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Author - Anupam Prasad

“I accept” - Two words and a single mouse click- That is all one needs to enter into an electronic contract.

Imagine you drafted an agreement on your computer and sent it to a freelance writer via e-mail. The freelance writer sent it back to you affirming his acceptance with an electronic signature. Read here why you should not freelance without a contract. Are electronic signatures valid? Are they valid substitutes of traditional inked signatures?

Imagine you purchased an anti-virus online. You clicked an "I Agree" button, like we usually do and agreed to the terms of the software license without reading them. Even though you did not read the terms of the license, you entered into a contract by clicking the “I agree” button.

Whether we accept it or not, Electronic contracts have become an integral part of our lives. From creating an e-mail account to ordering products and services online, electronic contracts are deeply embedded in the growing e-business sector. It is similar to a traditional business model wherein goods and services are exchanged for a particular quantity of consideration. The additional element in an E-Contract is the fact that the contract here takes place through a digital mode of communication like the internet.

Our lives have become complex and more streamlined at the same time. The development of internet has opened up avenues and opportunities one could never have imagined. The use of such internet services is aided by electronic contracts. The need of Electronic contracts is borne out of the requirement for speed, suitability and efficiency in business transactions.

Inspite of ever increasing use, a lot of uncertainty surrounds the issue of electronic contracts in the entrepreneurial world.  This partly stems from our insecurity in transacting online and partly from the intricacies involved in entering into e-contracts.

The traditional definition of contract cannot be applied to ‘e-contracts’ as the realm of e-contract is much bigger than the realm of a traditional mode of contract. In essence, e-contract is any agreement which is entered on internet by competent parties, with lawful consideration, free consent, without mala fide intentions and to create legal relationship. It can be formed at any time 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. For instance- when you create an e-mail account and agree to the disclaimer and privacy policies, you enter into an agreement with the e-mail service provider.

Section 4 of the Information Technology Act, 2000 provides that where any law provides that information shall be in writing or in the typewritten or printed form, then such requirement shall be deemed to have been satisfied if such information or matter is available in electronic form and accessible for a subsequent reference. Hence, an agreement in electronic form is recognized under the general contractual law.

This also means that your valid and legal contracts which have been designed, completed, and enforced as physical documents can be replaced with electronic parallels. Note that the IT Act, however, is not applicable in relation to your negotiable instruments, power of attorneys, trust, wills, contracts for sale or conveyance of immovable property.

An e-contracting process essentially includes two stages: contract establishment (formation) and contract enactment (contract fulfilment or performance).  The stage of contract establishment include activities such as identifying, checking and validation of contractual parties, negotiation and validation contract.

Contract enactment is further divided into two phases: performance and post-contractual activities. Monitoring of contract performance and compensation activities belongs to the contract performance phase while contract enforcement forms part of both contract performance and post-contractual activities.

The users of basic internet services like us often come across e-contracts like click wrap, browse wrap and shrink-wrap contracts. In each of these contracts, the terms and conditions of the contract are made available to the contracting party in a form that is significantly different from the usual contracts.

In case of a click wrap contract, your acceptance is taken by means of checking on an ‘I accept” tab. You have the option to scroll down and view all terms and conditions. A browse wrap agreement is intended to be binding on the contracting party by the mere use (or browse) of the website. Shrink wrap agreements though not directly relevant to e-commerce platforms are relevant in the context of e-commerce mostly because of the kind of goods associated with shrink-wrap agreements. In case of a shrink-wrap agreement the contracting party can read the terms and conditions only after opening the box within which the product (commonly a license) is packed.

When you enter into an electronic contract, you expose yourself to various laws like

• Indian Contract Act, 1872
• Consumer Protection Act, 1986
• Information Technology Act, 2000
• Indian Copyright Act, 1957

Hence, contrary to what we often believe, cyberspace is not a lawless arena for conducting commerce. Several laws acting in alliance have established a regulatory regime for e-contracts.

The Indian Contract Act, 1872 governs the making and performance of contracts in India. Similar to any other type of contract, an electronic contract should essentially fulfill the following requirements:

• Your offer must be made by to another party.
• The offer should be expressly or impliedly acknowledged.
• A legal consideration should exist. You and your party must give something in return.
• There has to be an intention to create lawful relationships
• The parties must be competent to contract. Contracts by minors, lunatics etc. are not valid.
• The contract should be entered into with the free consent of the contracting parties.
• The object of the contract is lawful
• There must be possibility of performance.

Indian law also provides for the authentication of electronic records by affixing a digital signature. Section 5 of the IT Act established the legal validity of digital signature.  Chapter IV of the Information Technology Act, 2000 also provides for use of  an asymmetric crypto system and hash function and also recommends  relevant standards.