E – Contract: From Zero to Game Changer

Abstract:

Electronic Contract are contracts that executed electronically or digitally. Every day start with E – Contract and ends with E – Contract. In India, the concept of E – Contracts are governed by various rules and regulation i.e. Indian Evidence Act, 1872, Information Technology Act, 2000, Indian Contract Act, 1872 etc. It is essentials for E contract to meet all the requirement of the contract that applies on physical contract. Primarily, there is only one difference between physical and E contract that E contracts are formed and executed electronically. For example, we order mobile from E – commerce website, this order is form electronically and also executed electronically except delivery. i.e. from placing the order to delivery of product. E – contracts will become the new mode of determination of rights, liabilities and obligation in our country. E-contract is an essential part of E-commerce. E-contracts are legally recognized by law. This article talks about the history of E – Contract, its emergence, its types, its formation, mailbox rule, contract of adhesion and also problems in E – Contract.

Keywords:

E – Contract, contract, mailbox rule, E – Commerce, Electronic

Introduction:

Contracts are now an unavoidable aspect of life for everyone. Whether we realize it or not, we make a lot of contracts in our daily lives. The terms “agreement” and “contract” are frequently used interchangeably. However, these two terms differ in a significant and significant way. For instance, when we go to any store, purchase a packet of cookies, and pay for them; this constitutes a contract since both parties intend to be bound by the terms of the agreement. Since this is a social agreement that cannot be enforced by the legal system, when we commit to going to see a movie with a friend, we are entering into an agreement. A contract is an agreement between two or more parties to create business relations or legal obligations between them. There are several stages involved in a contract such as exchange of information and negotiation, before the execution of the contract. A contract will define a set of activities to be performed by parties satisfying a set of terms and conditions (clauses).[1] There are different types of contracts like oral contract, written contract, express contract, implied contract, valid contract, void contract, voidable contract etc. Among all these, there is one more type of contract i.e. E- contract, which now days has gained more importance in business world.[2]

E-commerce has changed over the past few decades due to the significant advancements in IT and computer systems as well as the rise in new ideas. An integral component of e-commerce is the e-contract. Since e-contracts are fairly similar to traditional contracts, they are governed by a number of laws in India, including the provisions of the Indian Contract Act, 1872. They have been granted statutory recognition by the Information Technology Act of 2000, and they are enforceable by the Indian Evidence Act of 1872. E-contracts are essentially agreements that are executed digitally or electronically. An E-contract must meet the same requirements as a traditional contract in order to be formed and validated i.e., paper-based contracts, the only difference is that it is created and executed electronically.[3]

History of E contract

Since e-contracts are a significant component of e-commerce, it is vital to study their history before learning more about them. Simply put, e-commerce is the hiring of services and the selling and buying of goods via the internet. E-commerce has grown globally thanks to networking and technology. In the 1960s, companies conducted electronic transactions using Electronic Data Interchange (EDI).

E-commerce was widely embraced when the Internet was first used for commercial purposes in 1991. Since the World Wide Web was established in 1990, a vast number of companies have started offering their services online. For instance, Amazon and eBay were two of the first companies to transform e-commerce.

The concept of E-commerce was originally popularized in India in the late 1990s by Rediff. The Indian Railway Catering and Tourism Corporation Limited (IRCTC) was the first corporation in India to create an E-commerce platform.[4]

In 1996, the United Nations Commission on International Trade Law (UNCITRAL) adopted the Model Law on E-commerce. The UN General Assembly called on countries to consider this paradigm when revising or enacting legislation in January 1997.

In order to legitimize e-commerce in India and keep up with the globalization of trade and transactions as computer technology advanced, the Indian Parliament passed the Information Technology Act in 2000.

The rules and regulations governing e-commerce and, eventually, e-contracts are provided by the following international conventions and conferences

• The United Nations Convention on the Use of Electronic Communications (New York, 2005);
• The Hague Conference on Private International Law (HCPIL), which issued a Convention on Exclusive Choice of Court Agreements concluded in Civil and Commercial Matters on June 30, 2005;
• The Brussels Convention on Jurisdiction and Recognition of Judgements in Civil and Commercial Matters, 1968;
• The Convention on the Law Applicable to Contractual Obligations, June 19, 1980 (also known as the “Rome Convention”).

Emergence of E contract:

The rapid digitization and expansion of internet services, which have increased the prevalence and convenience of electronic transactions, are responsible for the emergence of e-contracts in India. The Information Technology Act of 2000 was crucial in giving e-contracts legal status, which encouraged their uptake in a number of industries. E – commerce is the well-known and wide spread kind of business nowadays globally.[5] It led to the growth of E Contract in India. There are many aspects in the development of E – contracts.

