Defining E- contracts and it’s the requirements of e-contracts

In India the legal validity of e-contacts is originated by considering the nexus

between Section 10 of the Indian Contract Act,1872 and Section 10-A of
the Information Technology Act, 2000.

The section 10 under Indian contract law provides the crucial pre-
requisites for a Contract to be legally valid. It is mandatory that a Contract
satisfies the essentials that are Offer, Acceptance to Offer, Consensus ad Idem,
Lawful Consideration Like traditional contracts; electronic contracts should
also possess the said elements.

As per Section 10-A of the Information Technology Act, 2000. This states
the validity of contracts formed through electronic means. It states that 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.

United Nation Commission on International Trade Law (UNCITRAL)

adopted the Model of Ecommerce, 19961 (MLEC). The Model Law has been
incorporated by majority of countries in their legislation relating to E
Commerce. The Indian IT Act 2000 has incorporated the concept of e-
contracts in it laws on the basis of principals that are stated by the model law.
The various articles of the MLEC like:

(a)In Article 5 as it address the legality issue of electronic information by lying

down that; the information shall not be denied legal effect, validity or
enforceability solely on the grounds that it is in the form of a data message.

(b)Further Article 11 provides the legal validity to the contract formed by means
of data messages as follows; in the context of contract formation, unless otherwise
agreed by the parties, an offer and the acceptance of an offer may be expressed by
means of data messages. Where a data message is used in the formation of a
contract, that contract shall not be denied validity or enforceability on the sole
ground that a data message was used for that purpose.
(c) Since the order is send by electronic device working in combination of
hardware and software, it has no legal personality. In Article 13 where the issue
about the validity of transaction in such cases is addressed. The MLEC resolved
the issue by having the provision of attribution in Article 13. The IT Act has
incorporated the provision of such nature in Section 11 of the Act.

Requirements of e-contracts:

1. Section 3 of IT Act 2000 states about the authentication of electronic

records. It states that:

(1) Subject to the provisions of this section any subscriber may authenticate
an electronic record by affixing his digital signature.

(2) The authentication of the electronic record shall be effected by the use of
asymmetric crypto system and hash function which envelop and transform the
initial electronic record into another electronic record.

2. Section 4 of It Act 2000 deals with the legality issues of communication as

reproduced below; “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.

3. Section 5 Legal recognition of digital signatures. 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 (hen, 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 digital signature affixed in such manner
as may be prescribed by the Central Government.
[Link] 11 Attribution of electronic records. An electronic record shall be
attributed to the originator— (a) if it was sent 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; or

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

operate automatically

5. Section 12 Acknowledgment of receipt. (1) Where the originator has

not agreed with the addressee that the acknowledgment of receipt of
electronic record be given in a particular form or by a particular method,
an acknowledgment may be given by—

(a) any communication by the addressee, automated or otherwise; or

(b) any conduct of the addressee, sufficient to indicate to the

originator that the electronic record has been received.

(2) Where the originator has stipulated that the electronic record shall
be binding only on receipt of an acknowledgment of such electronic
record by him, then unless acknowledgment has been so received, the
electronic record shall be deemed to have been never sent by the originator.

(3) Where the originator has not stipulated that the electronic record
shall be binding only on receipt of such acknowledgment, and the
acknowledgment has not been received by the originator within the time
specified or agreed or, if no time has been specified or agreed to within a
reasonable time, then the originator may give notice to the addressee stating
that no acknowledgment has been received by him and specifying a
reasonable time by which the acknowledgment must be received by him and if
no acknowledgment is received within the aforesaid time limit he may after
giving notice to the addressee, treat the electronic record as though it has
never been sent.
6. Section 13 Time and place of dispatch and receipt of electronic record: This
section essentially establishes the legal framework for determining when and
where an electronic record is dispatched and received. The major points
which this section explains are about:

1. Dispatch Timing: An electronic record is considered dispatched once it

leaves the control of the sender (originator) and enters a system beyond
their control.
2. Receipt Timing:
o If the receiver (addressee) has a designated system for receiving
electronic records, the record is received when it enters that
system.
o If it enters a non-designated system, it is received only when
retrieved by the addressee.
o If no system is designated, receipt occurs when it enters the
recipient’s system.
3. Location of Dispatch & Receipt:
o Dispatch occurs at the sender's place of business.
o Receipt occurs at the recipient's place of business.
o If either has multiple business locations, the principal place of
business is considered.
o If no business exists, the usual place of residence is used.
4. Independence from Physical Location: Even if the computer handling
the transaction is in a different place, the legal place of receipt remains
the recipient's business or residence location.

