DR. RAM MANOHAR LOHIA NATIONAL LAW

UNIVERSITY

LAW OF CONTRACT

TOPIC

Enforcement of e-contracts

Submitted to: Submitted by

Dr.VisalakshiVegesnaSakshi Nigam

Associate Professor (Law ) Roll-113

Dr.RMLNLUSandeep Singh Rathaur 114

ACKNOWLEDGEMENT

We have taken efforts in this project. However, it would not have been possible without the kind

support and help of many individuals. We would like to extend our sincere thanks to all of them.

We are highly indebted to thank Dr. VisalakshiVegesna Associate Professor (Law) for her

guidance and constant supervision as well as for providing necessary information regarding the

project & also for her support in completing the project.

We would like to express our gratitude towards our parents & librarian for their kind co-

operation and encouragement which helped us in completion of this project.

Our thanks and appreciations also go to our colleague in developing the project and people who

have willingly helped me out with their abilities.

Sakshi Nigam

Sandeep Singh Rathaur

TABLE OF CONTENTS

1. Contracts and e-contracts

2. Laws governing e-contracts

3. Types of e-contracts

4. Legal issues involving

5. Case laws

6. Conclusion

CONTRACTS AND E-CONTRACTS

An electronic contract is an agreement created and “signed” in electronic form - in other words,

no paper or other hard copies are used. For example, you write a contract on your computer and

email it to a business associate, and the business associate emails it back with an electronic

signature indicating acceptance. An e-contract can also be in the form of a “Click to Agree”

contract, commonly used with downloaded software: The user clicks an “I Agree” button on a

page containing the terms of the software license before the transaction can be competed.

Electronic contracts facilitate transactions and agreements electronically without the parties

meeting each other. This means that the traditional contract process of offer, acceptance and

agreement to transact through electronic mode of paper.1

Essentials of a contract are:

1. Lawful object

2. Lawful consideration

3. Competency of parties

4. Free consent

Like any other form of contract, an e-contract is also primarily governed by the codified

provisions of Indian Contract Act, 1872 ("Contract Act"). Therefore, an e-contract cannot be

validly executed unless it satisfies all the essentials of a valid contract, as prescribed under the

Contract Act. All other statutes applicable to an e-contract are to be read in conjunction with and

not in substitution with the Contract Act.2

1E.Paavai, Legal Issues in Electronic Contracts, (2008) 4 LW (JS) 90.

2http://www.dhlawassociates.com/assets/newsletters/2013/march-2013.html.

With the increasing use of technology e-contracts have become an inevitable part of day to day

transactions. The expressions of proposer and acceptor are substituted by the words Originator

and Addressee in case of Electronic contracts.3 In case of normal contracts the offerer may send

his offer telephonically, telegraphically or any other customary method but in case of e-contracts

the originator may send the offer by means of electronic record.4

LAWS GOVERNING E-CONTRACTS

The United Nations Commission of International Trade Law adopted the model law on

electronic commerce in 1996. The General Assembly of United Nations by it’s resolution

recommended that all States should give favorable considerations to the said Model law when

they revise or enact the law.5

In order to overcome the possible legal complications and other unforeseen problems covering

all Cyber laws comprehensively an act titled “The Information Technology Act, 2000” was

enacted with rules thereunder.

Hence all the laws governing electronic contracts are enumerated under Information Technology

act, 2000 and Information technology (Amendment) act, 2008.

There are certain relevant provisions under the Information Technology act by which electronic

contracts are governed.

The validity to electronic documents and records are provided under:

3 T.S VenkateshaIyer, Law of Contracts and Tenders with a special chapter on e-contracts,107.4 Ibid.5Supra 1, 106.

Where any law provides that information or any other matter shall be in writing or in the

typewritten or printed form, then, notwithstanding anything contained in such law, such

requirement shall be deemed to have been satisfied if such information or matter is

(a) rendered or made available in an electronic form; and 

(b) accessible so as to be usable for a subsequent reference.6

Where any law provides that information or any other matter shall be authenticated by affixing

the signature or any document shall be signed or bear the signature of any person, then,

notwithstanding anything contained in such law, such requirement shall be deemed to have been

satisfied, if such information or matter is authenticated by means of affixed in such manner as

may be prescribed by the Central Government.7 

The provisions that provide for authentication of electronic contracts are thereunder

An electronic record shall be attributed to the originator:

(a) It is send by the originator himself

(b) By a person who had the authority to act on behalf of the originator in respect of that

electronic record.

(c) By an information system programmed by or on behalf of the originator to operate

automatically.8

Also, acknowledgment in the cyber world is defined under section 12 of the Information

technology act, 2000.

6 Section 4 of Information Technology act,2000.7 Section 5 of Information Technology act,2000.8 Section 11 of Information Technology act,2000

4.1 Essentials of an electronic contract

As in every other contract, an electronic contract also requires the following necessary ingredients:

1. An offer needs to be made

In many transactions (whether online or conventional) the offer is not made directly one-on-one. The consumer ‘browses’ the available goods and services displayed on the merchant’s website and then chooses what he would like to purchase.. The offer is not made by website displaying the items for sale at particular price. This is actually an invitation to offer and hence is revocable at any time up to the time of acceptance. The offer is made byte customer on placing the products in the virtual ‘basket’ or ‘shoppingcart’ for payment.

