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Legal Perspectives on E-Contracts in the Globalized world

The concept of 'globalization' has brought about the opening of market economies, and this has had an impact on the global business regime. The business landscape revolves around contracts. Contracts have become so prevalent in our everyday lives that we often overlook the fact that we have agreed to them. From normally booking a cab to buying railway tickets online, a number of facets of our daily life are guided by contracts.

With the rise of E-Commerce and globalization, society continues to advance. The digital age has brought about unforeseen growth in commercial transactions, with electronic contracts playing a crucial role. As the economy becomes more technologically advanced and increasingly globalized, E-contracts are becoming more prominent in our lives.

E-contracts, often called electronic contracts, are specific kinds of contracts formed online. The interaction between the parties during the contract-forming process can take place through a variety of electronic channels, such as email, a computer program, or two electronic agents that have been programmed to recognize the contract-forming process.

According to Sir William Anson, an e-contract is simply any type of contract that is created when two or more individuals interact using electronic agents, like computer programs, or when at least two electronic agents interact and acknowledge the existence of E-contracts.

Evolution Of E-Contracts

In ancient times, the contract system emerged from the barter system in the economy. The commitments made by individuals were self-enforcing. As the British laws were introduced and the economy developed, these contracts required more attention. Before independence, India adopted its first legislation, known as The Contracts Act, 1872. With the passage of time and advancements in technology, most daily tasks became digital. Due to busy schedules, people relied on methods that were quick and precise. Thus, E-contracts became prevalent, replacing traditional paper contracts with digitally signed contracts.

E-contracts originated in India during the era of computers, when significant technological advancements affected how businesses conducted themselves.
Early Digital Transactions:
  • As digital communication technologies began to emerge in the late 20th century, businesses started exploring ways to conduct transactions electronically. The increasing dependence of business operations on computer networks and the internet was the primary driver for this shift. Organizations increasingly resorted to electronic means of entering into contractual agreements to take advantage of the efficiency and speed that digital communication offers.
Legal Recognition and Frameworks:
  • The legal recognition of e-contracts began with the development of legislative frameworks to accommodate electronic transactions. Initiatives like the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Electronic Commerce provided a foundation for the acceptance of e-contracts in international business (UNCITRAL, 2005).
  • In India, empowered by the provisions of the Information Technology Act of 2000 and guided by the principles of the Indian Contract Act of 1872, e-contracts have acquired legal legitimacy and recognition.
Globalization and Cross-Border Transactions:
  • The evolution of e-contracts has been tremendously impacted by globalization. Effective and standardized contract mechanisms became necessary as companies began to operate internationally. E-contracts have become a viable solution for enabling smooth transactions in the international marketplace.
Technological Advancements:
  • The rapid advancement of technology has been accelerated because of globalization. As businesses embrace digitalization, there is a growing necessity to opt from traditional contracts to E-contracts.

Nature Of E-Contract

  • The parties do not physically interact, and no physical boundaries are formed.
  • There is no need for a handwritten signature. It should be digitized.
  • The risk element in such contracts is quite high due to the lack of complete security.
  • Jurisdictional concerns are a substantial impediment to e-contracts in the event of a breach.
  • When a case is presented to the court, digital signatures and electronic records are used as evidence.

Requisites Of A Valid E-Contract

The term 'contract' is defined under Section 2(h) of the Indian Contract Act, 1872 as an agreement enforceable by law. Although the Contract Act does not specifically provide for electronic contracts (e-contracts), it does not prohibit them per se. E-contract is mainly guided by the provisions of Section 10 of the Indian Contract Act. The essential elements required for validating an e-contract set out under the Contract Act are as follows:

Competence Of the Parties
By competence, the contract legislation restricts the entry of 'minors' into an agreement. In the case of Mohori Bibi v. Dharmodas Ghose, the Privy Council was of the view that any contract entered by a minor 'below the age of 18 years' will be considered as 'void-ab-initio'. The other side of the coin relates to 'unsoundness'. In Kanhaiyalal v. Harsing Laxman Wanjari, the court highlighted 'mental incapacity' as a reason for declaring a contract void.

Owners of webpages or online portals have a legal duty to verify whether the party entering a contract has the legal capacity to do so.

Intention to Create Legal Relations
The intention to create legal relationships must be present at the time of formation of the contract. Unfortunately, because e-contracts are typically lengthy and detailed, they provide a barrier to the ability of a layperson to reason with them.

Very few consumers read their agreements before making a purchase, mainly because it is difficult to understand the wording in these lengthy agreements. This leads to online retailers taking advantage of their customers. They thus unintentionally subject individuals to the legal consequences of their conduct. Owing to these reasons, parties to electronic contracts might not always be aware of or intend to create the kinds of legal relationships that they are legally required to.

Free Consent
The "free consent" of the parties to the transaction is an essential element of contract formation. Since there is no such physical interaction between the contracting parties on online platforms, the question of whether the consent was granted voluntarily arises. In this case, there is no scope for negotiation, which disadvantages one party to the agreement. Users have the option to "discontinue" the use of online portals, webpages, or mobile applications after reading the terms. But in a typical situation, it is not expected of every person to have completed all the terms.

