0

TABLE OF CONTENTS
SR.NO

TOPIC

PG.NO

ABBREVIATIONS

TABLE OF CASES AND STATUTES

RESEARCH METHODOLOGY

Chapter 1
I

INTRODUCTION

EVOLUTION OF E-CONTRACTS

II UNDERLYING PRINCIPLE

3-8

III SCHEME AND SCOPE OF TOPIC

Chapter 2

LEGAL FRAMEWORK RELATING TO E-

CONTRACTS
I

COMPONENTS OF E-CONTRACTS

9-18

II FINE PRINT W.R.T E-CONTRACTS

6

Chapter 3

ROLE OF JUDICIARY

19-21
I
7

CASES

Chapter 4
I

COMPARITIVE STUDY

22-25

DIFFERENCE BETWEEN E-CONTRACTS AND

1
TRADITIONAL CONTRACTS
II E-CONTRACTS IN INDIA
III E-CONTRACTS IN UNITED STATES OF AMERICA
8

Chapter 5
I

CONCLUSIONS & SUGGESTIONS

CONCLUSION

26-29

II SUGGESTION
9

BIBLIOGRAPHY

30-31

ABBREVIATIONS

Indian Contract Act, 1872

Information Technology Act, 2000
Versus
United Nations Commission on International Trade Law
Uniform Computer Information Transaction Act
Civil Procedure Code

ICA
IT Act
VS
UNICITRAL
UCITA
CPC

TABLE OF CASES

P.R. Transport Agency vs. Union of India and Others

Himachal Joint Venture vs. Pani Peena World Transport
Ratna vs. Vasutech Ltd.
Trimex International FZE Ltd. Dubai VS. Vedanta Aluminum Ltd.
Citi Bank vs. TLC
Cable network vs. CNN

TABLE OF STATUTES

Indian Contract Act, 1872

Information Technology Act, 2000
The Electronic Commerce Act,1998
United Nations Commission on International Trade Law(UNICITRAL), 1996

RESEARCH METHODOLOGY
RELEVANCE OF THE PROJECT
The subject of Law of Contracts II, which includes studying, analysing and interpreting the
topics of Contractual Agreements. This paper aims to carry out a research study pertaining to
E-Contracts. The topic E-Contracts: Issues and Limitations ' forms a part of this subject. This
topic helps to understand an integral area pertaining to the subject.

OBJECTIVE OF STUDY
The Objective of this study is to provide an intensive research and analysis of E-Contracts:
Issues and Limitations' regarding its formation, evolution, types, issues etc. These essential
areas have been studied in depth and briefed up in the project. It aims at exploring all aspects
of E-Contracts. This project aims at studying the rules and provisions of Indian Contract Act
and Information Technology Act relating to E-Contracts.

RESEARCH HYPOTHESIS
During the study of this project, the researchers seeked to make an attempt to answer the
following questions:
1.
2.
3.
4.
5.
6.
7.

What is E-Contract and its forms?

What is the current scenario of E-contracts in India?
What is the legal framework and issues relating to E-contracts?
What are the treaties and conventions relating to E-Contracts?
What are the various judicial decisions and interpretations relating to E-Contracts?
Difference between E-contracts and Traditional Contracts
E-contract Legal framework in various other Countries

LIMITATION OF RESEARCH
This project was subject to a couple of limitations. The project was restricted to a secondary
means of research, conducted only by means of books and the internet, due tto which certain
limitations are bound to creep in. A primary way of research could not be adopted for the same
due to the nature of the topic and due to lack of means and time restrain.

Chapter 1 : INTRODUCTION

According to Thomas Hobbes, Life in the state of nature was poor, solitary; nasty
and brutish he elucidates these postulations in his theory of Social Contract, Locke
and Rossouaue also have similar postulations about the formation of society. Therefore
it can be stated with fair confidence that it is indubitable that the modern society has its
genesis in a contract. Much like the human race, contracts too, have evolved and
adapted to the changing nature of human life and surrounding conditions. Over the
years, many acclaimed jurists defined the term contract in a manner which they
deemed fit.
According to Salmond, a contract is "An agreement, creating and defining obligations
between the parties."
According to Pollock, "Every agreement and promise enforceable at a court of law is a
contract." However, a constant is that, a contract has two or more parties, making a
promise and a reciprocal consideration for the fulfillment of that promise.
Contracts play a cardinal role in instituting legally binding relationships between
various business and their customers. A contract consists of numerous activities that
have to be carried out by the involved parties as well as contract clauses that address
specific concerns in the business process interaction.1 Electronic commerce can be
defined as Electronic buying and selling on the Internet and includes all the activities
that a firm performs, selling and buying services and products using computers and
communication technologies.2
The need and requirement for electronic form of contract can basically be attributed to
the need for a quick, efficient and time saving mode of contracting. The virtual
cyberspace being time saving and unbound by challenges of distance gives an
opportunity for parties to enter into a contract over internet. In the electronic age, the
whole transaction can be completed in seconds, with both parties simply affixing their

