International Science and Technology Journal ISSN NO: 1632-2882

“E-CONTRACTS IN INDIA: ISSUES AND

CHALLENGES”

1
SHASHANK TYAGI, ASSISTANT PROF. IN LAW, LAW COLLEGE
DEHRADUN & 2SHIVANGI RANA B.A.LL.B. XTH SEM LAW
COLLEGE DEHRADUN

LAW COLLEGE DEHRADUN, UTTARANCHAL UNIVERSITY

DEHRADUN

INTRODUCTION:
Contracts are very commonly used and accepted in our daily lives nowadays.
Right from buying household items from a store to withdrawing money from
an ATM, everything is governed through a contract. Computer & Internet
being the greatest inventions of mankind is nowadays used in almost
everything, such as, e-commerce, social networking, dispute resolution, e-
mails, etc. Almost all the transactions and other forms of trade are conducted
electronically saving time.
For examples- online railway ticket bookings, online auctions, etc. Out of
the need for speed, convenience and efficiency, electronic contracts which
are in electronic form. 1 Justice Fazal Ali headed a survey which was
conducted regarding this issue and strongly recommended for a separate law
regulating based on electronic devices. He refused to modify the present law
so as to include electronic devices into the preview of present law of
contract.
It was also noted that contracts and other commercial activities shall mostly
be based on e-devices. It helps to run smoothly the corporate transactions. In
India, our Legislation then decided to form new laws in this field that are
like, Electronic Commerce Act 1998, The Indian Contract Act, 1872,
Consumer Protection Act, 1986, Information Technology Act, 2000 &
Indian Copyright Act, 1957 etc.

1
https://www.theguardian.com/technology/2017/jul/01/bitcoins-underground-
economy-proves-a-hard-sell.

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International Science and Technology Journal ISSN NO: 1632-2882

The authority of the transactions of e-contracts is established under the

Information Technology Act, 2000 regulate the transactions and solve issues
arising out of such contracts.2
MEANING:
Electronic contracts mean the contracts which are formed between two
parties through negotiations, by the use of any electronic means. They are
also popularly called as cyber contracts, digital contracts or online contracts.
In concept, they are very similar to traditional contracts, which are paper
based and wherein goods and services are exchanged for a specific amount
of consideration. The only extra element they have is that the mode of
contract is digital in nature like the internet/other e- instruments.
Essential Elements of E- Contracts:
1. There must be two parties
2. Use of electronic means.
3. E-Proposal & E- Acceptance
4. Amount of Consideration.
5. Certainty and Possibility of Legal Performance
6. Intention to Create Legal Relations
7. Competency of the Parties & Free Consent

DEFINITION:
According to Sir William Anson: A contract is a legally binding agreement
between two or more persons by which rights are acquired by one or more
acts or forbearance on the part of the other or others. E-contract is any kind
of contract formed in the course of e-commerce by the interaction of two or
more individuals using electronic means, such as e-mail, the interaction of an
individual with an electronic agent, such as a computer program, or the
interaction of at least two electronic agents that are programmed to recognize
the existence of a contract.3
The principles governing the traditional contracts also apply to the e-
contracts. This is also known as electronic contract. E-Contract is an aid to
drafting and negotiating successful contracts for consumer in business e-
commerce and related services. It is designed in a way to assist people in
formulating and implementing commercial contracts policies within e-

2
http://elib.bvuict.in/moodle/pluginfile
3
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2136980.

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International Science and Technology Journal ISSN NO: 1632-2882

businesses. It contains model contracts for the sale of products and supply of
digital products and services to both consumers and businesses.4

FORMS OF E-CONTRACTS:
Generally the basic forms of "E-Contracts" are mentioned following-
1. The Click-wrap or Web-wrap Agreements.
2. The Shrink-wrap Agreements.
3. The Electronic Data Interchange or (EDI).
1. Click-wrap Agreements:
While surfing the internet we generally come across these agreements such
as “I AGREE” to the terms or “I DISAGREE” to the above
conditions. Click-wrap agreements are those whereby a party after going
through the terms and conditions provided in the website or program has to
typically indicate his assent to the same, by way of clicking on an "I Agree"
icon or decline the same by clicking "I Disagree". These are the most
common types of contracts used on the Internet, whether it be granting of a
permission to access a site or downloading of a software or selling
something by way of a website. The main difference between click-
wrap contracts and e-mail is that such contracts are forms instantaneously.
2. Shrink-wrap Agreements:
These are the agreements which are generally containing the CD Rom of
software. The terms and conditions are provided on the cover of CD Rom.
Sometimes additional terms are given when the licenses of such Roms
appear on the screen when the CD is downloaded to the computer. If the new
terms and conditions are not to his liking, the user has right to return it. As
defined in Section 13(2) of the IT Act, communication of an offer or
acceptance in the web-click mode is complete when the addressee is in
receipt of the electronic record.

