E-contracts

Introduction
Like how everything in this world is becoming digitalized to meet the requirements of this fast-paced
world, the traditional pen and paper contracts have now taken the form of the new age E-Contracts.
From the simple household gasoline form registration to the much-complicated patent registrations,
everything is happening at the click of the mouse. If 50 years ago someone would have told our
parent’s generation that at the flick of an eye, they could do business transactions with a foreign
entity, they would have assumed we are conning them. But today thanks to the digital contracts which
have come in handy, even the gen x generations are utilizing it with much zeal and enthusiasm as it
has paved their way into gen z’s digital convenience and saving them all the hassle of traditional
transactions.

While all the digital paraphernalia makes daily tasks a piece of cake, it also imposes a formal legal
obligation known as E-Contracts.

It is still a question to wonder as to the number of E-contracts being entered into on a day-to-day
basis and that, there are several legislations governing it under our Indian Law and worldwide legal
systems.

The nitty-gritty of this fast-evolving method of fulfilling traditional contractual obligations through
modern technology is discussed ahead.

What is an electronic contract (e-contract)

Section 2(h), of the Indian Contract Act, 1872, tells us that the term ‘contract’ is an agreement that is
enforceable under the law. Interestingly, in the case of an E-Contract, the essence of Section 2(h) is
still sustained by only tweaking the mode in which the Contract comes into existence.

Hence, an E-Contract is an agreement that is enforceable under the law and is in all respects drafted,
negotiated, and executed digitally. Unlike a traditional contract which is paper-based, E-Contracts are
digital in their entirety. In an E-Contract, though there is an absence of a physical meeting of the
parties, a meeting of minds is present absolutely. The parties communicate with each other over the
internet or through telephonic media. An E-Contract is a step ahead of traditional pen-paper contracts
and comes into existence through electronic and digital mediums.

What is the legal validity of an e-contract

As much as we are accustomed to performing our Contractual Obligations in the traditional method, in
the current era, we are also warming up to the idea of Electronic Contracts largely due to the hassle-
free nature of such transactions and primarily because it is recognized by the Indian Judicature. In
order to further understand as, how is an E-Contract legally recognized under Indian Law it is
imperative to emphasize the nexus between Section 10 of the Indian Contract Act,1872 and Section
10-A of the Information Technology Act, 2000.
Section 10 of the Indian Contract Act, 1872 provides the crucial pre-requisites for a Contract to be
legally valid. It is mandatory that a Contract satisfies the essentials specified in Section 10 of the
Contracts Act, i.e.,

1. Offer

2. Acceptance to Offer

3. Consensus ad Idem

4. Lawful Consideration

Like traditional contracts, electronic contracts should also possess the said elements. It should be
noted that electronic contracts are specifically not referred to in the Indian Contract Act.

Through Section 10-A of the Information Technology Act, 2000, we can procure the validity of the
contracts formulated through the electronic medium.

“Section 10-A of the Information Technology Act, 2000: Validity of contracts formed through electronic
means. – 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.”

The nexus between Section 10 of the Indian Contract Act and Section 10(A) of the Information
Technology Act is that, when an E-Contract satisfies all the essentials under Section 10 of the Indian
Contract Act, then as per Section 10-A of the Information Technology Act, it’s legal authenticity cannot
be relinquished only for the plain condition that it was digitally conceived and executed.

Consequently, when an agreement meets all the essential conditions of a contract, it cannot be denied
validity only for the mere reason that it was electronically formulated. In a nutshell, E-Contracts are
enforceable by law and considered valid contracts.

It is substantial to ascertain the legal validity of an E-Contract for the primary purpose of resorting to
legal recourse in the event of any breach thereof.