An electronic transaction is an action taken by parties involved in a civil legal turnover with the intention of establishing, altering, and ending civil legal relations based on the exchange of electronic data and produced electronically, using handwritten signature analogs. If the transaction is carried out through electronic or other technical means, it is deemed to have been completed. In this situation, an electronic transaction needs to be accepted as legitimate as long as it is feasible to reliably identify the parties involved and reproduce the transaction’s contents in an unaltered format on a physical medium (such as print on paper).[6]

A contract has three main stages: (i) Contract preparation, (ii) Contract negotiation, and (iii) Contract fulfillment. The contract preparation stage provides the specifications for the fulfillment of contract. The contract negotiation stage helps in arriving at a common strategy on payments, deliverables, milestones, etc. Finally, the contract fulfillment stage deals with the actual execution of the contract and specific tasks detailed in the contract.[7] 

Important Aspects of the Development of E-Contracts:

1. Legal Framework: E-contracts are legally enforceable thanks to the IT Act of 2000, which established the legal validity of digital signatures and electronic records.
2. Technological Advancements: The transition from traditional paper-based contracts to e-contracts was made easier by the growth of smartphones, digital platforms, and internet penetration.
3. E-Commerce Growth: The use of e-contracts for transactions, purchases, and service agreements became necessary due to India’s burgeoning e-commerce sector.
4. Government Initiatives: To further encourage the use of e-contracts, initiatives such as Digital India sought to advance digital literacy and infrastructure.
5. Business Efficiency: To increase operational efficiency, cut expenses, and streamline procedures, businesses implemented e-contracts.
6. EU and USA perspective: The National Conference of Commissioners on Uniform State Laws (NCCUSL) has created two uniform state acts, UCITA and UETA, to ensure legal certainty in electronic transactions. UCITA deals with contracts in computer information, while UETA covers all types of electronic transactions.[8]

Benefits of E Contract in India:

1. quicker contract processing and execution.
2. decreased dependence on paper records.
3. Improved ease of use and accessibility.

Challenges with E contract in India:

1. guaranteeing digital signatures’ security and legitimacy
2. addressing jurisdictional and legal concerns in online transactions
3. enhancing user awareness and trust.

Doctrine of unconscionability:

The doctrine of unconscionability is a common law doctrine that has migrated across jurisdictions and is becoming increasingly salient due to the proliferation of the internet and the consequent contracts entered by everyone.[9]

Therefore, e-contracts have completely changed the way agreements are made in India. They offer a number of advantages, but they also bring with them new difficulties that must be resolved. Legally valid electronic contracts are a prerequisite for further development of electronic commerce.[10]

Types of E – Contract

• Click Wrap Contract: Click-wrap agreements are typically found during software package installation. It is also known as a “click-wrap license” or “click-through” agreement. There is no bargaining power because it is a take-it-or-leave-it contract. A customer clicks “I accept” or “Ok” if he likes a product and wants to purchase it or use its services; if he rejects it, he will not be able to do so. The types of click-wrap agreements include the following:
• The user must type “I accept” or other predetermined words into an on-screen box before clicking a “Submit” or comparable button. This shows that the terms of the contract are accepted. Without taking these actions, a user cannot download or view the target information.
• An icon clicking in a dialog box or pop-up window where the user is required to click the “OK” or “I agree” buttons. By selecting “Cancel” or shutting down the window, a user expresses rejection. Before being accepted, the terms of service or license must always be available, even if they don’t always show up on the same page or window.
• Shrink Wrap Contract: Boilerplates, license agreements, and other terms and conditions that are enclosed with the products are known as shrink wrap contracts. The consumer’s acceptance of the contract is estimated by the product’s use. The shrink wraps plastic wrapping used to cover software boxes or the terms and conditions that accompany products while they are being transported is referred to as “Shrink Wrap.”

In the mass business sector transmission of programming, PC programming companies primarily rely on the use of “Shrink- wrap” permit assertions. “Shrink- wrap” assertions are unsigned permit identifications that specify that the client acknowledges the terms of the assertion by using the product, opening the Shrink- wrap or other product packaging, or using another specific tool. 

• Browse Wrap Agreement: Access to or use of content found on a website or in a downloadable product is covered by browse-wrap agreements. The user can only access the website’s contents if he accepts the terms and conditions stated there. The majority of the time, the website or Browse-wrap contains a notice indicating that the user agrees to those terms by continuing to use the website or the downloaded software. The terms listed in the browse wrap are frequently expressed clearly on the website, but the existence of the browse wrap is obscured or not visible on the page.

