ELECTRONIC CONTRACT: A NEW NORMAL
Author: Vishakha Bhardwaj
With the passage of the year through this deadly disease, called COVID-19, all the countries across the world have diverted towards digitalisation on a wide scale. The exposure to globalisation and industrialisation has become the ultimate base for the growth of the technology which eventually gave rise to the computer system. In the 21st century, Electronic-commerce has become one of the most vital economic realities. With this, everything, from online classes, webinars, work from home to electronic contracts, has become a new normal.
In simple terms, e-commerce is “buying and selling of the goods and services via internet, and the transfer of money and data to complete the sales.” Internet has become a prominent platform for conducting the business. According to Hemant Goel’s book on Law and Emerging Technology, Cyber law, “E-commerce is the directing of exchanges of using a proper system of computers, and telecommunication i.e. internet.” Further, he stated in his book that it is a transfer of goods and services via internet, and a monetary consideration for them.
Besides the communication, calculating, analysing and computing, nowadays, the internet is also used for online contracts which left us with no distinction between online and offline contracts. E-contract is defined as “a kind of contract formed in the course of e-commerce by the exchange of two parties using electronic means, such as e-mail, telephones, or faxes.” Basically, the medium of interaction between the two parties should be of an electronic agent in order for the e-contract to exist. Therefore, an e-contract is a contract shaped, specified, executed and expanded by a software system.
The main parties to the e-contract are:-
There are two major parties to the e-contract and they are Originator and Addressee. According to the IT Act, 2008, an originator is “a person who sends, generates, stores, or transmits any electronic message to be sent, generated, stored, or transmitted to some other person, and does not, include any intermediary” and an addressee is “a person who is intended by the originator, to receive the electronic record, but does not, include any intermediary.”
Essential elements of E-Contract:-
- Offer- According to the Section 2(a) of the Indian Contract Act, 1872 “offer is an expression of the willingness of a person to enter into a legally binding contract with another party.”
The advertisements on the various websites are usually considered as the invitation to the valid offer until and unless it is specifically mentioned. However, the offer and the invitation to offer are two distinct concepts; therefore, an offer is an invitation to it, till the intention regarding it, is understandable conveyed.
Moreover, when a person responds through an e-mail or a form associated to it which is available on the internet, at that time, they are making an offer to a particular thing. Now, it’s the discretion of the seller whether to accept it or reject it through a confirmation or a conduct.
In Kleinwort Benson Vs Malaysia Mining Corporation Berhad, when asked by MMCB to guarantee the debts of a subsidiary company, stated that it is their policy to ensure that their business of the subsidiary company is at all times in a position to meet its liabilities. It was held that this was not a proposal and the words, “it is in our policy”, merely expressed an intention to do something but they were made to get the offeree to assent to them. Therefore, when the subsidiary was allowed to become insolvent by Kleinwort Company, MMCB could not claim for breach of a contractual undertaking.
- Acceptance- Once an offer is accepted, the contract comes to an end. In case of e-contracts, both the offer and acceptance is done electronic medium such as through e-mails, online agreements or website forms.
- Lawful Consideration- As per the Indian Contract Act, 1872 that for a valid contract to exist there has to be a lawful consideration and same applicable to the e-contracts as well. However, there certain problems which are attached to the lawful consideration when it comes to e-contracts such as where autonomous computers are involved in the contracts and in this situation the contract cannot be fully applicable.
- Lawful Object- For a valid contract to persist, the object involved must be lawful in nature. However, the Contracts which infringe the public policy, those contracts are considered to be void. Also, those contracts which involve illegal objects, those contracts are also considered as void in nature. Simultaneously, these conditions are also applicable on e-contracts.
- Parties are Competent to Contract- As per the Act, 1872 the parties to contract have to be competent in nature and same is applicable in the case of e-contracts. The natural persons and legal person, both are capable of entering into the contracts. However, in the case of e-contracts, the autonomous computers are not considered to be competent to enter into the contract.
- Free Consent- According to the Indian Contract Act, 1872, there has to be free consent of the parties to enter into the contract. Consent obtained should be from fraud, misrepresentation, mistake, etc. and same in applicable in the case of e-contracts.
According to the provisions of the Information Technology Act, 2000, an electronic-contract is considered to lawful, valid and enforceable. The Section 10-A of the Act, 2000 states that “where in a contract formation, the communication of proposals, acceptance of proposals, the revocation of proposals and acceptances as the case may be, are expressed in electronic form or through electronic records, such contracts shall not deemed to be unenforceable solely on the ground that such electronic form or means was used for that purpose.”
However, the only thing which is important in the case of e-contracts are the essential conditions which are mentioned above, should be met for the contract to be valid and enforceable.
In the case of Trimex International FZE Ltd. Dubai Vs Vedanta Aluminium Ltd, the offer and acceptance was made by the parties via e-mail in the absence of signed documents. The Supreme Court of India observed that “once a contract is concluded orally or in written form, the mere fact that the formal contract has to be prepared and witnessed by the parties would anyway not affect either the acceptance or the implementation of such a contract.”
Of observed closely, the digitalisation has made the impossible to exist in such a fast manner. We saw the courts to get converted into e-courts and making themselves as paperless which somehow is directly related to the environment. However, as we know that every coin has two sides, in the similar manner, this digitalisation has process has its disadvantages as well. But we have to be contained in the reality and accept the fact that the electronic-contracts are the new normal.