1 E-Contract Modeling and E-Enactment by P.Radha Krishna (Centre for data engineering- IIT Hyderabad)
2 SV Joga Rao, Computer Contracts & Information Technology Law (2nd Edition, 2005), pg. 182
4

digital signatures3 to an electronic copy of the contract.

It is undisputed that today, e-contracts have an evidentiary value. Not only because of
the sheer number of persons who enter into such contracts on a daily basis but also
because of the magnitude, volume and implications of these contracts. Present day
Indian economy would hobble to a stop if e-contracts were to be cropped from the
picture. It is but obvious that the advent of e-contracts came with the popularization of
e-commerce, however it is a popular misconception that e-contracts are restricted to the
online transactions pertaining to buying and selling of consumable goods, in fact
insurance bought online, educational courses taken, online exams, are all examples of
e-contracts.

I .EVOLUTION OF E-CONTRACTS
If the Internet is anything to go by, India's technological and economic advancemnt has
moved into the top gear. In the fiscal year of 2014-2015, india registered a whopping
growth of 200% in the e-commerce sector. However to understand the evolution of econtracts it is prudent to take into account the evolution of e-commerce in India.
1. Timeline
Circa 1991: Introduction of E-Commerce
The year 1991 noted a new chapter in the history of the online world where ecommerce became a hot choice amongst the commercial use of the internet. At that
time it was unanticipated that buying and selling online and online trading would be so
rife and would eventually become a trend in the developed and developing countries,
with India sharing a substantial proportion of this success and progress.
Circa 2002: IRCTC teaches India to Book ticket online
India first came into interaction with E-Commerce via the IRCTC. The Govt. of India
experimented with this online strategy to make it convenient for its public to book train
3 Digital Signature Certificates (DSC) are the digital equivalent (that is electronic format) of physical or paper certificates.
Examples of physical certificates are drivers' licenses, passports or membership cards. Certificates serve as proof of identity of
an individual for a certain purpose; for example, a driver's license identifies someone who can legally drive in a particular
country. Likewise, a digital certificate can be presented electronically to prove your identity, to access information or services
on the Internet or to sign certain documents digitally.

tickets, Online Passenger Reservation System, which facilitated online booking from
anywhere, anytime. This was a boon to the common man as now, for anyone
conversant with the online system, waiting in long lines is a thing of the past. This can
be pegged as a crucial achievement in the history of Indias internet story as it directly
affected the comman man.
Circa 2003: Introduction of Low Cost Airline with AirDeccan
After the unpredicted success of the IRCTC, the OTBS4 was followed by airlines, like
AirDeccan, Indian Airlines, Spicejet, et cetera Airline agency encouraged, web booking
to save on middle men commission and thus in a way added a number of people in the
country in the E-Commerce loop for the first time.

Circa 2007: The Deep Discounted model of Flipkart

The permeating acceptance of E-commerce by the Indian consumer influenced many
other business players to try this technique for their E-businesses and generate higher
profits.
Though online shopping has been present since the 2000 with only a handful players
like infibeam, indiamart etc, it gained popularity only with deep discount model of
Flipkart. Flipkart re-launched online shopping in India. Soon enough, other portals like
Amazon, Jabong, ebay, Myntra et cetera started the process to set u shop in India as
they identifies it as one of the biggest consumer and potential growth bases in the
world.
Graph depcting the rise and comparision of the penetration of internet, user growth and
share of indian users amongst world internet users.5

4 Online Ticket Booking System

5 Taken from http://www.internetlivestats.com/internet-users/india/ on 25th July, 15 at 6:11 pm.
6

Graph depcting the rise and comparision of the penetration of internet, user growth and
share of indian users amongst world internet users.6
45.00%
40.00%
35.00%
30.00%
25.00%
20.00%

Penetration of Internet
User growth
Share of World internet users

15.00%
10.00%
5.00%
0.00%

It can be infered from the above graphical representation that over the years, the
penetration of Internet and hence the number of users have increased phenomenally,
however, eventhogh the percentage increase in user growth has declined, it is because,
between 2002 to 2011, it experienced a somewhat stable level. However the share in
world Internet users has risen steadly indicating a growing trend of population and
availablilty of internet amongst that population.