Users frequently come across these "take it or leave it" deals.

It implies that users of these online services should exercise caution and vigilance when giving their consent to avoid any potential legal problems down the road.

The other essential elements prerequisite for validating an e-contract under the Contract Act include Lawful offer and acceptance, Lawful object, and Lawful consideration.

Validity/ Recognition Of E-Contracts In India

In India, electronic contracts must conform to the Information Technology Act of 2000 and the Indian Contract Act of 1872. Once the conditions are met, an online contract becomes binding when the user clicks the "I Agree" button.

Under the provisions of the Information Technology Act, 2000, particularly Section 10-A, an electronic contract is valid and enforceable.

Section 10 of the IT Act (2008) provides legal authority for E-contracts, reinforcing contract law principles. It says that "Where in a contract formation, the communication of proposals, the acceptance of proposals, the revocation of proposals and acceptances, as the case may be, are expressed in electronic form or by means of an electronic record, such contract shall not be deemed to be unenforceable solely on the ground that such electronic form or means was used for that purpose.".

The above provision was enacted by the Information Technology (Amendment Act) of 2008 in recognition of the increased reliance on electronic means to conclude commercial agreements. This applies when contract formulation, communication of the proposal, and acceptance take place electronically.

For a contract to be valid it should be in consonance with Section 10 of the Indian Contract Act, of 1872,

What agreements are contracts?
All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.

Nothing herein contained shall affect any law in force in India and not hereby expressly repealed by which any contract is required to be made in writing or the presence of witnesses, or any law relating to the registration of documents.

Evidentiary Value Of E-Records

According to the relevant sections of the Indian Evidence Act, 1872, courts in India accept electronic documents and their submission as evidence. However, several standards of the Indian Evidence Act, 1872 and various case laws must be met for the same to be admissible.

An E-contract after its execution is recorded with the executing parties in electronic form, i.e., in an electronic record.

As per the Information Technology ACT 2000, under Section 2(t), "electronic record" means data, record or data generated, image or sound stored, received or sent in an electronic form or microfilm or computer-generated microfiche.

Sections 3 and 4 of the Information Technology Act also include the authentication and legal recognition of electronic records. Under section 65-B of the Indian Evidence Act, electronic records are admissible. Any information contained in an electronic record, if printed or stored on a CD, is admissible in the court as evidence without further proof or production of the original in any proceedings.

Thus, it can be stated that electronic contracts have the same legal force as traditional contracts.

Issue Of JurisdicTion And Concerns
The ability of a court to hear a case and decide a dispute is known as jurisdiction. The Issue: of jurisdiction is quite contentious and complicated in the matter of E-contracts. It gets more complicated mostly because the internet has no geographical boundaries. Traditionally, disputes are resolved on physical grounds where one or both parties are located. Various national jurisdictions apply various principles in this regard.

Within their physical, geographical, and political borders, a court will always have the authority to enforce its laws in domestic transactions. However, because technology is constantly evolving in borderless internet, enforcement of laws presents several difficulties when it comes to international transactions.

The use of the Internet to draft contracts has resulted in several distinct challenges with regard to the execution of e-contracts, including non-negotiable terms and conditions, enforcement and jurisdictional Issue:s, and time of acceptance concerns. This caused several Issue:s to arise before the Indian legal system.

There is no juridical structure in place to handle legal disputes occurring between nationals of various nations about e-commerce. The IT Act governs the cyber law in India. Nevertheless, the IT Act does not address several significant legal concerns, such as jurisdiction.


Capacity to Contract
  • E-contracts also raise the question of legal capacity to contract because they tend to include anonymous signatories, and these parties may be minors who consent to the terms and conditions of an e-contract. The service provider is unable to determine whether the person who selected the "I Agree" text or symbol is of legal age to sign contracts.
  • When online transactions, particularly those involving consumers, occur between strangers, concerns are raised over the parties' identities, capacities, and validity to enter into the contract.
Issues Relating to Privacy:
  • It is nearly impossible to finish an online transaction involving e-commerce without gathering some sort of personal data from the users, such as identification and financial details. In addition to gathering primary data from users, e-commerce platforms can gather a range of indirect but valuable information, such as search habits and personal preferences of consumers. The IT Act addresses privacy violations in a narrow sense.

Cases Relating To E-Contracts

Considering the subject of our discussion, these rulings are not only relevant, but they also provide a noteworthy precedent for the emergence of similar kinds of problems in the future.

Trimex International Fze Limited V. Vedanta Aluminium Limited (2010)

Trimex sent VAL an email offering to deliver bauxite. After multiple email exchanges, VAL accepted Trimex's offer, confirming the supply of five shipments of bauxite from Australia to India. Even though a draft contract had been created, it still required formalization. Following the receipt of the first shipment of commodities, VAL asked Trimex to hold off on sending the subsequent shipment so they could inspect the utility value of bauxite. Nonetheless, the ship's owners designated the day for loading the cargo. Trimex later canceled the contract and demanded that VAL pay damages to the ship owners. VAL refused, claiming that there was never a contract in the first place.