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, [Link] 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.
E Signatures/ Digital Signatures.
The signature also reflects the intention of parties to be bound by terms
agreed and provides certainty to the time and place of formation of contract.
To make it more authentic various procedures are adopted around the world
like stamping, perforation etc. to authentic the communication through e-
signatures MLEC has drafted Article 7. It focuses on the two basic functions
of a signature, namely (a) to identify the author of a document and (b) to
confirm that the author approved the content of that document.
Paragraph (1)(a) establishes the principle that, in an electronic environment,
the basic legal functions of a signature are performed by way of a method that
identifies the originator of a data message and confirms that the originator
approve the content of that data message. Paragraph (1)(b) establishes a
flexible approach to the level of security to be achieved by the method of
identification used under paragraph (1)(a).

The Information Technology Act 2000 has incorporated the provisions for
both digital signature and E- signature. Section 3 of the IT Act allows the
authentication of the electronic records by affixing his digital signature. For
authentication of the electronic records the use of asymmetric crypto system
and hash function are used. The application of hash function2 technically
envelops it and transforms it to another electronic record. Digital signature is
issued by the Certifying Authority under the IT Act. It requires the private key,
public key and hash function to authenticate the electronic records. While
sender apply the digital signature they have to follow the procedure as
pictorially depicted.

Section 6 promotes the use of e signature in government and its agencies.

Therefore, where the law requires the filling, issue, grant, receipt or payment
has to be done, it can be done with the use of e-signature.

Types of agreements in e-contract.

1. 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.
2. Click wrap 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.
3. 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.
4. 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.

5. 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.

Mode of e-contracts

1. Electronic mail is the simplest form of entering into agreements. It resembles

the traditional form of contract governed by Indian Contract Act, 1872, where offer
and acceptance happens through electronic mode of communication. This mode of
agreement gives ample time and space to both parties to do bargaining or fix terms
and conditions. The Supreme Court in the case of Trimex International FZE Ltd.
Dubai v. Vedanta Aluminum Ltd.15 recognized that the emails exchange
between parties regarding mutual obligations constitutes a contract.

2. Websites and Click-Wrap Agreements: Used in e-commerce (e.g., "I Agree"

checkboxes, Terms & Conditions acceptance) Clicking a button or checking a box
is considered consent.

3. Electronic Data Interchange (EDI) :Used in B2B transactions for automated

contract exchanges. Involves structured data exchange between businesses.
4. Instant Messaging and Chat Applications: Platforms like WhatsApp,
Telegram, and Slack can be used. Courts have upheld contracts formed via chat if
intent is clear.

5. Digital Signatures and E-Signature Platforms: Platforms like DocuSign,

Adobe Sign, eMudhra allow legally binding e-signatures. Recognized under laws
like ESIGN Act (USA), IT Act (India), and eIDAS (EU).

6. Smart Contracts (Block chain-Based Contracts): Self-executing contracts

with terms written in code. Used in crypto currencies and DeFi transactions.

7. Fax and Scanned Copies of Signed Documents: Some jurisdictions still accept
faxed or scanned signatures.

E-Contracts where one of the parties be International

1. Compliance with the applicable law: Firstly the need is to comply with
the Indian laws that govern e-contracts. In e-contracts in India are governed
by Indian Contracts Act, 1872 which outlines the essentials of a valid contract.
The Information Technology Act, 2000 grants legal recognition to electronic
records and signatures , facilitating the information of contracts through
electronic means.
Compliance with the United Nation Convention on the Electronic
Communications in International Contracts.(relevant articles are stated
Of convention below).

Article 1: The ECC applies to electronic communications related to the

formation or performance of contracts between parties whose places of
business are in different States. Includes any statement, declaration, demand,
notice, or request made by electronic means, such as emails, electronic data
interchange (EDI), or other digital formats. If the international nature of the
contract (i.e., parties being in different States) isn't evident from the contract
itself, prior dealings, or information disclosed before or at the contract's
conclusion, this fact is disregarded. The ECC doesn't apply if neither party is
aware, nor should have been aware, that they are in different countries. The
Convention's applicability isn't influenced by the parties' nationalities.
Article 2: Specifies exclusions, such as : Contracts for personal, family, or
household purposes. Certain financial transactions and instruments.
Transferable documents like bills of lading or warehouse receipts.

Article 3 states that The parties may exclude the application of this
Convention or derogate from or vary the effect of any of its provisions.

Article 8 gives legal recognition of electronic communication. It's states

that a communication or contract cannot be denied validity or enforceability
solely because it is in electronic form, ensuring non-discrimination against
electronic communications.

Article 9 Stats that an electronic communication satisfies the legal

requirement of being "in writing" if the information is accessible for future
reference. It's also states about the "signature" requirement if a method is
used to identify the party and indicate their intention, and that method is
reliable as appropriate. An electronic communication is considered an
"original".