II .UNDERLYING PRINCIPLE
In the Law of Contracts, the aim and intent is to form a legal relationship between two
parties, i.e. an onus of responsibility upon both the parties to honour the conditions of
the contract and thereby fulfill the contract. The failure to do so by any of the consenting
6 Taken from http://www.internetlivestats.com/internet-users/india/ on 25th July, 15 at 6:11 pm.
7

parties results in non-completion of the said contract. The project will be based on the
underlying principle and will aim to amplify and explain the same. E-contracts being a
modern phenomenon have no direct
The legal maxim which can be applied and interpreted w.r.t this topic is Contractus
legem ex conventione accipiunt which means, the agreement of the parties makes the
law of contracts, therefore, it means that, the agreement which the parties have arrived
at, including the conditions which they both have agreed upon will constitute the
contract and the law would be interpreted on the basis of the conditions and terms
formulating the contract. Another applicable principle is Ubi Jus Ibi Remedium7. It
means, Where there is a right there is a remedy. The basic principle contemplated in
the maxim is that, when a person's right is violated the victim will have an equitable
remedy under law. The maxim also states that the person whose right is being infringed
has a right to enforce the infringed right through any action before a court. All law courts
are also guided with the same principle of Ubi Jus Ibi Remedium. 8 This maxim is not
specific to e-contracts, nonetheless it is important as it dictates the justice seeking
mechanism that a person can resort in case of violation of a contract.

III .SCOPE & SCHEME OF TOPIC

Conventional concept of contract, developed over the years provides for fundamental
principles governing all aspects (formation discharge, remedies et cetera) of different
types of contracts. The legal rules governing various facets of a convetional contract are
quite clear. However, owing to the ways in which e-comerce differs from traditional
commerce, it raises some novel technical and legal challenges, which leads to the the
scope of the topic being widned. From the standpoint of law, it is the most appropriate
time to understand the structural changes, that are possible in this new world because of
the change in dynamics of business relationships, and the legal issues arising out of
them. Some exceedingly challening and intriguing questions have been posed, the
project seeks to answer these questions in relative unambigious manner and provide
relevant information w.r.t to the same. The questions are
7 Taken from http://definitions.uslegal.com/ on March 2, 2015 at 12:11 pm
8 Taken from http://www.oxfordreference.com/ on March 2, 2015 at 12:13 pm.
8

i.
ii.
iii.
iv.

The formation and consequent conclusion of E-contracts.

Validity and enforceabilty of such contracts.
Extent of applicabilty of established principles of law of contracts to e-contracts.
Study of past cases so as to function as a Judicial precedent.

In response to recent escalating growth witnessed by the e-commerce sector and the
resultant rise in the number of contracts which are being entered into online, some
commentrators have suggersted that the formulation of a formal law governing these
contracts is imperative. It is undubitable that legal and economic institutions will have to
undergo a substantial technological and organizational revolutionzation in order to keep
up with the technology. Other experts have taken a skeptical stand, arguing that recent
positions are rather viewed as changes of degree rather than kind, and can be
accomodated by extending and modfying existing arrangements in a revolutionary and
all encompassing manner.
The scheme of the project will be reletively linear and will touch upon the formation,
completion and breach of e-contracts, it will then go on to explore various cases and the
interpretations and judicial implications of the same.

Minimal Involvement of Contracting Parties

9

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Chapter 2 LEGAL FRAMEWORK RELATING TO E-CONTRACT

Statute
Governing EContracts

Information
Technology Act,
2000

Information
Technology
Amendment Act,
2008

Indian Contract
Act,1872

The Indian Contract Act, 1872 governs the manner in which contracts are made and
executed in India. It governs the way in which the provisions in a contract are
implemented and codifies the effect of a breach of contractual provisions.
Within the framework of the Act, parties are free to contract on any terms they
choose. Indian Contract Act consists of limiting factors subject to which contract may
be entered into, executed and breach enforced.
It only provides a framework of rules and regulations that govern formation and
performance of contract. The rights and duties of parties and terms of agreement are
decided by the contracting parties themselves. The court of law acts to enforce
agreement, in case of non- performance.
With the growing importance and value of e-contract in India and across the world,
the different stakeholders are continuously identifying and evaluating the nuances of
legal outline relating to it.
The participation of different service providers in the transaction of e-contract, which
includes a payment gateway, the main website, the bank or card verification website,
the security authorisation website and the final service provider which can also
comprise the shipping agent has made the E-contract business more complex.
Therefore, the need for amendable it has augmented. In India, till date there are no
definite legislations or guidelines protecting the buyers and sellers of goods and
services over the electronic medium.
However, several laws acting in unification are trying to regulate the business
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transactions of E-contract. They are as follows,