2. The offer needs to be accepted

As stated earlier, the acceptance is usually undertaken by the business after the offer has been made by the consumer in relation with the invitation to offer. An offer is revocable at any time until the acceptance is made.

Procedures available for forming electronic contracts include:

E-mail: Offers and acceptances can be exchanged entirely by e-mail, or can be combined with paper documents, faxes, telephonic discussions etc.

Web Site Forms: The seller can offer goods or services (e.g. air tickets, software etc) through his website. The customer places an order by completing and transmitting the order formprovided on the website. The goods may be physically delivered later (e.g. in case of clothes, music CDs etc) or be immediately delivered electronically (e.g. e-tickets, software,

Online Agreements: Users may need to accept an online agreement in order to be able to avail of the services e.g. clicking on “I accept” while installing software or clicking on“I agree” while signing up for an email account.

3. There has to be lawful considerationAny contract to be enforceable by law must have lawful consideration,i.e., when both partiesgive and receive something in return. Therefore, if an auction site facilitates a contract between two parties where one person provides a pornographic movie as consideration for purchasingan mp3 player, then such a contract is void.

There has to be an intention to create legal relationsIf there is no intention on the part of the parties to create legal relationships, then no contract is possible between them. Usually, agreements of a domestic or social nature are not contracts and therefore are not enforceable, e.g., a website providing general health related information and tips.

The parties must be competent to contractContracts by minors, lunatics etc are void. All the parties to the contractmust be legally competent to enter into the contract

There must be free and genuine consentConsent is said to be free when there is absence of coercion, misrepresentation, undue influence or fraud. In other words, there must not be any subversion of the will of any party to the contract to enter such contract.

Usually, in online contracts, especially when there is no active real-time interaction between the contracting parties, e.g., between a website and the customer who buys through such a site, the click through procedure ensures free and genuine consent.

7. The object of the contract must be lawfulA valid contract presupposes a lawful object. Thus a contract for selling narcotic drugs or pornography online is void.

8. There must be certainty and possibility of performanceA contract, to be enforceable, must not be vague or uncertain and there must be possibility of performance. A contract, which is impossible to perform, cannot be enforced, e.g., where a website promises to sell land on the moon.

P.R. Transport Agency vs. Union of India & othersAIR2006All23, 2006(1)AWC504

IN THE HIGH COURT OF ALLAHABADCivil Misc. Writ Petition No. 58468 of 2005Decided On: 24.09.2005Appellants: P.R. Transport Agency through its partner Sri PrabhakarSingh Vs.

Respondent: Union of India (UOI) through Secretary, Ministry of Coal,Bharat Coking Coal Ltd. through its Chairman, Chief Sales Manager Road Sales, Bharat Coking Coal Ltd. and Metal and Scrap Trading Corporation Ltd. (MSTC Ltd.) through its Chairman cum Managing Director

Background of the caseBharat Coking Coal Ltd (BCC) held an e-auction for coal in different lots.P.R. Transport Agency’s (PRTA) bid was accepted for 4000 metric tons of coal from Dobari Colliery.The acceptance letter was issued on 19th July 2005 by e-mail to Prates’-mail address. Acting upon this acceptance, PRTA deposited the full amount of Rs. 81.12 lakh through a cheque in favour of BCC. Thischeque was accepted and encased by BCC.BCC did not deliver the coal to PRTA. Instead it e-mailed PRTA saying that the sale as well as the e-auction in favour of PRTA stood cancelled “due to some technical and unavoidable reasons”. The only reason for this cancellation was that there was some other person whose bid for the same coal was slightly higher than that ofPRTA. Due to some flaw in the computer or its programme or feeding of data the higher bid had not been considered earlier. This communication was challenged by PRTA in the High Court of Allahabad. [Note: Allahabad is in the state of Uttar Pradesh (UP)]BCC objected to the “territorial jurisdiction” of the Court on the grounds that no part of the cause of action had arisen within U.P.

Issue raised by BCCThe High Court at Allahabad (in U.P.) had no jurisdictions no part of the cause of action had arisen within U.P.

Issues raised by PRTA1. The communication of the acceptance of the tender was received by the petitioner by e-

mail at Chandauli(U.P.). Hence, the contract (from which the dispute arose) was completed at Chandauli (U.P). The completion of the contract is a part of the “cause of action”.

2. The place where the contract was completed by receipt of communication of acceptance is a place where 'part of cause of action' arises.

Points considered by the court1. With reference to contracts made by telephone, telex or fax, the contract is complete when and where the acceptance is received. However, this principle canapply only where the transmitting terminal and the receiving terminal are at fixed points.2. In case of e-mail, the data (in this case acceptance)can be transmitted from anywhere by the e-mail account holder. It goes to the memory of a 'server ‘which may be located anywhere and can

be retrieved by the addressee account holder from anywhere in the world. Therefore, there is no fixed point either of transmission or of receipt.3. Section 13(3) of the Information Technology Act has covered this difficulty of “no fixed point either transmission or of receipt”. According to this section“...an electronic record is deemed to be received at the place where the addressee has his place of business."4. The acceptance of the tender will be deemed to be received by PRTA at the places where it has place of business. In this case it is Varanasi and Chandauli(both in U.P.)

Decision of the court1. The acceptance was received by PRTA at Chandauli /Varanasi. The contract became complete by receipt of such acceptance.2. Both these places were within the territorial jurisdiction of the High Court of Allahabad. Therefore, a part of the cause of action had arisen in U.P. and the court had territorial jurisdiction.