E-contracts: functioning and challenges

Author : Simarpreet Saluja, Bharti Vidyapeeth, Pune


E contract is one of the vital instruments in today’s scenario for both consumer and the commerce. E-contracts are such instruments which helps for most of the E-commerce related issues to get sorted. With the help of the e-contracts most of the problems concerning to the consumers as well as to the business can be taken into consideration and after that formulation and implementation of the commercial contracts can be done within the scope of e-business.

E-contracts include terms and policies as to the contract which could be easily understandable to the individuals. It also includes the composition or pattern for the supply of the products, statutory guidelines and recognition under the law, services related to the digital products as well as services available to both consumer as well as the businesses.

An E-contract is a contract formatted, specifically implemented and stationed by a software system. Many of the computer software programs are been formulated and designed in such a way to direct the various business processes that govern e-contracts. E-contract is similar to the traditional contract, the only extra element which included in E-contract is that, hear the contract take place with the help of digital mode of communication like internet. We people come across these kinds of contracts even in our daily life. For example: when an individual download an app and after its installation one go through its terms and policies and agreed to it. The one does not give too much attention to it but sometimes few people unknowingly enters in such type of e-contract.

The U.S. legal definition, defines as e contract is a kind of contract formed by negotiation of two or more individuals through the use of electronic means, such as email, the interaction of an individual with electronic agent such as computer program, or the introduction of at least two electronic agents that are programmed to recognise the existence of a contract.

Types of online contract:

1) Shrink wrap agreements: These are mainly the licenced agreements applied in case of software products buying.

2) Click or web wrap agreements: These are web-based agreements which requires the consent of the user by way of clicking.

3) Browse wrap agreements: These are those agreements which are made with the intention to be binding on more than one party with the use of website.

There are some other online contracts such as contractor agreement, sale re-sale agreements, distributor agreements, employment contract, non-disclosure agreement, source code escrow agreements, software developments.


1)whether E-contract is actually an important instrument for both the consumer as well as the business? 

2) whether E-contract is totally safe considering the matter of severity for both consumer as well as business?

3) whether E-contract face any kind of Technical issue?

4) whether the parties to the E-contract can be properly identical to each other?

5) whether the current laws prevailing in India related to the online contracting and its functioning is satisfactory to accomplish?

6) whether the statutory provision in India are severely inadequate to hold the trans border transaction?


Today India is giving tough competition to every country at the global level. Everyone can see that India is at par with most of the developing countries. But India being advanced even in technological field, e-commerce and e-contracts have not reached at the prudent level. Its being challenging for the India to bring this into the knowledge of every individual of the country.

The residence does not have any particular source to get aware of such information. The impression of e-contracts suffered due to the uneducated population i.e. illiteracy prevailing in the country, maximum population from the rural areas, inaccessibility of internet connection, lack of awareness and many more.

One of the biggest drawbacks for the ineffective and inefficient execution of E- contracts is that the Administration Department and other authorities uses various standardization, phraseology and approaches which is sometimes not understandable to a layman.

The primary challenge of e-contract is that there is no other way for identifying a party to the contract on the other side then encryption / digital signatures or cryptography. In E-contracts, it may be possible that an individual fake his identity and may do fraud with the other party.

Another challenge to e-contracts is that the parties to the contract may be held responsible and face the difficulties due to the technical issues such as network issues, internet connection, internet inaccessibility, programming issues, worker’s mistake or misconduct by the parties itself.

The application for the principal of laws as to its jurisdiction has proved to be very challenging for the litigation in the border less transaction.


E-contract has reached to the platform which saves a lot of time and increases the efficiency of the task in the modern advanced technological era. The government has taken so many steps to it but the main drawback is that there is no specific litigation as to the e-contracts. Though there are some laws acting as regulatory bodies for the e-contracts such as Indian Contract Act 1872, Information technology Act, 2000 and Consumer Protection Act, 1986. The Information technology Act work as a backbone of the e-contracts. It provides a framework for the digital signatures, encryption, public key, cryptography, sorting out the issues related to it, the verification process to be done properly and also act as a safeguard for both the parties to the contract.

Even after having these laws, there is a need for a proper or definite law to the jurisdiction of the court for sorting out the disputes related to the e-business transactions.

Advantages and Disadvantages of E-contracts:

These are some of the advantages to the E contract:

1) Easy to use: E-contracts are kind of contracts which are easy to use by any individual as because online legal binding agreement are already available there in the form of templates and anyone can create an e-contract with minimal training. In this type of contract, the parties only need to choose a particular template and then they can fill the required details and agreed to such details or terms and policies with the help of digital signatures.

