Communication of proposal and acceptance by email or other electronic mode is
largely considered as an informal mode of communication. Due to this many people
make contracts, offers, acceptance and revocation just for the sake of
negotiation purpose, thinking it not to be a formal contract with no legal
obligations. But the case is not so, it is one of the important modes of formal
communication and especially in the Covid times it has gained immense value.
This topic of research has its roots not only in Indian contract act 1872, but
also in the Information technology act, 2000.
The section 10A of the IT act
provides the legislative authority to the online contracts and also states the
validity to the online contracts as well. The part to provide legislative
authority to online contracts came through an amendment in the IT act in 2008.
Through this research paper we would throw some try light on the validity of the
contracts entered through online mode and email and also about the legal
perspective of the same.
First to start with the topic one needs to understand the basic terms of
“acceptance” and “proposal” to get better understanding. So these words have
been describes in the Indian contracts act, 1872. Going by the act “Proposal
means one has to signify his willingness to do an act or not. This action of his
will make the other one understand his choice to enter into a contract.
proceed with let us know what is acceptance with respect to communication.
Acceptance is defined as when your proposal to offer gets accepted it is called
as acceptance. The acceptance is the second essential for a valid contract.
Acceptance should not be conditional and once if it is communicated it cannot be
revoked after that, but can be revoked before the acceptance is received by the offeror.
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To start with, first question is to understand is what do you mean by a
contract? Section 10 of the Indian Contract Act, 1872 describes contract as an
agreement enforceable by law. Now, next task is to find out the essentials which
make an agreement a contract. It does not matter whether it’s the online mode or
offline mode to form a contract; the basic essential to form a contract remains
So, let us first look into these essentials which make an offer or
proposal into a contract:
- Offer and Acceptance:
This means that there should be a “lawful offer” and lawful acceptance. This
implies that the offer and acceptance must satisfy the requirements of the
Indian contract act in relation thereto
- Intention to create legal relationships:
There must be an intention of
parties to enter into a legal relation and obligation. This
is because agreements of social and domestic nature cannot be enforced.
- Capacity of parties:
the parties to contract must be competent by law
to enter into contracts and create binding legal relationships.
- Free consent:
One of the most essential elements for the formation of
the contract is free consent. If the consent is not obtained freely it
may render contract void or voidable. Consent must not be obtained through
coercion, undue influence, fraud, misrepresentation and mistake.
These are the basic essentials which one should have to enter into a contract to
make an agreement into a contract.
Now to understand the validity of the online contracts lets first understand
that whether the postal rule in case of letters be applied in this case or not
to make the contracts valid.
The postal rule which is applied in the case of communication through letters
states that, when acceptance is given by post, the communication of the
acceptance is complete as against the proposer, when the letter of the
acceptance is posted. Thus, a mere posting of letter of the acceptance is
sufficient to conclude the contract. The letter posted must by completely
stamped and addressed. Against the offeree, the acceptance is completed when the
offeror reads about the acceptance. The same can be highlighted from the case
of Bhagwandas vs. Girdhari Lal & Co.
The Indian Contract Act, 1872 nowhere answers this question, but it nowhere
restricts it too. E-mail contracts are similar to the normal contracts made
through offline mode and are governed by the provisions of the Indian Contract
act. These contracts can also be not made if the basic essential are not
The basic essentials to a contract in online form are:
- Terms of agreements must be agreed upon by both the parties in the same
manner (consensus ad idem
- There should be intention to create legal relation
- Vital terms of the contracts must be agreed upon
- Terms and conditions must be clear in the online mode
- Contract must be enforceable by law
- Parties must be competent to enter into a contract
All the terms and statues of the email contract must be read in with reference
to the Indian Contract act and not in suspension to it. Also, for the
recognition of the contracts through online mode signature must be put on the
contract to signify acceptance to the terms and conditions of the contract.
Talking about the validity of the contracts through email, Information
technology act, 2000 makes them valid. But it expressly states that, they can’t
just become invalid on the aspect that there is acceptance and proposal through
online mode of communication. Section10 of the IT Act talks about the same.
Another aspect to this situation is that the Evidence act, 1872 also tells us
that email contracts can also be presented as evidence in the court of law with
proper online signature of the parties to contract.
State of Delhi vs. Mohd Afzal and Ors:
This case held that “electronic records
are also permissible as evidence in the court of law. If someone challenges this
evidence, then the person challenging must have to prove it that why is it wrong
and on which basis.
From this case we can see that online evidence is also accepted in the same way
as the normal evidence. Also, it follows the same procedure as of the normal
evidence. This case shows us that the online evidence can also be accepted as
valid evidence in court of law.
Now let us look at some case laws in respect to the online mode of
Goel & Anor vs. Grant & Anor: In this the company went into the process of
administration. The organizers thought that they had potential claim against the
third parties. There was an exchange of emails between the outsider and the two
company shareholders, discussing the possible claim to be taken by the two
shareholders. The shareholders claimed that the contract through email was a
legally binding contract as there was a formal agreement. But the Administrator
stated that there was no proper offer that was there for acceptance. So no
binding contract was formed. Afterwards the court held the point of the
administrator to be valid and held the contract annulled.
From this case we case see that whether there is a online or an offline
contract, the basic conditions to make a contract must be fulfilled. In this
there was no offer, but emails were exchanged just as a purpose of
communication and to know about the matter. There was no intention to create
any legal relationships, also there was no acceptance from the other side as
there was no offer made and finally there was no consideration as well
Trimex International FZE Limited, Dubai vs. Vendata Aluminium
Ltd.: In this case law the parties agreed on all the terms and legally entered
into a contract through emails. The Supreme Court held the contract valid as the
contract was entered through proper consent, there was a intention to create
legal relationships and was followed by due procedure of law. The court did not
annul the contract because it was through email.
This shows that the contracts through email and other online mode can also be
valid if all the essentials to a contract are satisfied. Thos also shows the
validity of the communication through online mode in the Indian courts.
Bhagwandas Goverdhandas kedia vs. Girdharilal Parshottamdas and Co.
and Ors.In this case the two parties to contract made the conditions clear over
telephonic conversation, which is deemed to be an instantaneous form of
communication. In this case the acceptance is made as and when the offer is made
as it is assumed that the parties are at the same place. But in this case, the
acceptance is completed when a “yes” is heard by the offeror.
In this case the court held that in instantaneous mode of communication the
acceptance will be completed when it reaches the offeror. This case highlights
the importance of instantaneous offer.
After knowing about the validity of the online contracts in Indian context and
the key essentials to form an online contract, we can conclude that there are
not many cases which talk about the contracts formed through online mode. It is
still debatable as to when email contracts are concluded and are binding. Yet
when we read Indian Contract Act, 1872 with the Information technology act,
2000, we get to know that these define the online contracts and contracts
Also in the Covid times, where everyone is shifting to online
mode there is a need to bring a separate legislation in India so as to bring
better validity to the contracts and make them legally binding. It should also
be made more protective so that people could rely more on these modes of
communication by legal status to the concept of digital signature. When the
social distancing has become the norm for life, there is a need to make ratify
the international conventions and a make a more reliable law for India in
response to the online contracts and contracts made through email.