Article 10 states that an electronic communication is dispatched when it

leaves an information system under the control of the originator. It is
received when it becomes capable of being retrieved by the addressee at an
electronic address designated by the addressee. The communication is
deemed sent from and received at the parties' respective places of business.

Article 12 states that the contracts formed through automated message

systems, without human intervention, are valid and enforceable, recognizing
the legitimacy of modern contracting methods.

Article 14 States that If a natural person makes an input error in an

electronic communication with an automated message system and the
system does not provide a means to correct the error, the person has the right
to withdraw the portion of the communication where the error occurred,
provided they notify the other party promptly.

But our country India has not adopted the UN convention model for e-
contracts in case where international party is involved.
2. Jurisdiction and Choice of Law: Clearly specify in the contract which
country's laws will govern the agreement and which courts will have jurisdiction in
case of disputes. This clarity helps prevent legal ambiguities and conflicts arising
from differing international laws.

3. Electronic Signatures: Ensure that the electronic signatures used are legally
recognized in all relevant jurisdictions. In India, electronic signatures are validated
under the Information Technology Act, 2000, provided they meet certain criteria,
such as being unique to the signatory and capable of identifying them

4. Data Protection and Privacy: Adhere to data protection regulations applicable

in the jurisdictions involved. For instance, the General Data Protection Regulation
(GDPR) in the European Union imposes strict rules on handling personal data,
which may affect international contracts involving EU citizens.

5. Consumer Protection Laws: If the contract involves consumers, ensure

compliance with consumer protection laws in the respective countries, as these
laws can significantly impact the terms and enforceability of e-contracts.

[Link] foreign judgments in India involves navigating the provisions of the

Code of Civil Procedure, 1908 (CPC), which delineates procedures based on
whether the judgment originates from a reciprocating or non-reciprocating
territory.

1. Reciprocating Territories: A reciprocating territory is a country or territory

outside India that the Indian government has officially declared as such
through a notification in the Official Gazette. Judgments from superior courts
of these territories can be enforced in India under Section 44A of the CPC. For
reciprocating territories, the limitation period for enforcing a foreign judgment
in India is determined by the law of the country where the judgment was
passed. If the decree holder initiates execution proceedings in the foreign
country within its limitation period and the decree remains unsatisfied, they
can file for execution in India within three years from the conclusion of the
foreign execution proceedings.
 2. Non-reciprocating territories refer to countries that India has not officially
designated as reciprocating territories under Section 44A of the Code of Civil
Procedure, 1908 (CPC). Judgments from these countries' courts are not directly
enforceable in India.

 In Indian e-contracts where one of the parties involved is the

international party the applicability will be of Indian laws only. The
fundamental principals governing the contract will of Indian contract act
1872 and IT Act 2000. India has not adopted the United Convention on the
use of electronic communications in International contracts.

 The jurisdiction is determined by the parties in the agreement that will

govern the potential disputes.

 The Consumer Protection Act 2019 applies to cross-border e-commerce

transactions, ensuring the rights of Indian consumers in foreign dealings.

 The existing data protection legislations are applicable in the e-contracts.

 The enforcing of foreign judgments in India is governed by the Code of

Civil Procedure, 1908 (CPC), which delineates procedures based on
whether the judgment originates from a reciprocating or non-reciprocating
territory. This distinction has been addressed in several notable Indian case
laws:

1. Moletji Nar Singh Rao v. Shankar Saran (1962): The Supreme Court of India
held that a foreign judgment from a non-reciprocating territory cannot be
executed directly in India. Instead, the decree-holder must file a fresh suit in
an Indian court based on the foreign judgment. The foreign judgment serves
as evidence in this new suit, but the Indian court will examine the merits of
the case afresh.

2. I&G Investment Trust v. Raja of Khalikote (1952): In this case, the Orissa
High Court emphasized that for a foreign judgment from a reciprocating
territory to be executed in India under Section 44A of the CPC, it must be
conclusive as per Section 13 of the CPC. The court highlighted that even if a
judgment is from a reciprocating territory, it can be challenged in India on
grounds such as fraud, lack of jurisdiction, or being contrary to natural justice.
According to case Trimex International Fze [Link] vs. Vedanta
Aluminum Limited, India the Supreme Court validated the e-contracts which
was entered between international party (Dubai) and India. The Supreme Court
of India examined the enforceability of contracts formed through electronic
communications. In this case, the parties negotiated and finalized terms via email
exchanges without a formal written contract. The Court upheld that such email
correspondences constituted a valid and binding contract, emphasizing that the
absence of a traditional paper document does not invalidate an agreement reached
electronically.