Validity of Click-Wrap Agreements in India

Introduction

Today in the 21st century, when technological advancements are at their peak, and with the coming of the AI era, the role of contracts has become essential for ensuring legality and safety. Contracts are governed by the Indian Contracts Act 1872 in India along with other relevant statutes which are necessary for the safety of the business.[1]

With the evolving technologies contracts have also evolved. With a simple click on the agree button we unknowingly give consent to our date without reading terms and conditions. Sometimes business make it very lengthy for us to read it and at time we are forced to click to use their services.

Though data privacy has become a tool which can cause damage to the nation’s internal security & when in hands of alien forces the sovereignty of the nation is compromised. Though India is a fastest growing economy on paper there are many challenges we are facing. In particular, concerning the laws that have been created for the protection of the privacy of ordinary citizens.[2]

The Indian community is dispersed all around the globe; in America, Indians are holding the posts of CEOs and developers, thus guiding the destiny of the country. Yet when it comes to India, we have now implemented the DPDP act after most of our data is with USA’s Google, Facebook and social media providers or with China the manufacturer of almost 80% of things across the world.

The new governments ambitions are huge, great & in the best interest of the nation which can be seen in their policy making. However, on ground due to corruption & brain drain we are unable to solve our goals.

Common Types of “Wrap” Agreements

1. Click-Wrap Agreements
2. Shrink-Wrap Agreements
3. Browse-Wrap Agreements

All these agreements are called electronic agreements from which click-wrap agreements are considered most valid form of agreement. They are reliable due to the explicit user consent which cannot be seen in the other two forms of contracts.

Validity of these agreements.

For any agreement to be valid you need of fulfil the essential elements of contract which is mentioned in The Indian Contracts Act, 1872. These elements remain the same for the electronic contract.[3]

Essential of an electronic contract

1. Offer (Section 2(a))

Offer refers to an expression made by one party to another expressing their willingness to perform or refrain from doing something on the condition that the other party accepts the offer.[4]

2. Acceptance (Section 2(b))

Acceptance entails the assent of the party receiving the offer to accept it.[5]

3. Lawful Consideration (Section 2(d) & Section 23)

Consideration refers to the price paid, promise, act done, or forbearance.[6]

Consideration is said to be lawful if:

1. It is not prohibited by law
2. It is not fraudulent
3. It is not immoral
4. It is not against public policy

       4. Lawful Object (Section 23)

Object refers to the purpose of entering into the agreement.[7]

The object is unlawful if:

1. It is prohibited by law
2. It defeats any provision of law
3. It is fraudulent
4. It causes injury to other persons
5. It is immoral or against public policy

       5. Lawful Purpose

Lawful purpose is almost similar to the object of the agreement.

Boilerplate Clauses (Standard Clauses)

Definition of Boilerplate

Boilerplate refers to standardized language that is incorporated into most contracts. Such language is always pre-written and does not need to be rewritten each time. It is because it addresses common legal issues.

To put it in simple terms, boilerplate clauses refer to the default legal terms of a contract that ensure that there is no confusion and misunderstanding between the two parties.

Some examples of boilerplate clauses are as follows:

1. Jurisdiction
2. Governing law
3. Force majeure
4. Entire agreement

While they appear to be standard, they are crucial in protecting both parties’ rights.

Proposal + Acceptance = Agreement indicates that if any one individual makes an offer or proposal, which the second individual accepts, the two will have an agreement according to the Indian Contract Act, 1872. For instance, if A proposes selling a laptop at ₹50,000 and B accepts it, there exists an agreement between the two.[8]

Agreement with Consideration = Contract suggests that where there is an agreement made on exchange of some value between the parties, the agreement acquires the status of contract according to the Indian Contract Act, 1872. For instance, when A proposes to sell his bike to B and agrees to accept payment of ₹40,000 from him in return, there is an agreement, which becomes a contract as it has consideration involved in it.[9]

Online contracts can also be created by clicking on “I agree.” This type of contract is called a click-wrap or “click it or leave it” contract. This kind of contract is very common when installing software or subscribing to an online service where the user agrees to the terms set by the supplier as it is; there is rarely any room for negotiation. When the user clicks on “I agree” or “OK,” then the contract is established. However, if the user clicks “I reject,” then he or she will not be able to enjoy using or accessing the product or service. These kinds of contracts generally have provisions such as the license (right to use without having to own the software), fees and payments (the cost and schedule of payments), warranties (the guarantee of the product or service), and limitation of liability (reducing the risk of the supplier). With the rapid advancement of technology, the acceptance process is becoming biometric (fingerprint and facial identification).

Trimex International FZE Ltd. v. Vedanta Aluminium Ltd.

It is not necessary for a contract to be in writing for it to be legally binding. The contract was established through emails and interaction between the two parties. The Court stated that if the offer and acceptance have been agreed on, there is a contract in place despite signing a more elaborate one later.[10]

Info Tech Software Dealers Association vs. Union of India

In this case, the dispute was regarding software sales and licensing. The Court held that software offered on license (CDs or downloads), entails rights and liabilities and hence may be treated as goods for tax purposes under certain conditions.[11]

LIC of India vs Consumer Education and Research Centre

In this case, the Supreme Court clearly stated that terms and conditions which are unfair or unconscionable cannot be considered binding in a situation where there was an imbalance of bargaining powers (e.g. between corporate giants and consumers).[12]

Conclusion

Click-wrap agreements’ validity in India is a reflection of how well the law evolves with technology yet retains its dependence on the old principles of contracts outlined by the Indian Contract Act of 1872. In the context of a virtual world, the key components of a contract, which include offer, acceptance, legal consideration, and legal object, remain the same. The act of agreeing by clicking on “I Agree” constitutes legal acceptance, among other things.

In contrast, the growing trend towards using “click-it-or-leave-it” contracts brings up several problems of unequal bargaining positions and the problem of obtaining genuine consent by forcing users to agree to voluminous and highly complicated conditions. In Trimex International FZE Ltd. v. Vedanta Aluminium Ltd., the court established that electronic interactions between parties could give rise to valid contractual obligations. Also, Info Tech Software Dealers Association v. Union of India has recognized the nature of business and legal relationships in software licensing arrangements. Nonetheless, in LIC of India v. Consumer Education and Research Centre, the court ruled that unreasonable contract terms were unenforceable.

In light of emerging issues regarding the security of personal data and digital consent, especially in light of the use of biometric verification systems and global movement of data, there arises a necessity for better safeguards and more transparency. Although click-wrap agreements are legally binding and commonly used contracts, their validity will depend on fair dealings, clear communication, and conformity to public policy considerations. In other words, the future of digital contracts in India is contingent upon the legitimacy of the process of obtaining digital consent.

Reference(S):

[1] Indian Contract Act 1872.

[2] Digital Personal Data Protection Act 2023.

[3] Indian Contract Act 1872, ss 2, 10, 23.

[4] Indian Contract Act 1872, s 2(a).

[5] Indian Contract Act 1872, s 2(b).

[6] Indian Contract Act 1872, ss 2(d), 23.

[7] Indian Contract Act 1872, s 23.

[8] Indian Contract Act 1872, s 2(e).

[9] Indian Contract Act 1872, s 10.

[10] Trimex International FZE Ltd v Vedanta Aluminium Ltd (2010) 3 SCC 1.

[11] Info Tech Software Dealers Association v Union of India (2010) 20 STT 129 (Mad).

[12] LIC of India v Consumer Education and Research Centre (1995) 5 SCC 482.