  • Whether there was any valid subsisting contract between the parties in the absence of any formal contract?
  • The Supreme Court Held: that since the offer and acceptance were communicated by the parties through the exchange of e-mails, the e-mails would constitute a contract in themselves.
  • The Honorable Court stated that a contract must meet the requirements of Section 10 of the Indian Contract Act, 1872 for it to be enforceable, regardless of whether it is electronic or otherwise.

Pr-Transport Agency V. Union Of India (2006)

In PR Transport Agency v. Union of India, the court provided the first judicial clarification on the Issue: of jurisdiction in an electronic contract dispute. "Whether the Court has jurisdiction?" was one of the Issue:s that the Allahabad High Court was considering in this particular case.

In this instance, BCC conducted an online auction to allocate coal. The bid from PRTA (headquartered in UP) was approved. On July 19, 2005, the acceptance letter was sent to PRTA's email address via email. In accordance with the "Terms of Allocation," PRTA deposited the entire sum upon receiving the acceptance. Despite cashing the money that PRTA had left, BCC failed to deliver the coal. Rather, PRTA received an email announcing that the e-auction was canceled due to "some technical and unavoidable reasons." Aggrieved by this letter, PRTA filed an appeal with the Allahabad High Court.

Contentions Of The Parties Involved

  • BCC brought up a jurisdictional Issue:, arguing that UP courts lack territorial jurisdiction.
  • In response, PRTA claimed the contract might be deemed to have been entered into at UP because it had received communication of acceptance at UP. The "place of contract" is one of the determining factors for ascertaining the place of jurisdiction in a breach of contract case.
The court relied on Section 13(3) of the Information Technology Act 2000, which states "´┐Żan electronic record is deemed to be received at the place where the addressee has his place of business". By employing this clause, the High Court determined that it possessed the necessary territorial jurisdiction to decide the Issue: because it is believed that the email acceptance was received at UP.

Rudder V. Microsoft Corporation (1999)

This case established the enforceability of the E-contracts and gave it a dignified position.

Under the grounds of misappropriation, breach of contract, and breach of fiduciary duty, the plaintiff filed a class action lawsuit against MSN, a Microsoft website, who happened to be a subscriber to the same.

  • Whether the unenforceability of the clauses be justified by the fact that the plaintiff (and the class as a whole) did not read them?

Contentions Of The Parties Involved

  1. Microsoft argued the class action lawsuit be dismissed on the grounds that there was a provision in the click-wrap agreement between the subscribers and the company that gave the State of Washington exclusive jurisdiction for the resolution of disputes.
  2. Rudder, the plaintiff, contended that because the users were not made aware of the clause, it would not be applicable.

The court Held: the decision in favor of Microsoft, noting that users of the portal were required to click the "I Agree" button twice in order to consent to the terms and conditions of the website. Regardless of whether he read the contract or not, the plaintiff was legally bound to abide by the terms and conditions stated in it because he had selected this option.

The court Held: that scrolling across multiple pages was to be considered to be the same as turning through multiple pages of a written contract in the paper.

Global Perspectives On E-Contracts

The status of Electronic Contracts has evolved significantly in recent years, marked by advancements in technology, changes in consumer behavior, and adaptations in legal frameworks. Across various jurisdictions, e-contracts are now widely recognized and utilized, representing a pivotal shift towards digital transformation in commercial transactions.

Uncitral Model Law

Electronic contracts are validated by the UNCITRAL Model Law. It establishes a few clear guidelines regarding the legality of electronic contracts. It offers and does mostly rely on data communications as the primary component for invitations to contracts and offers. Article 11 explicitly stipulates that an electronic contract is not to be considered inapplicable exclusively on the basis that data communications have been used to send the request.

UNCITRAL model law provides specific answers that are significant in the field of electronic contracts.

To implement the UNCITRAL Model Law on Electronic Commerce, 1996, the Indian government enacted the Information Technology Act 2000. Additionally, it adopted the Information Technology (Amendment) Act 2008 to apply the UNCITRAL Model Law on Electronic Signatures, 2001, in India.

U.S Regime

A crucial US law pertaining to electronic contracts is the Uniform Electronic Transactions Act (UETA). According to Articles 3 and 4, UETA only pertains to exchanges that are associated with commercial, business, and government affairs as well as exchanges that are conducted electronically.

The development and evolution of electronic contracts, or e-contracts, highlights how crucial they are in today's globalized world. E-contracts are crucial tools for enabling smooth and effective cross-border transactions as market economies expand and enterprises expand beyond national borders. In the era of digitalization, where technology is embedded in every part of our lives, e-contracts are essential for promoting economic growth, innovation, and process reduce complexity.

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