Formation and problems with E – Contract:

Electronic contracting offers immense possibilities for commercial use – and also raises new problems. It is not the subject matters that are new, but the methods for exchanging and displaying information. Transmission speed, for example, is usually very high, but may vary considerably depending on the medium chosen. This leads to significant problems in deciding whether a communication is instantaneous or not. If networks are used, electronic data will usually be exchanged and stored on computers of service-providers. This may influence the place of contract formation. A service provider is not necessarily situated in the country in which the contracting parties are domiciled or have their places of business. As a consequence, the contract could be governed by a law completely unfamiliar to the persons involved. Interactive web sites are another example. They allow various new ways of on-line shopping but in some situations, it may be difficult to decide whether they contain offers or mere invitations to treat. Some of the problems clearly result from the fact the German BGB is still strongly influenced by the late nineteenth century and many of the leading cases in common law also go back to this time or even further. It simply proves difficult to apply legal rules that have been developed in the days when most contracts were concluded personally or by mail and the tele- phone was the most sophisticated technological facility.[11] The increasing use of the Internet has facilitated communication between sellers and suppliers, allowing them to market their products and services to targeted customers. However, electronic contracting presents new challenges to traditional legal principles. This examines the legal framework of electronic contracting from a comparative law perspective, focusing on issues like instantaneous email communication, nonbinding legal effects of online displays, and the necessity of electronic agents.[12]

The Mailbox Rule:

The “mailbox” rule, also known as the dispatch rule, was established in the early 1800s in English courts to ensure acceptances were valid at dispatch or receipt. This rule was based on the predictable quality of long-distance communication, and courts believed that an offeree should accept a contract with the knowledge it would be binding immediately. The debate between the two rules eventually reached a stalemate, leading to a general apathy in the legal community.

The dispatch rule and receipt rule are no longer equally justifiable due to technological advancements and the rapid communication between contracting parties. The Internet and electronic communication systems have presented an opportunity to choose between the two rules for contract acceptances.

The legal doctrine must adapt to technological advancements, as electronic contracting becomes increasingly common. This efficiency reduces transaction costs and eliminates human involvement. However, uncertainty about rules and risk allocations persists. The binding point of acceptance is crucial for ensuring legal compliance with new media.

The modern communication has led to a world where dispatch and receipt rules are indispensable. Electronic technology has reduced the importance of the “meeting of the minds” doctrine and made acceptances valid at receipt. As globalization and cross-border transactions increase, consistency in legal rules is crucial for commercial markets.[13] This suggests that contracts formed using non-instantaneous technologies should now be governed by receipt, as modernity has induced transformations in contract law.

The Internet offers numerous benefits, including instantaneous, reliable, and accurate communication at a low cost. This allows for quicker negotiations, contract formation, and dispute resolution. The internet also offers superior document management capabilities compared to postal mail, making it easier to distribute emails to multiple recipients. E-mails are also digital, making them easy to scan, skim, arrange, and delete. Additionally, electronic communication is more environmentally friendly than mail by post.

Contracts of Adhesion:

In his discussion of party autonomy as defined by the recently enacted German Civil Code, renowned French civilist Raymond Saleilles significantly coined the term “adhesion contract” sixty years ago. According to his definition, adhesion contracts are predetermined agreements where the offeror’s wishes are paramount and the terms are set for an arbitrary number of acceptors rather than just one.[14]

“Contracts of adhesion,” also known as standard form consumer contracts, are a major issue for liberal state political theory.

According to that theory, there are only two grounds—both based on consent—for imposing rules on anybody. One is individual or contractual consent, which is sometimes referred to as a “liberal contract” and involves an individual’s expression of a willingness to be bound in relatively specific ways. The other is collective consent, which results in the sovereign applying the law through democratic state processes.[15]

Contracts with major agreements that are more akin to collective legal regulations—known to the Romans as lex than private individual agreements are among the examples given by Saleilles.

Subsequent commentators added the following characteristics to these:

(a) the offer’s continuous and general nature;

(b) the offeror’s monopolistic position or at least significant economic power;

(c) the widespread demand for the goods or services offered; 

(d) the use of standard forms of type contracts, the terms of which primarily serve the interests of the offeror and are difficult for the offeree to read, let alone understand.

