Due to globalization and the increase in trade worldwide, an Electronic Contract has become essential. Electronic Contracts or E-Contracts means a contract that has been executed electronically by the parties. Traditionally, Contracts were executed between parties with the help of pen and paper. Parties come together, discuss, and then finalize the terms of the agreement before entering into any agreement with the other parties. This becomes a time-consuming process and it is not possible in today’s age for parties to wait for such a long time before agreeing with each other. Our economy is developing day by day and e-commerce is a very big source behind it. All the transaction that is happening on an e-commerce platform is governed by an electronic agreement. These agreements are the base of such transactions and without these contracts, we cannot get involved in any of such activities.
Geeky Takeaways:
- E-contract saves a lot of time as parties are not required to come together to finalize any points.
- These discussions of the parties are happening with the help of online mediums such as email, zoom, and other communication channels.
- As a result, each party can examine the current state of the agreement and determine if it has been adequately respected or not.
What is an E-Contract?
A Contract is formed when two parties put their agreement in writing, and have certain obligations that must be fulfilled by both parties, and the written agreement becomes legally binding. The Indian Contract Act defines a Contract as a legally enforceable agreement. In the Indian Contract Act, there are essential elements that need to be fulfilled for a contract to become legally enforceable in a court of law. These elements are essentially the gold standard or yardstick against which any agreement should be judged to be considered valid.
The Indian Contract Act, 1872 defines a contract as an agreement that is enforceable by law. E-Contract or Electronic Contract has also the same meaning under the act and the main difference between these two is the mode under which it is executed. An E-Contract is executed in online mode while a Traditional Contract is executed on paper. E-contracts are smart because they work by executing specified orders while still adhering to regulatory requirements. All of these actions and procedures are documented, processed, and carried out on all platforms at the same time.
Legal Validity of an E-Contract
The validity of a Contract is clearly defined under the Indian Contract Act, 1872. Section 10 of the Indian Contract Act, 1872 provides some essentials that must be present in a contract to make it legally valid. These essentials are a valid offer, an acceptance of the offer, free consent of the parties, a lawful object, and a valid consideration. If any contract has these essentials, then it should be considered a valid contract as per the Indian Contract Act, 1872.
The term Electronic Contract is specifically not defined under the Indian Contract Act, 1872 but the validity of the same cannot be questioned on the mere fact that it has been created electronically. Section 10 A of the Information Technology Act, 2000 validates any electronic contract that has been formed with the help of electronic form. Further, Section 2(r) of the Information Technology Act, 2000 defines electronic form as any information sent and received through media, computer memory, magnetic, microfilm, optical, or similar device. Section 10 A of the act states that any electronic contract cannot be held invalid because they are created using an online medium of electronic form.
Indian Evidence Act and E-Contracts
The Indian Evidence Act, 1872 under Section 65 B also supports the validity of an Electronic Contract. This section states that if any information is recorded or sent through using an online medium then it will be considered as a document. This section also states that such documents created through online mediums will be admissible in court without any other proof of originality. The Supreme Court of our country in the case of Trimex International Vs. Vedanta Aluminium also held that without any formal agreement, any electronic form of communication will be considered an agreement/ contract if it satisfies the essentials of a valid contract.
Kinds of E-Contract
There are several types of E-Contract based on their execution. Different types of businesses use different types of E-Contracts. Some of the most important kinds of E-Contract are explained below:
1. Shrink Wrap Agreements:
This type of agreement is mainly used in the software industry. This agreement is attached to the software, so as soon as the person has purchased the software and opened it, he/she has agreed with them. The End User License Agreement (EULA) is also a Shrink Wrap Agreement. This type of agreement protects both the user and the manufacturer, it protects the user by providing him/her with all the necessary permission that is required to use the software.
2. Click Wrap Agreements:
This agreement is also known as a Click-Through Agreement as the user will use the services only when he clicks on the agreement and accepts all the terms and conditions. This type of agreement takes the consent of the user before he/she is using the services. This type of agreement is largely present all over the internet in software licenses or for using any website. This agreement provides the user the chance to go through the terms and policies of the agreement, and only if they agree and provide their consent, then only they can visit the website. The user has the option to reject, but once they reject the terms and conditions they will not be allowed to visit the website or use the services. Hence, once the user clicks I Agree, they become bound by the legal obligations.