2) Minimum errors: As these contracts are formulated and specified by the  technological experts and the legal Experts, there are very less chances of errors. In traditional contract there may be a chance of occurrence of error but E-contract helps in avoiding such errors because it has been checked multiple times by number of experts.

3) Time saving process: E-contract is a time saving process because here the parties to the contract are not required to meet physically. Here the parties can just go through the terms and policies of the contract through the digital mode of communication and can suggest changes as per their need and agreed through digital signatures.

4) Security purpose: E-contract has enhanced security to e-services. It has end to end encryption property and cryptography feature. The content available in the E-contract cannot be copied as security is one of the most prior priority of E-contract. In E-contract, an individual has to go through authentication process at every step to ensure the identity of an individual.

5) Low cost: As compared to the traditional contract e-contract has low transaction cost as it does not require any labour work or paper work.

6) Customer satisfaction: E-contract resulted into the customer satisfaction which should be the first preference of every business. It allows the party to the contract to enter into a contract sitting at their home in the comfort places and keep the connection with the customers.

7)Clarity between the parties: As all the terms and conditions to the E-contracts are present in front of the eyes of the parties to the contract it helps in creating the clarity between the parties to the contract. These types of contract can help the parties to be clear about their terms and conditions for what they have contracted which, therefore, to reduces the chances of disputes or lawsuits.

Some of the disadvantages of e contract:

1) Lack of privacy: Sometimes these e-contracts resulted into fraud. There are so many websites which do not provide proper services of encryption or cryptography due to which the information to the contract does not secured with a proper security. In India, many of the people fear before giving any of their personal information such as credit card number or their financial information. This is one of the drawbacks of e-contracts.

2) Suitability: The parties to the contract worried about the suitability of the product before entering into the contract. Few people in India does not believe in the images or the pictures shared to them electronically. This is one of the reasons for the individuals not entering to the e-contracts.

3) High labour cost: E-contracts requires high labour cost as because it requires skilled and expertise knowledge for the formulation of the e-contracts. The team which prepare the e-contracts, the terms and conditions to the contract should be highly qualified since any error to the contract can resulted into big issue such as lawsuits.

4) Technical issues: Due to the technical issues such as the standardization, terminologies and methodologies used by the expertise, the individual fear to enter into such type of contracts. Sometime the parties to the contract may face network issues, software programming issues, misconduct by the parties to the contract itself and many more.

5) Cultural troubles: E-contract allows the individual to enter into the contract from all over the globe due to which the parties to the contract can face linguistic problem when they both belong to two different nations.  6) Lack of jurisdiction: The laws that are available to govern the E-contract are not definite and clear. There is a need for a definite law to govern the contract as to the jurisdiction of the court.

Difference between E-contracts and traditional contracts:

E-contractsTraditional contracts
1) These are those contracts which are generated by the computer.1) These are the contracts which are written in form.  
2) Here digital signature is required.2) here hand-written signature is required.
3) Here sometimes the parties to the E-contracts are strangers to each other on the internet bound by the digitally produced but binding agreements.3) Here the parties are known to each other.        
4) It take place in virtual space.  4) Take place in the real world. Two-sided face to face deal.

5) E-contracts saves a lot of time as because parties are not required to meet physically.

5) traditional contracts take a lot of time as here parties are required to meet physically for knowing the terms and conditions.


In today’s technological advanced Era, the internet has provided such a good platform for the consumers to perform their tasks efficiently. Therefore, one should utilise the features of e-contract for the effective transaction. One should switch to e-contracts because it will help in avoiding the errors which may occur in the traditional contracts because the E-contracts are being formulated by the team of expertise. There are many issues and challenges as to the e-contracts but still the advantages of e-contracts overweight the disadvantages of it.


  1. http://www.legalserviceindia.com/articles/ecta.htm
  2.  http://definition.uslegal.com/e/e-contract
  3. Singh Avtar,” Law of Contract and Specific relief”10 the edition, pg.no.3.
  4. ttps://medium.com/magebit/advantages-and-dhttps://accountlearning.com/limitations-or-disadvantages-of-electronic…isadvantages-of-ecommerce…
  5. Bakshi P.M & Suri R.K, Cyber and E-commerce Laws, Bharat Publishing House, edn 1, 2002.
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