Cases based on the E – CONTRACT:

• Douglas v. U.S. District Court for the Central District of California,[16] the case to address the ubiquitous terms of service modification provisions that state that the terms can be modified at any time. Modification of online contracts also made its way into the popular media when Facebook tried to slip a contract modification past its users.[17]
• Margae, Inc. v. Clear Link Technologies, LLC[18] involved a business-to-business online agreement. The plaintiff and defendant were internet marketing companies. The plaintiff agreed to defendant’s “Partner Agreement” by clicking an “I accept” link on the defendant’s web site. The Partner Agreement contained a modification clause which stated that the defendant could “modify the agreement at any time by notifying [the plaintiff] or by posting a new agreement” on the defendant’s web site. About a month after the plaintiff accepted the original agreement, the defendant modified it and posted the modified agreement on its web site. The amended agreement contained an arbitration clause.

Conclusion

In India, e-contracts represent a significant move towards digitalization of business and contracts. Although their validity is supported by the current legal framework, it is crucial to address the issues of security, jurisdiction, awareness, and data protection. India can fully benefit from e-contracts and follow the trends of global digital transformation by combining efforts in public education, technology integration, and legal reforms. One of the fundamental challenges encountered by e contract is for e-retailers is the incapability of on-time delivering products due to insufficient freight shipping capacity, especially when demand fluctuates.[19]

[1] Karlapalem, K., Dani, A.R. and Krishna, P.R., 2001. A frame work for modeling electronic contracts. In Conceptual Modeling—ER 2001: 20th International Conference on Conceptual Modeling Yokohama, Japan, November 27–30, 2001 Proceedings 20 (pp. 193-207). Springer Berlin Heidelberg.

[2] Jaiswal, S., 2022. E-contract its validity and legal provisions in India.

[3] Arshiya, 2022. E-Contract: A New Normal. Part 1 Indian J. Integrated Rsch. L., 2, p.1.

[4] Gupta, S. and Baweja, K., VALIDITY OF E-CONTRACTS IN INDIA: A NEW MODE OF CONTRACTING.

[5] Chahande, J., 2020. An Analytical Study on E-Contract: Its Legal Validity and Jurisdiction. Issue 6 Int’l JL Mgmt. & Human., 3, p.1.

[6] Kirillova, E.A., Zenin, P.D.C.S.S., Kovaleva, O.A., Baskakova, N.P. and Fatkulin, P.D.C.S.T., 2020. Legal status, classification, and features of electronic contracts. Revista Inclusiones, 7, pp.325-336.

[7] Krishna, P.R., Karlapalem, K. and Dani, A.R., 2005. From contracts to e-contracts: Modeling and enactment. Information Technology and Management, 6, pp.363-387.

[8] Kierkegaard, S.M., 2007. E-Contract formation: US and EU perspectives. Washington Journal of Law, Technology & Arts, 3(3), p.12.

[9] Prasad, D. and Mishra, P., 2022. Unconscionability of E-contracts: A comparative study of India, the United Kingdom, and the United States. Liverpool Law Review, 43(2), pp.339-360.

[10] Gisler, M., Stanoevska-Slabeva, K. and Greunz, M., 2000, June. Legal Aspects of Electronic Contracts. In ISDO.

[11] Glatt, C., 1998. Comparative issues in the formation of electronic contracts. International Journal of Law & Information Technology, 6(1).

[12] Utku, D., 2020. Formation of Contracts via the Internet. In Eurasian Economic Perspectives: Proceedings of the 25th Eurasia Business and Economics Society Conference (pp. 289-308). Springer International Publishing.

[13] Rawls, A., 2009. Contract formation in an Internet Age. Colum. Sci. & Tech. L. Rev., 10, p.200.

[14] Kessler, F., 1943. Contracts of adhesion–some thoughts about freedom of contract. Columbia Law Review, 43(5), pp.629-642.

[15] Macneil, I.R., 1984. Bureaucracy and contracts of adhesion. Osgoode Hall LJ, 22, p.5.

[16] 495 F.3d 1062, 1069 (9th Cir. 2007), cert. denied sub nom. Talk Am., Inc. v. Douglas, 128 S. Ct. 1472 (2008); Moringiello & Reynolds, 2008 Survey, supra note 1, at 206.

[17] . Brad Stone & Brian Stelter, Facebook Withdraws Changes in Data Use, N.Y. TIMES, Feb. 19, 2009, at B1; Brian Stelter, Facebook’s Users Ask Who Owns Information, N.Y. TIMES, Feb. 17, 2009, at B3.

[18] No. 2:07-CV-00916-TC, 2008 WL 2465450, at *2 (D. Utah June 16, 2008).

[19] Heydari, J. and Bakhshi, A., 2022. Contracts between an e-retailer and a third party logistics provider to expand home delivery capacity. Computers & Industrial Engineering, 163, p.107763.