3. Browse Wrap Agreements:
This type of agreement is imbedded in the websites, so by merely using the website the user is giving his/her assent to the agreement. This agreement is hidden in the website, and the users do not have the option to read these before entering the website. The continued use of the website by the user is the assent to this agreement. These can be found in some hyperlinks or the policies section of the website. These are updated by the website from time to time, and it is a practice that the user has accepted these terms.
4. Scroll Wrap Agreements:
As the name of the agreement suggests this agreement means that the user has to scroll the whole agreement then only he/she can visit the website or use the service. Scrolling the agreement is the consent of the user. If he/she does not scroll the agreement till the end, then he/she will not be able to use the services. In this type of agreement, the user has the option to reject the terms after scrolling and reading the terms of the use.
5. Sign-In Wrap Agreements:
In this type of agreement, the user signed up for a service, then only he/she will be allowed to use the service. The process of signing into an agreement can be different for different websites, but the reasons behind all are the same. It only lets the user use the services when they sign in to the website using the different techniques that are present there.
What are Electronic Signatures?
The Information Technology Act, 2000 recognizes the validity of Electronic Signatures in our country. The act specifies that Electronic Signature comes under the purview of Digital Signature. The scope of Digital Signature is very vast under the act, and obtaining a Digital Signature is a tough task. The Information Technology (Amendment) Act, 2008 substituted the term Digital Signature with Electronic Signature. Under the act, there are no specific rules for the use of Electronic Signatures. A person can put an electronic signature into an agreement by simply putting his/her name in the document electronically or by signing the document electronically using any online medium.
The act substituted the name to provide ease of business to various organizations. E-commerce is growing around the world, and Electronic Signatures have proved to be beneficial in such situations. The legal status of an Electronic Signature is equivalent to a normal signature. Various judgments are established around the world that an Electronic Signature cannot be held invalid based on its electronic form only.
Stamping of E-Contract
The Indian Stamp Act, 1899 governs the rule of stamping of a contract in our country. Different states have different rules regarding the same. According to the Indian Stamp Act, 1899, Stamp Duty is levied on every document, and as per the definition of the IT Act, 2000, an E-Contract is a document, hence it requires stamp duty to be paid. The simplest way to pay the stamp duty is by taking out the print of the contract and affixing a stamp on the same. People can also pay the stamp duty with the help of their website and then download the certificate and paste the same in the front part of the agreement.
Conclusion
E-contracts have proved to be beneficial around the globe. The main benefit is that it saves a lot of time and paper. Before the emergence of E-Contracts, contracts used to take a long time for execution. In cases, where parties were involved from different states or countries, it used to be difficult for them to agree. After the introduction of E-Contracts, business around the globe has become very easy. We can agree with another person in a different country with some clicks on our computer and the validity of both agreements is the same.
Electronic Contracts- FAQs
What is an E-Contract?
E-Contract or Electronic Contract has also the same meaning as a Contract under the Indian Contract Act, 1972. It defines a contract as an agreement that is enforceable by law. The main difference between these two is the mode under which it is executed. Electronic Contract is executed through online means.
What are the kinds of E-Contracts?
The different kinds of E-Contracts are as follows: Shrink Wrap Agreements, Click Wrap Agreements, Browse Wrap Agreements, Scroll Wrap Agreements, and Sign-In Wrap Agreements.
Are E-Contracts legally binding?
Yes, E-Contracts are legally binding and are enforceable in the same way as traditional contracts.
Is there any linkage between the Indian Evidence Act and E-Contracts?
The Indian Evidence Act, 1872 under Section 65B also, supports the validity of an Electronic Contract. This section states that if any information is recorded or sent through an online medium then it will be considered a document.
What are Electronic Signatures?
The Information Technology Act, 2000 recognizes the validity of Electronic Signatures in our country. The act specifies that Electronic Signature comes under the purview of Digital Signature.
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