technological age we live in, nearly every daily task we perform is assisted by a gadget or equipment. Nowadays, with all the ease with which technology has enhanced our lives, it is nearly hard to fathom living without it. It is important to recognize that, unintentionally, we rely heavily on technology to simplify our lives. From minor chores like buying groceries to large ones like paying taxes or buying stock in a firm, everything can be done with a single click. That is the significance of technology—the ease and hassle-free way it makes our life every step of the way. Additionally, technology has facilitated global connectivity. Using a variety of electronic methods and through global applications, people may interact, communicate, and observe each other without physically meeting in person in the comfort of their own environment. The transition from paper-based to electronic records is another significant development brought about by technology. An environmental step could be taken by allowing documents, records, agreements, etc. to be copied, altered, searched, and carried without having to worry about them being lost or incorrectly filed or requiring paper copies.
The rules pertaining to technology and the internet have to be updated as their use has grown, since transactions conducted through these channels can be abused. Therefore, rules have been created and put into effect all over the world to stop such a scenario from happening as well as to verify and give legal recognition to the use of electronic documents. Legal provisions pertaining to technology and electronic forms of different kinds of things are found in a number of different sectors. We shall discuss how contractual law has been modified to deal with electronic contracts, or “e-contracts,” in this article.
WHAT ARE E-CONTRACTS
According to The Indian Contract Act, of 1872, Section 2(h) defines a contract as a legally enforceable arrangement. A legally binding agreement created electronically is called an electronic contract, or simply a “e-contract.” It is entirely digital because it is drafted, negotiated, and carried out online. Neither the Information Technology Act of 2000 nor the Indian Contract Act of 1872 define the phrase “e-contract” or “electronic contract.” According to Section 10A of the IT Act of 2000, a contract is considered enforceable if offers are sent, accepted, or rescinded electronically or using any electronic record.
The primary benefit of electronic contracts is their lack of paper basis, which allows parties to agree even in cases when the promisee and the promisor are geographically apart. This eliminates the need for an in-person meeting to sign the contract. Alternatively, the parties may use a digital signature to sign the agreement. A legitimate digital substitute for a handwritten signature is a digital signature. The IT Act of 2000 defines it in Section 2(1)(p). A person’s digital signature can be appended to electronic data to authenticate them, according to Section 3 of the IT Act, 2000.
ESSENTIALS OF E-CONTRACTS
A legitimate e-contract must meet the same requirements as a legitimate traditional contract. Section 10 of the Indian Contract Act of 1872 lays out the requirements for a contract. These are:
Offer, acceptance, the existence of a legitimate purpose and consideration, competence of the parties, and free consent of the parties, are all necessary conditions for a contract to be formed. Any e-contract made in violation of any of the aforementioned requirements will be void.
Three types of e-contracts exist:
shrink-wrap,
click-wrap
browse-wrap.
SHRINK-WRAP CONTRACTS
When a person purchases a specific product or piece of software, they are considered to have consented to the terms and conditions of the agreement. These agreements are predicated on the straightforward notion that acceptance of the terms and conditions of a product is indicated upon opening a packaged or wrapped item. One important thing to keep in mind is that shrink-wrap contracts do not grant any negotiation power. A customer purchasing a mobile phone or any software item is one situation in which these kinds of agreements are observed. An End User License Agreement, or EULA for short, is an illustration of a shrink-wrap agreement.
CLICK-WRAP AGREEMENTS
Here, clicking the “I Accept” or “Click to Accept” button in the terms and conditions of the web interface is considered as an individual’s acceptance or approval. Before agreeing to use this website or interface, the user must read and consider the information provided in the terms and conditions or privacy policies. Click-wrap contracts do not provide for the power of bargaining, just like shrink-wrap contracts do not. Click-wrap contracts are present on nearly every website we visit. Among these websites are Urbanic, Facebook, LinkedIn, Urban Clap, and so on.
BROWSE-WRAP AGREEMENTS
These are license agreements offered on websites or user interfaces where a “Hyperlink” leads to a page with the terms and conditions of using that specific application when double-clicked by the user. By using the website or downloading such an application, the user indicates that they have read and agree to the terms of the agreement. Also absent from browse-wrap contracts is the ability to negotiate. Examples are links that display the terms and conditions before installing mobile apps from Amazon, Netflix, and other companies.
