Primer on E-Contracts

Learn about E-Contracts: how they work, their benefits, and why they matter in today's digital world.

Nature and Scope of E-Contracts

Contracts form the basis of commercial or contractual relationships in today's markets. Apart from allowing parties to assign themselves rights and duties, contracts perform several other functions that assume primacy over what was previously stated. Facilitating trade and commerce, fueling the economy and attributing enforceability to commercial liability stemming from contracts are some of the few primordial functions of contracts.

The development of the internet and cyberspace has led to a widespread utilisation of these realms in the area of commerce. Some of the world's largest B2C (Business-to-Consumer/Customer) business models such as Amazon, eBay and Alibaba are hosted by the internet and are thus regarded as manifestations of e-commerce.

However, this shift to the e-commerce platform came with its drawbacks, which were observed while such platforms strived to fulfill their most important objective; global reach and access. Although customers had easy access, negating geographic or temporal hindrances, difficulties prevailed whilst the many businesses desired to cooperate and coordinate with each other. Businesses like these work only based on contractual relationships and engaging in contracts with entities situated in countries across the globe became hard with the normative model of contracts.

Therefore, the concept of E-contracts, introduced in an attempt to reduce the restrictions that came with the requirement of contracts being physical/written documents, became a commonly resorted method of contracting. The concept of E-commerce has much more than what simply meets the eye. Its intricacies are as discussed below:

Formation of E-Contracts

As per Section 2(h) of the Indian Contract Act, 1872, a contract is defined as an agreement enforceable by law. Essentials of a valid contract as outlined in Section 10 of the Indian Contract Act, 1872, such as capacity of parties, valid offer and acceptance, free consent, lawful object, and lawful consideration, are equally applicable to e-contracts. This means that for an e-contract to be enforceable, it must satisfy these essential elements just like any other contract.

However, in the digital realm, it can sometimes be unclear whether an offer has been made or accepted. Similarly, it may be challenging to determine whether there has been adequate consideration exchanged or whether individuals may misrepresent their legal capacity to enter into contracts online, which can be done with a lot more ease than that which may be negated in terms of normal contracts requiring the physical presence of parties.

However, attempts have been made through forming devices to settle discrepancies relating to whether or not the essential requirements have been fulfilled. The most relevant device/tool would be that of the Postal/Mailbox Rule and Receipt Rule. The former pertains to when the aspect of offer and acceptance is being carried out through non-instantaneous modes of communication such as posts/letters. As per this rule, the contract commences when the offeree accepts the offer and not when the offer is physically received by the offeree in terms of the contract. The reason for this is to negate any delay in the delivery/knowledge of the offer to the offeree.

On the other hand, the Receipt Rule relates to modes of communication that are instantaneous between the offeror and the offeree. In such a case, acceptance when received by the offeror, marks the commencement of the contract. How the Receipt Rule has been applied has evolved, relating to Section 13 of the Information Technology Act, 2000 and Section 4 of the Indian Contract Act. 

Legislative Framework Governing E-Contracts

The primary legislation governing E-contracts in India is the Information Technology Act, 2000. However, since this was implemented//enacted in the backdrops of the UNCITRAL MLEC or United Nations Commission on International Trade Law - Model Law on E-commerce, it would provide for better contextualisation to first elaborate on the UNCITRAL MLEC and further elaborate on the Information Technology Act, 2000.

UNCITRAL MLEC

The UNCITRAL MLEC played a crucial role in bridging gaps in international trade by removing hindrances in international trade, facilitating imports and exports, acting as a regulatory framework in international trade law and creating rules on the formation and formulation of contracts. The primary purpose with which the said Model Law was introduced was to increase predictability/uniformity by providing countries with the central subject matter to legislate upon and thereby ensure that electronic information and paper-based information are accorded the same treatment. The UNCITRAL MLEC has different principles that it requires parties/signatories to apply in matters relating to e-commerce.

Of these principles, the Principle of Non-Discrimination and the Principle of Functional Equivalence are relevant to us in the context of the present subject. The former, entailed under Article 5 of the UNCITRAL MLEC lays down that electronic documents are not to be discriminated against and are to be treated in the same manner as that of paper documents.The latter, entailed under Article 9 of the UNCITRAL MLEC regards that the functionality of the electronic documents/contracts should not be questioned and must also be admissible before courts of law, carrying weight as evidence.