3. Electronic Data Interchange (EDI):

These are the contracts which are used in trade transactions enabling the
transfer of data from one computer to another in such a way that each
transaction in the trading cycle can be processed with virtually no
paperwork. Here unlike the other two there is exchange of information and

4
http://www.lexvidhi.com/article-details/electronic.

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International Science and Technology Journal ISSN NO: 1632-2882

completion of contracts between two computers and not an individual and a

computer.
ISSUES AND CHALLENGES:
1. Capacity to contract:
Relying on an electronic contract, the parties should take steps to make sure
the contract is binding, e.g., that the essential terms of the contract are
complies with, agreed upon, and that the persons who are parties to the
electronic contract have the legal competence and capacity to enter into an
agreement.
Mostly, who enters into a contract is a nameless individual. The other party
(service provider) has no idea whether the individual who has clicked on “I
Agree” text or icon is legally competent to enter into a contract, which
according the Indian Contract Act, 1872, is one of the pre-requisites of a
valid contract[sections 10, 11 & 12]. Contracts entered into by individuals,
who are not competent to contract are void. There may arise in a situation,
wherein minors who are not competent to enter into a contract are entering
into an online contract with the service provider by clicking on “I Agree”
text or icon.

2. Electronic Authentication:
Over a period of many centuries, the common law of contract has evolved. It
has made the concept of “pen-paper-and-signature” as physical means of
authenticating a contract. Now, in the online medium electronic
authentication has to be done by the mens of “electronic records and digital
signatures”. Electronic records needs to be validated under the rules of
evidence and procedure. Digital signature provisions being procedural
provisions treats the digital signature as equivalent to a handwritten
signature. The Information Technology Act, 2000 provides for the use of
digital signatures to authenticate electronic records. The said Act provides a
legal framework for facilitating and safeguarding electronic transactions in
the electronic medium. It accepts ‘digital signature’ [section 2 (1)(p)] as a
means of authentication. Section 3 of the Act provides the whole process of
digital signature creation and its verification.5 It is based on UNCITRAL’s
Model Law on E-commerce.

5
http://www.wipo.int/wipolex/en/text.jsp?file_id=185998

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3. Choice of Law:
Courts most often apply the law of the jurisdiction that has the most points
of contract with the contractual relationship which is referred to as “personal
jurisdiction” of the court. The problem arises, if he is a non-resident, what
laws would be applicable – domestic laws of the state where he is residing or
domestic laws of the state whose laws he has committed the offence. In an
online medium, fixing the choice of law becomes a more complex problem.
4.Choice of forum:
Choice of forum clause is given in almost all online contracts. It makes a
good legal sense for the online service providers to limit their exposure to
one jurisdiction only. Defending lawsuits at multiple geographical locations
could be both expensive and frustrating. Thus the online service provider has
no other choice but to subject themselves to only one set of forum and
applicable laws only. The user has no other choice, but to accept the service
provider’s Standard Terms and Conditions by clicking an on-screen text or
icon “I Agree”, “I Accept” or “Yes”.

Current Position:
Today, due to reason of E- Commerce the standard of living of people is
totally changed. This is where the electronic commerce offers the flexibility
to business environment in terms of place, time, space, distance, and
payment. With the growth of e-commerce, there is a rapid advancement in
the use of e-contracts. E-contracts are well suited to facilitate the re-
engineering of business processes occurring at many firms involving a
composite of technologies, processes, and business strategies that aids the
instant exchange of information. The e-contracts have their own merits and
demerits. On the one hand they reduce costs, saves time, fasten customer
response and improve service quality by reducing paper work, thus
increasing automation. And on the other hand the law governing e-
contract lacks certain provisions like -There is nothing to determine the
intention of the parties to enter into a legally enforceable contract.
With this, E-commerce is expected to improve the productivity and
competitiveness of participating businesses by providing unprecedented
access to an online global marketplace with millions of customers and
thousands of products and services.

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