i. Indian Contract Act, 1872
ii. Consumer Protection Act, 1986
iii. Information Technology Act, 2000
iv. Indian Copyright Act 1957
Like any other types of business, E-contract business also works on the basis of
contracts. It is therefore, structured by the Indian Contract Act, 1872. Any valid and
legal E-contracts can be designed, completed, and enforced as parties replace paper
documents with electronic parallels. The contracts are move in between the service
providers or sellers and buyers.
Earlier, there was no definite law to regulate the intermediaries such as verification
service providers and shipping service providers to safeguard that the product or
service is actually delivered. However, the government has recently acquainted the
Information Technology (Intermediaries Guidelines) Rules 2011.
The actual scope of the security provided under these regulations would only be
known after judicial interpretation of the provisions. However, now it has been
explained that even foreign intermediaries delivered to provide service could be sued
in India.
The payment gateways which footing a very important position as the primary
processor of the payment for the merchants were brought into the legal framework
after proclamation of the Payment and settlement Systems Act, 2007 (PSS Act, 2007).
The PSS Act, 2007 as well as the Payment and Settlement System Regulations, 2008
made under the Act came into effect from August 12, 2008. Further, the Reserve Bank
of India issued additional guidelines initiating all such gateways and payments
processors to register under the said act.
The authority of the transactions of E-contract is established under the Information
Technology Act, 2000 (IT Act, 2000). It explains the reasonable mode of acceptance
of the offer. IT Act, 2000 also rules the revocation of offer and acceptance. However,
definite provisions that regulate E-contract transactions conducted over the Internet,
mobile phones, et cetera are vague. With numerous cross border transactions also
being conducted over the Internet, specific law guarding the Indian customers and
Indian businesses are essential and Indian laws are gravely insufficient on this issue.
In a bid to safeguard security, the government has made digital signatures necessary in
several E-contract transactions mainly in the government to government (G2G) or
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government to business (G2B) framework with a view to safeguarding the identity of

the transacting parties. E-contracts transactions on these modes require digital
signatures as essential parts. They are used for the verification of the electronic
contracts. These are controlled by the IT Act, 2000 which provides the outline for
digital signatures, their issues and verification.
The Act thus tries to safeguard that trust between both the parties is maintained
through verification of identities and help prevent cybercrimes and ensure cyber
security practices.
In the light of the above discussion, it is to be said that the present laws in respect of
the guidelines of E-contract and its related operations are not suitably serving the
purpose. Propagation of laws is creating confusion in the smooth procedures of the Econtract accomplishments.
Further, the present laws are salient on features of e-contract such as payment
instrument and delivery instrument and present standard practices which have been
settled by the industry. The Reserve Bank of India, however, has tried to support the
electronic payment mechanism through various orders, but such orders can only act as
a stopgap procedure.
The most important order in this regard was the application of second factor
verification in all Indian Payment Gateways. Commonly recognised as Verified by
Visa or MasterCard Secure Code, this had made card transactions on the Internet
moderately more secure.

I .COMPONENTS OF AN E-CONTRACT
1. Offer
(1) The law already recognizes contracts formed using facsimile, telex and other
similar technology. An agreement between parties is legally valid if it satisfies the
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requirements of the law regarding its formation, i.e. that the parties intended to
create a contract primarily.
(2) This intention is evidenced by their compliance with three classical cornerstones
i.e. offer, acceptance and consideration. One of the early steps in the formation of
a contract lies in arriving at an agreement between the contracting parties by
means of an offer and acceptance.
(3) An advertisement on website may or may not constitute an offer, as offer and
invitation to offer are two distinct concepts. Being an offer to unspecified person,
it is probably an invitation to treat, unless a contrary intention is clearly
expressed.
(4) The test is of intention whether by supplying the information, the person intends
to be legally bound or not. When consumers respond through e-mail or by filling
in an online form, built into the web page, they make an Offer. The seller can
accept this offer either by express confirmation or by conduct.

