Introductions
The Indian Contract Act, 1872 [1]are agreements that are legally binding on the parties to form a legal relationship between the parties. In today’s world, software applications are widely used, and e-contracts play a significant role in regulating these agreements. E-contracts are considered a subset of contract law that are formed, communicated, and stored electronically. It can be created by drafting, negotiating, and executing the agreement completely online.
Shrink-wrap and click-wrap contracts are two categories of e-contracts. Shrink wrap is also known as a shrink wrap license used in software and technology applications. It displays a notice or message on the screen during software installation and processing. Click-wrap contracts, also known as click-to-accept agreements, allow the user to make an affirmative choice by clicking a checkbox.
Research Question
- E-contracts [shrink-wrap and click-wrap contracts] are particularly challenging when it comes to minors because there is no proper mechanism to verify their age, whether they are competent to enter into a contract, or not.
- Enforceability of e-contract and data security protecting data from unauthorized access by spammers?
Analysis
E-contracts become challenging when dealing with minors because there is no proper mechanism to handle their involvement. Minors are engaging in various online transactions, such as shopping on e-commerce websites, creating social media accounts, and even entering into employment contracts.
- Minors have an advantage here because the contracts they enter into are voidable, meaning they can cancel them if they wish.
- To make e-contracts more reliable and secure, a well-defined security policy should be in place.
- This policy will ensure that the contracts are legally enforceable and protect against unauthorized usage.
- Additionally, there should be a robust data backup system to safeguard user information and meet all contractual requirements.
Shrink Wrap Contract
Shrink-wrap contracts are those that govern the terms and conditions of software and digital products. “Shrink wrap “derives from the practice of packaging software in shrink wrap plastic, where the user gives assent to the terms and conditions by opening the packaging.
But in the digital era, users give consent by clicking the agree button, and they are considered to have accepted the terms and conditions. They serve as a legal relationship between the software provider and the user.
Shrink contracts appear on the user screen as a notice or message during installation, and by accepting the terms and conditions, the user enters into the contract.
| Key Elements | Description |
|---|---|
| Notice | It includes sellers’ terms for the buyer and conspicuous notice of agreement and title retention. |
| Restrictions | It restricts transfer and modification to prevent the proliferation of software copies and the deconstruction used to extract design information from them. |
Importance In The Software Industry
Shrink-wrap contracts encourage users to be responsible and to avoid misusing or breaking the rules. They clearly state that users must keep the software secure and private, and not use it for unauthorized activities. These contracts also inform users about how they can use the software within certain limits and set boundaries on the company’s responsibility, reducing potential risks. Additionally, they state that the software is protected by copyright, meaning users cannot make unauthorized copies.
Formation Of Contract
- When the user installs the software, the terms and conditions are displayed on the screen so that the user can read the terms and conditions with due diligence and have a chance to review them.
- After reviewing, the user has a chance to accept the terms and conditions or not. If the user agrees to the terms and conditions, they can enter into a contract by clicking the “Agree” button.
- The terms and conditions should be absolute, not vague.
- After accepting the terms and conditions, the user enters into a binding relationship with the software vendor.
Case Laws Relate To Shrink-Wrap Contract
Step-Saver Data Sys., Inc. v. Wyse Tech [2]
Plaintiff purchased computer programs from Defendant, and each software program came with a box-top license agreement stating that by opening the package, the customer agreed to all terms, including a warranty disclaimer. The plaintiff would resell the program to numerous clients. Due to issues with the software, Plaintiff began receiving lawsuits and sought indemnification from Defendant, as well as enforcement of breach-of-warranty claims against Defendant.
A box top license’s extra terms are not integrated into the parties’ agreement if they would fundamentally change it in accordance with 2-207.
ProCD, Inc. v. Zeidenberg [3]
Defendant purchased a CD-ROM database with a licensing limitation that limited the consumer-purchaser to non-commercial use. Shrink-wrap packaging indicated a license restriction, but the conditions were on the inside, not the outside. Defendant disregarded the license and sold the data from the CD database once more.
The option to refuse the permit if it looks unjust appeared to be the deciding factor. The buyer may return the program if they believe the license terms make it less valuable than the purchase price. It is not the seller’s responsibility to maximize their profit, the court emphasizes.