AN EXAMINATION OF LEGAL ACCOMMODATIONS FOR E-CONTRACTS
These days, electronic contracts are widely used and have a significant impact on trade and business. When compared to paper contracts, the key reasons for this are that they are less likely to contain errors, speedier, easier to work on, and are more easily accessible. As previously mentioned, provisions about e-contracts have also been accommodated in many areas of the legislation.
The Tamil Nadu Organics Private Limited v. State Bank of India (2019) case covered e-contract validity and enforceability in great depth. In this decision, the Madras High Court ruled that e-contracts are legally binding and that associated contractual responsibilities will follow.
The Supreme Court ruled in Trimex International FZE Ltd. Dubai vs. Vedanta Aluminium Ltd. (2010) that the parties’ email correspondence constituted a contract in and of itself because it served as a means of communication for the offer and acceptance. The Supreme Court of India noted that once a deal is reached, its execution will not be impacted by a written contract that the parties have prepared and initiated.
The Supreme Court ruled in Bhagwandas Goverdhandhas Kedia vs. Girdhari Lal Parshottamdas & Co. and Anr. (1965) that the place of acceptance of an offer received is the appropriate venue for the execution of a contract made electronically.
PROBLEMS AND ISSUES ABOUT ELECTRONIC CONTRACTS
Even if E-contracts save labor and time, alleviate workloads, and address many other issues that people face daily, they also come with limitations and disadvantages. Let’s take them one at a time now:
One of the most important factors to take into account for an agreement to become a contract is the capacity to contract. The Indian Contract Act, of 1872, mentions soundness, major, and not being legally disqualified as requirements for being competent to contract under sections 10, 11, and 12. E-contracts comply with these fundamental specifications as well.
The fact that neither party is aware of the other in an e-contract is the problem. If there is another party, the one offering the goods or services is unaware of whether they can enter into contracts lawfully or not. For example, if a sixteen-year-old child places an order on any online retailer.
CHOICE OF LAW
One of the challenges with e-contracts that requires special consideration is the choice of law. When two states or countries are involved in the contract, this problem occurs. In this instance, the laws and regulations of the two countries conflict, making it difficult to decide which law should be obeyed. Applying the jurisdiction where the bulk contracting transactions took place presents another issue for the court. Fixing a surety regarding the choice of law in the event of a disagreement is a complicated matter in electronic contracts. For example, the contractual parties are from India for the originator and the USA for the recipient.
CONCLUSION
In conclusion, e-contract usage has increased significantly over the last ten years and has benefited many individuals worldwide. It’s critical to comprehend and apply these contracts sensibly. Future e-contract usage is expected to rise, particularly given government initiatives to promote digitalization. Consequently, comprehensive legislation about enforcing e-contracts and associated concerns must be developed.
FREQUENTLY ANSWERED QUESTIONS (FAQS)
Q1. What is an E-Contract?
A1. An E-Contract, or electronic contract, is a legally binding agreement formed electronically. It doesn’t require traditional paper documents.
Q2. How are electronic contracts made?
A2. Electronic signatures, emails, websites, and specialist e-contract platforms are some examples of the electronic tools used to construct e-contracts. The offer, acceptance, consideration, and purpose to establish legal relations are the same as in traditional contracts.
Q3. Are there any dangers connected to electronic contracts?
A3. Although e-contracts have numerous advantages, there are also problems associated with them, including the possibility of security breaches, disagreements on the legality of electronic signatures, and difficulties executing contracts in various legal jurisdictions. Ensuring compliance with pertinent laws and regulations and putting in place appropriate security measures are crucial.
Q4. Can an electronic contract be executed in any format?
A4. Yes, in a lot of situations. But some contracts, like wills or real estate contracts, can have special legal restrictions that control how they are executed and could make it difficult to execute them electronically. To ascertain if electronic execution is appropriate for a given kind of contract, legal professionals must be consulted.
Q5. Is it possible to electronically edit or modify an e-contract?
A5. Yes, electronic contracts may be updated or changed as long as all parties agree to the changes and they take into account both the original conditions of the agreement and any applicable legal requirements. It’s imperative to accurately record any changes and make sure copies of the updated agreement are sent to each party.
