A contract, in layman’s language, is a lawful agreement between two or more people, to do or to refrain from doing something and in return avail a benefit, called the ‘consideration’, which is normally in the form of money. Due emphasis is given on lawful agreement since an agreement to do something illegal and to abstain from doing something which is a right, is void ab initio. A contract gives rise to rights, duties and liabilities. Broadly speaking, there are three essentials of a contract, as elucidated in the Indian Contract Act, 1872-
- An offer or a proposal (Sec 2(a))
- Acceptance of such an offer or proposal (Sec 2 (b))
- Some form of lawful consideration (Sec 2(d))
There are more intricate matters such as –
- Capacity – if the parties to the contract are capable of contracting or not ( Sec 11)
- Free consent of the parties to contract as without such consent (Sec 13,14)
- Intention to form a legal relationship.
- Reasonableness of the terms of the agreement; one cannot simply agree to do something which is impossible. Such a contract will be held void.
The mode of creating contracts is not restricted. It could be written or oral. It could also be expressed – when the proposal is made in words or implied- when proposal is made otherwise than in words. (Sec 9)
Performance of the terms of the proposal can also lead to a contract as such a performance forms an acceptance of the proposal. (Sec 8)
A contract can also be revoked but we shall not delve into that.
Genesis of E-Contracts
The Indian Contract Act, 1872, does not provide for any specific mode of communication. It only lays down provisions for the completion of communication. Sec 4, of the Act, says that the communication of a proposal is complete when it comes to the knowledge of the person to whom such a proposal is made.
Sec 4 goes on to state that the communication of an acceptance, of an offer, is said to be complete, as against the offerer or proposer, when it is put in a course of transmission to the offerer or proposer as to be out of the power of the acceptor. And as against the acceptor, when it comes to the knowledge of the proposer.
The Contract does specify the mode of transmission in the aforementioned section. It only says, “in a course of transmission”. Therefore, if the essentials of a contract are met, then such a contract can also be contracted through electronic means such as email or WhatsApp or the Internet. This gives birth to the concept of E-Contracts. (It is to be noted that documents transmitted through electronic means are recognized under the Indian Evidence Act, 1872)
With the advent of technology, it has now become very easy to communicate with someone who is thousands of miles away. Such communication builds relationships, which in turn lead to trade and commerce, of a scale which was unimaginable for someone living in the beginning of the 20th century. All these ultimately lead to globalization. In such an era, contracts play a pivotal role. People can now sign contracts from their homes without the need or necessity of going to the source. This is mainly done through the internet with the help of emails such as those of employment contracts. The internet also forms a mode for trade and commerce, called the e-commerce. There are now virtual markets through which customers can buy products without going to the seller or the producer or even the manufacturer. All these require agreements which cannot be done physically and hence, the coming of the e-contract generation.
E-contracts are software generated and almost all the time, are drafted along the same lines of a tangible contract. Such contracts are also given additional validity(after the Indian Contract Act ) under the Information Technology Act, 2000, Sections 11, 12 & 13. There are, broadly speaking, three types of e-contracts :
- Shrink Wrap Agreements- These are the terms and conditions stipulated, in the form of a license, when you install a software in your computer, called the EULA, or end user license agreement- that one part of installing a software we never pay heed to or barely read a few lines. Without accepting the terms of the EULA, we cannot install the software.
- Click Wrap Agreements- These are the terms and conditions we give our assent to prior to buying a product from the virtual market place such as Flipkart. We give our assent by clicking on the ‘I Agree’ button, without which we cannot buy the product. Almost all of the time we can read the terms and conditions (usually hyperlinked) that we give our assent to.
- Browse Wrap Agreements – Sometimes, upon entering a website, we are required to agree to certain terms and conditions and only then are we allowed to enter the website. For example, Law firms are forbidden from advertising their areas of practice in a website. Therefore, websites of such law firms usually ask users to agree that they haven’t advertised any such areas and only then let the user enter. Such agreements are called browse wrap agreements.
There is another form of e-contract which requires the parties to give their assent by signing the contract. This can be done by scanning a signature and then attaching it on the contract but is not a reliable method. Someone can easily photoshop a signature and put it on a contract resulting in fraud and forgery. A more reliable method is obtaining a digital signature which is an encrypted form of a signature and very difficult to forge. There are numerous softwares which create digital signatures but the most genuine one is Adobe Acrobat Reader which has an 8 bit encryption hard to crack. After obtaining such a signature, one can simply attach it onto the contract and thereby give his or her assent.
E-contracts, although valid as part of a general contract under Indian Contract Act, 1872, as well as IT Act 2000, lacks specific legislation and strong judicial precedent. There is a lot of scope for miscarriage of justice in this area. Having said so, e-contract is the way forward in a world which is now connected is such magnified multitudes yet with such precise intricacies. Not a single day can be thought of when we have not used e-contract; such is its vastness. The time is now ripe for a rigid legislation in this field for its inevitable regulation