Click Wrap Contract [4]
Click-wrap contracts, also known as “click-through agreements,” are electronic contracts that appear during the installation of online services, data, software, or other digital services. These contracts are known as click contracts because users can accept the terms and conditions by clicking either “I agree” or “I do not agree”.
Unlike the shrink wrap, the court does not require the user to have adequate notice of terms and conditions because they appear at the initial point of contract formation. But the terms of the contract must be clear, conspicuous, and easily accessible to the user.
In a click-wrap contract, there is no bargaining option between the parties; it is in the form of a standard: either agree or disagree.
Formation Of Click Wrap Contract [5]
- Presenting the terms and conditions on the screen, where the user gets access to the terms and conditions
- The terms must be clear, not vague, and absolute and accessible to reading so that the user can understand the terms; they must not be inconspicuous, as we can see in Specht v. Netscape Communications Corporation, the plaintiff brought suit against the defendant, alleging that they downloaded an innovative program. The defendant sought to stay the court action and to proceed to arbitration under an online contractual agreement. The court held that a reasonable user would not assent to contractual terms that are so inconspicuous that they could overlook them
- Consent mechanism must be present so that the user can take affirmative action by clicking either accept or not
- By clicking the agree check box, the user accepts the terms and conditions and enters into a contract by affirmative consent
- The service provider and website operator have to maintain the record of acceptance
- After entering the contract, the user gets access to the product, software, etc.
Case Laws Related To Click-Wrap Contract
| Case Name | Brief Description | Decision |
|---|---|---|
| Caspi v. Microsoft Network[6] | The case is about a contract dispute between Microsoft and its online service customers. The contract had a term requiring any lawsuits to be filed in Washington state, where Microsoft is based. The customers sued Microsoft in New Jersey, where some of them lived, for various claims. | Microsoft asked the court to dismiss the case on the grounds of the contract term. The court agreed with Microsoft and dismissed the case, saying the contract term was valid and fair. |
| Forrest v. Verizon Communication, Inc.[7] | Plaintiff argued that the forum selection clause applied only to contractual rights, not consumer protection claims. | The court held that the forum clause was broad enough to encompass all claims arising from the service. |
Legal Provisions
An e-contract is legally binding if it follows the essentials of a valid contract and is made electronically. The Indian Information Technology Act, 2000, provides legal recognition to electronic agreements.
Section 10A Of The Information Technology Act, 2000
Section 10A of the IT Act says that “Where the formation of the contract, offer and acceptance of the contract, as the case may be, are expressed in electronic form, such contract shall not be deemed unenforceable merely on the ground that it was created electronically.”
- Electronic contracts that follow the essentials of a valid contract are legally enforceable.
- A contract cannot be declared invalid merely because it is created in electronic form.
Conclusion
In today’s world, e-contracts are prevalent in the digital era, driven by constantly evolving technologies. They offer advantages in convenience, cost-effectiveness, accessibility, and speed.
- They help the environment by restricting the use of paper.
- They support remote collaborations.
But as every coin has two sides, both advantages and disadvantages can be improved to make it more effective. Enforceable software vendors or website entities should specify a statutory revocation period and offer user withdrawal options.
- The terms should be easily accessible and more effective.
- Digital elements such as videos or images should briefly explain the terms and conditions.
- It should accommodate various languages for diverse linguistic backgrounds.
In this way, it can become more effective and accessible. End Notes:
- (2023) Indian Contract Act, 1872 “BARE ACT”, Lexis Nexis.
- Step-Save Data Sys Inc vs Wyse Tech, 939 F.2d 91 (3d Cir. 1991).
- ProCD Inc vs Zeidenbaerg, 86 F.3d 1447 (7th Cir. 1996).
- Bhat Sairam, Law of Business Contracts in India, Pg No. 204–206, Sage Law.
- https://www.heinonline.org (accessed on 28/07/2023).
- Caspi vs Microsoft Network, 732 A.2d 528 (N.J. App. Div. 1999).
- District of Columbia Court of Appeals, CA-405-01, decided on August 29, 2002.