The nations required the documents to be in writing and validation was only given to the handwritten signature as a form of authentication. By the means of provisions in Articles 6 & 7, the Model has done away with both of the above obstacles. Accessibility of data messages does not require the document to be in writing, and recognition of digital signature marks the approval of the full structure of the contract. This provision is termed relevant for every circumstance including a relevant agreement.

Information Technology Act, 2000

The primary features of the Act are; to grant legal recognition to e-commerce transactions, recognise electronic data storage, recognise digital signatures and facilitate the electronic filing of documents. Digital Signatures are of high importance in this matter since they resulted in the removal of significant hindrances in e-contracts about the geographic and physical/tangible restraints that were once a limiting factor of e-contracts.

In a similar context, the Act establishes a regulatory framework for such digital signatures to further the ideals of authentication, non-repudiation and integrity, which are aimed to be achieved through digital signatures.

Section 4 - Legal Recognition of Electronic Records: This section provides legal recognition to electronic records and states that if any law requires information or any other matter to be in writing, or to be signed or sealed, and if such requirement is fulfilled with an electronic record or electronic signature, then such electronic record or signature shall be considered valid and enforceable.

Section 5 - Legal Recognition of Electronic Signatures: This section states that a signature, authentication, or record may not be denied legal effect solely on the ground that it is in electronic form. This provision ensures that electronic signatures are given the same legal validity and enforceability as handwritten signatures. Co-relates to Article 5 of the MLEC.

Section 6 - Use of Electronic Records and Signatures in Government: This Section elaborates on the usage of e-documents/signatures by the government and goes on to state that when laws or information relating to such laws are required to be in written or printed form if the information is presented as an electronic record and remains accessible for future reference, the conditions in the eyes of law would be satisfied to hold such records/documents eligible for government use.

Section 10A - Validity of Contracts Formed through Electronic means: Section 10A, inserted by an amendment in 2008, sheds light on contracts formed through electronic means. This provision mandates that contracts formed through electronic means shall not be deemed invalid on the sole grounds that such contracts have been concluded/entered into electronically. Co-relates to Article 9 of the MLEC.

Section 13 - Time and Place of Dispatch and Receipt of Electronic Records: This section establishes the rules utilised whilst determining the time and place of dispatch and receipt of electronic records, unless otherwise agreed upon by the parties.

Section 15 - Secure Electronic Records and Signatures: Secure electronic records and digital signatures shall be deemed to be valid and this Section sets out the conditions required to be fulfilled by the electronic record to be deemed secure as i) it being under the exclusive control of the signatory and no other person and ii) it should also be stored exclusively as may be prescribed.

Section 16 - Secure Electronic Records and Secure Digital Signatures for Government Agencies: Section 16 provides that any law requiring a signature, seal, or certification to be affixed, applied, or attached to any paper or document shall be satisfied if it is done with a secure electronic signature.

Important Judgments

i) Anwar P.V v. P.K Basheer, 2014 (10) SCC 473

In this significant case, the Supreme Court of India thought that electronic evidence under Section 65B of the Indian Evidence Act may be admitted before any Court only upon the satisfaction of certain requirements. The court emphasised that it was necessary for electronic evidence to be accompanied by a certificate u/s 65B(4), such as emails or computer-generated records, for admissibility. The judgment stressed and attempted to facilitate a rather strict adherence to procedural guidelines.

ii) Shafhi Mohammad v. State of Himachal Pradesh, (2018) 2 SCC 801

This case reiterated the significance of the procedural requirements of Section 65B. The Supreme Court held that failure to produce a Section 65B(4) certificate would render electronic evidence inadmissible. Thereby furthering the inherent purpose of Section 65B in aiming to safeguard the integrity of different types of electronic evidence. The judgement highlighted the requirement of established certification standards to prevent tampering or manipulation of digital records/electronic evidence.

References

[1] Indian Contract Act, 1872

[2] Information Technology Act, 2000

[3] Supreme Court on the admissibility of electronic evidence under Section 65B of the Evidence Act, Available Here

[4] UNCITRAL Model Law on Electronic Commerce (1996) with additional article 5 bis as adopted in 1998, Available Here