Contracts have been a staple in most of our lives; from signing terms and conditions we haven’t got the time to read, to watching lawyers argue about contracts in our favorite courtroom dramas. Contracts are one of the myriad ways in which the law permeates our lives.
What is E Contract?
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.
E-contract is a contract modeled, specified, executed and deployed by a software system.
The Indian Contract Act of 1872 prescribes the conditions, fulfilling which an agreement is deemed a valid contract. These include –
- Offer and acceptance
- Free consent
- Lawful consideration
- Lawful Object
- Competent parties to Contract.
- Certainty of terms
These conditions are meant to ensure that the two parties entering into a contract with each other possess the capacity to do so, are doing so freely and lawfully, and are of the appropriate age. Additionally, the contract must entail an offer and a verifiable means of accepting this offer. Electronic contracts that meet these criteria are valid and can be upheld in a court of law.
The 2 main parties to an e-contract are- The Originator and the Addressee.
- Originator according to the IT Act, 2008 is a person who sends, generates, stores or transmits any electronic message to be sent, generated, stored or transmitted to any other person and does not include an Intermediary.
- An Addressee according to the IT Act, 2008 is a person who is intended by the originator to receive the electronic record but does not include any Intermediary
NATURE OF E-CONTRACT
1. The parties do not, in most cases, meet physically.
2. There are no physical boundaries.
3. No handwritten signature and in most times, no handwriting is required.
4. Since there is no utmost security, risk factor is very high.
5. Jurisdictional issues are a major setback on e-contracts in case of breach.
6. There is no single authority to monitor the whole process especially in shrink-wrap contracts.
7. Digital Signatures are used and electronic records are used as evidences in court n when need arises.
8. The three main methods of contracting electronically are e-mail, World Wide Web (www), and Cyber contracts (Click to agree/online contract).
9. The subject matter includes:
(A). Physical goods, where goods are ordered online and paid over Internet and physical delivery is made.
(B). Digitized products such as software which can also be ordered for.
(C). Services like electronic banking, sale of shares, financial advice etc.
Types of electronic contracts
Shrink-wrap contracts are typically licensing agreements for software.
The name derives from the shrink-wrap packaging of the CD-ROMs in which software used to be distributed. In cases when licensing contracts are packaged along with the software, the contract begins when the user tears open the shrink-wrap to use the software.
Licensing agreements these days are usually not delivered with the packaging and instead show up before installing the software in question.
Click wrap contracts refer to those familiar and long blocks of text that nobody reads, detailing the terms and conditions for using a web-based service, software, etc. They’re called click wrap contracts because the user typically has to click a button or check a box to indicate that they accept the contract.
Essentially, browse-wrap agreements are contracts that you agree to simply by continuing to use the service or continuing to browse the web page, which is where the term originates.
Emails are not something you’d expect to see in a list of electronic contracts, but they have been ruled in several cases, to constitute a legally binding contract.
Electronic signatures refer to the digital and verifiable counterparts of regular wet signatures. Electronic signatures are used to sign documents online, which can typically be done in two ways –
- Aadhaar-based signatures using an OTP
- Digital signatures that use an asymmetric public key system and hash algorithms, and allow users to sign documents with a password
The provisions in the Information Technology Act, 2000,states that:
Section 10-A states about the validity of contracts formed by any 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 through electronic records, such contract shall not be deemed to be unenforceable solely on the ground that such electronic form or means was used for that purpose.”
Section 4 of the IT Act says as under:
“Section 4 states Legal recognition of electronic records: Where any law provides that information or any other matter shall be in writing or 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:
- Rendered or made available in an electronic form; and
- Accessible to be usable for a subsequent reference.
Section 5- Legal recognition of electronic signatures:
E-Contracts as well as E-Signatures are recognized under Indian law and are governed by the Information Technology Act, 2000.
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 through an electronic signature affixed in such manner as may be prescribed by the Central Government.
The COVID-19 situation has digitalized India to a large extent, including the Indian courts, taking it to a new paradigm of paperless state of things. E-Contracts and E-Signature enable people to continue their transactions and other commercial activities while also maintaining the social distancing norms. However, payment of stamp duty as required under law continues to be a point of contemplation and steps in this regard are now being actively taken by several state governments by way of opening online portals for payment of stamp duty.
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