How many of us, when we click the mouse on the “I Accept” tab of a Zip Folder, actually bother to read the small print? Or realise that the innocuous act creates a binding contract between the parties; no different from signing on a dotted line? Both E-Commerce and e-filings have acquired formality and acceptance but have our laws kept pace with the paradigm change in recognising validity and enforceability of contracts executed electronically?
As on date, Indian laws dealing with contracts are largely colonial — with the Indian Contract Act, 1872, Transfer of Property Act, 1882, the Registration Act, 1908, the Stamps Act, 1899, and the Evidence Act, 1872 still going strong. The legal recognition to electronic governance — the use, retention and maintenance of such records, and that of digital signatures — has been accorded by the Information Technology Act, 2000, in order to integrate electronic contracts with the existing law, the core of which is the Contract Act.
The essentials of a valid contract never really change with the main ingredients such as consideration, free consent and performance, offer and acceptance being constant. E-Commerce is no different, except it is modelled, specified and deployed by a software system.
The web is the vendor’s shop window for the product, price and the counter. The customer has to consider options, negotiate if possible, place orders and make payments. Do these mechanisms meet the legal requirements of a alid contract?
The critical difference lies in the touchstones of offer and acceptance. Unless the offer is specifically indicated to be so, an advertisement on a website is not an offer but an invitation to treat. The person responding completes the online form on the web page and the offer is made when he clicks “submit”.
Once the offer is discharged from the customer’s site and a conclusive record of the time, place and discharge is established, the offer is recognised as legal. Acceptance takes place when is the offer is received, which makes the record of acceptance critical.
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The Information Technology (IT) Act in Sections 12 and 13 provides that when the electronic record enters the information system designated by the addressee for the purpose, or is attributable to the originator or any person having authority to act on his behalf, the acceptance is binding on the offeree.
This is the difference with the Contract Act, as there can be no revocation post transmission or receipt.
The amendments to the Evidence Act on the admissibility of electronic documents and records, enlarging the definition of documents to mean and include electronic records stored or copied in optical or magnetic media and dispensing with production of any original, have facilitated Courts’ powers in permitting electronic evidence to be led. It is another matter, whether Courts can treat electronic contracts as per se enforceable, regardless of the character of the transactions.
| CONTRACTS AT YOUR FINGERTIPS |
| * Legal recognition to electronic governance — the use, retention and maintenance of such records, and that of digital signatures — has been accorded by the Information Technology Act, 2000, in order to integrate electronic contracts with the existing law, the core of which is the Contract Act |
| * Once the offer is discharged from the customer’s site and a conclusive record of the time, place and discharge is established, the offer is recognised as legal |
| * E-Commerce contracts, being retail transactions, have made inroads in selected markets for availing standard services such as air ticket and hotel reservations |
| * Electronic mode has yet to gain acceptance in business-to-business transactions in spite of advantages |
By and large, E-Commerce contracts being retail transactions have made inroads in selected markets for availing standard services such as air ticket and hotel reservations. The concern is not the executability of the contract but the scope for redressal in case of deficiency in goods or services, which the Consumer Protection Act does address partially.
It is another matter that the electronic mode has yet to gain acceptance in business-to-business transactions in spite of advantages of cost, communication and information involving as they do high stakes and complexities of stamp duty, registration etc.
Most documents require payment of stamp duty to be valid and enforceable. This is not addressed in the Stamp Act, and while e-stamping is possible, the procedure is not totally paperless as it involves payment by cash or demand draft.
What is more complex is registration, which is mandatory for documents of conveyance, securitisation, collateralisation, etc. Given the stringent norms which are required for the purpose of identification on execution, while possible to be devised electronically, the level of comfort and acceptance has yet to be established.
Ultimately the issue is one of redressal and jurisdiction, particularly when transaction has cross border dimensions. Under the Indian Law, a contract is concluded where the acceptance takes place. To that extent Indian Courts would have jurisdiction, the issue is of enforceability. Section 75 of the Information Technology Act is applicable to offences and contraventions committed outside India, but it cannot extend to contractual disputes.
Kumkum Sen is a Partner in Rajinder Narain & Co. and can be reached at kumkumsen@rnclegal.com