Indian Evidence Act and e-contracts

Section 65 B of the Indian Evidence Act, 1872, reinforces the validity of Electronic Contracts. Section
65 B pronounces that, any information that is contained in an electronic record that is either printed
on a paper, stored, recorded, or copied in an optical or magnetic media produced by a computer is
deemed to be a document when the conditions mentioned in this section are satisfied it shall be
admissible as evidence without further proof or production of the original.
Kinds of e-contracts
E-contracts are specific to the nature of the business. There are various types of E-Contracts executed
depending on the structure of the business. The amalgamation of the conventional contracts with the
proficiency of technology constitutes an E-Contract. Below are a few of the most common types of E-
Contracts:

1. Shrink Wrap Agreements

2. Clickwrap Agreements

3. Browse Wrap Agreements

4. Scroll Wrap Agreements

5. Sign-In Wrap Agreements

Shrink Wrap Agreements

Shrink Wrap agreements are the End User License Agreements (EULA) or Terms and Conditions, which
are packaged with the products. The technique of enclosing the product in a plastic wrap is called
Shrink Wrap which declares that the customer purchasing it is bound by the EULA.

Usage of the product is deemed acceptance by the user. Interestingly, the acceptance is by default
once the product is purchased along with the packaging being ripped and utilized. An example of
Shrink Wrap Agreements is Software Drives.

Clickwrap Agreements
Clickwrap agreements are a form of agreement used for software licensing, websites, and other
electronic media. When the user logs in to a website the terms and conditions or the privacy policies
of the website are to be accepted by the user as legal consent. Though the user is intimated in this
method about the existence of certain terms and conditions and is required to accept the same, there
is no power of negotiation.

The user clicks “I Agree” to be bound by the legal obligations. Some prominent examples of Click
Wrap agreements are Amazon, Flipkart, and Make My Trip.

Browse Wrap Agreements

Browse Wrap Agreements are online contract or license agreements commonly used in website notices
or mobile applications. The terms and conditions are provided in a ‘Hyperlink’ in some part of the
website which is not beforehand intimated to the user.
There is no procedure to assent or reject the Terms and Conditions. At the onset, when the user is
aware of such terms they can scroll down and double click on the terms and conditions to have a
complete view of the same.

Scroll Wrap Agreements

The Scroll Wrap Agreements require the user to scroll down the License Agreements, implying that it
has been read by the user by scrolling down through the terms and conditions before they can give
their assent or rejection.

Sign-In Wrap Agreements

The Sign-In Wrap agreement is a kind of E-Contract in which once the end-user has signed into an
online service or signs in to use a product the acceptance is acquired.

Electronic Signatures
In the world of Electronic Contracts, the ancillary feature that has gained tremendous prominence is
the Digital signature or the Electronic Signature. The degree of acceptance of a Digital Signature is at
varying levels across the globe, so it is essential to ensure the validity of E- Signature ahead of
execution of any International Contract digitally.

The rendering of the signature which is done by the click of a button or through checking a box
digitally is called an electronic signature.

Electronic signatures are proffered digitally, which is, unconventional in comparison to the traditional
Wet Signature.

Information Technology Act, 2000 recognizes the legal validity of a Digital Signature Certificate (DSC)
under Indian Law.
Stamping of e- contract
According to the Indian Stamp Act, 1899, stamp duty is levied on the ‘instrument’. The term
instrument engulfs every document which has a right or liability excluding a bill of exchange, letter of
credit, cheque, promissory note, bill of lading, insurance policy, transfer of share, debenture, proxy,
and receipt.

It should be noted that the term ‘document’ also includes any electronic record as defined in Section
2(1)(t) of the Information Technology Act, 2000.

In India, electronic documents are stamped by taking a print of the document on a stamp paper or by
the method of franking or by the method of E-Stamping through the procurement of a stamp duty
certificate.

Conclusion
As the world is steadily moving toward complete digitalization and the idea of remote operations in all
fields is quickly gaining momentum it can be safe to say that E-Contracts is the next potent revolution
that in its stride is ready to completely take over the business field globally and as a result gradually
fade away the usage of traditional contracts in all spheres.