2. Acceptance
(1) Unequivocal unconditional communication of acceptance is required to be made
in terms of the offer, to create a valid e-contract. The critical issue is when
acceptance takes effect, to determine where and when the contract comes into
existence.
(2) The general receipt rule is that acceptance is effective when received. For
contracting no conclusive rule is settled. The applicable rule of communication
depends upon reasonable certainty of the message being received.
(3) When parties connect directly, without a server, they will be aware of failure or
partial receipt of a message. Such party realizing the fault must request retransmission, as acceptance is only effective when received.
(4) When there is a common server, the actual point of receipt of the acceptance is
crucial in deciding the jurisdiction in which the e-contract is concluded. If the
server is trusted, the postal rule may apply, if however, the server is not trusted or
there is uncertainty concerning the e-mails route, it is best not to apply the postal
rule. When arrival at the server is presumed insufficient, the receipt at the mail
box rule is preferred.

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3. Consideration and Performance

(1) Contracts result only when one promise is made in exchange for something in
return. This something in return is called consideration. The present rules of
consideration apply to e-contracts.
(2) There is concern among consumers regarding Transitional Security over the
Internet. The e-directive on Distance Selling tries to generate confidence by
minimizing abuse by purchasers and suppliers. It specifies the following,
(i) A list of key points, must be supplied to the consumer in a clear and
comprehensible manner.
(ii) Written confirmation, or confirmation in another durable medium available and
accessible to the consumer, of the principle points.
(iii)
The right of withdrawal enabling consumers to avoid deals entered into
inadvertently or without sufficient knowledge, providing for seven-day coolingoff period free from penalty or reason to return the goods or reimburse the cost of
services.
(iv)
Performance should be delivered within thirty days of order unless otherwise
expressly agreed.
(v) Reimbursement of sums lost to fraudulent use of credit cards. It places the risk of
fraud on the credit card Company, requiring them to take steps to protect their
position.
(vi)
On the other hand, there is also need to protect sellers from rogue purchasers.
For this, the provision of charge-back clauses and encouragement of prepayment by buyers is recommended.
(vii) Thus, this Directive adequately protects rights of consumers against unknown
sellers and sellers against unknown buyers.

4. Liability And Damages

(1) A party that commits breach of an agreement may face various types of
liability under contract law. Due to the nature of the systems and the networks
that business employ to conduct e-commerce, parties may find themselves
liable for contracts which technically originated with them but, due to
programming error, employee mistake or deliberate misconduct were executed,
released without the actual intent or authority of the party.
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(2) Sound policies dictate that parties receiving messages be able to rely on the
legal expressions of the authority from the senders computer and this legally
be able to attribute these messages to the sender.
(3) In addition to employing information security mechanisms and other controls,
techniques for limiting exposure to liability include the following,
Trading partner and legal technical arguments
Compliance with recognized procedures, guidelines and practices
Audit and control programmers and reviews.
Technical competence and accreditation
Proper human resource management
Insurance
Enhance notice and disclosure mechanisms
Legislation and regulation addressing relevant secure electronic
commerce issuing.

Forms of EContracts
Exchange of
E-mail

Website
Forms
E-ticketing,
software etc

Online
agreements
Web Wrap,
Click Wrap &
Browse Wrap

II .FINE PRINT W.R.T E-CONTRACTS

1. General Requirements
Enforceability of electronic contracts will generally require:
(1) Sufficient notice of terms (particularly onerous terms specifically brought to
attention)
(2) Sufficient opportunity of the user to consider terms and to decline

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(3) Evidence of acceptance of terms that is sufficiently clear and positive as to

demonstrate actual consent to be bound by terms
(4) The absence of terms that are unconscionable or greatly unfair

B) Specific actions to take and avoid to achieve enforceability

(1) Presentment & review of terms and conditions:
(i) Web site operators should ensure that notice of the existence of user terms
and conditions are clearly presented to potential users of the web site
(ii) Do not rely solely on legal terms that are merely posted on the web site
(whether by hypertext link on the home page or otherwise buried on pages
deeper in the site) and require the user to find and/or review on their own
initiative (i.e. so-called browse-wrap)
(iii) Users should not be able to agree to terms and conditions and/or be
permitted to access and use the site and/or obtain products and services
available through the site without having been presented with the terms of
the proposed agreement and agreeing to such terms of use
(iv) Ensure that the users ability to review terms and conditions is as simple
and straightforward as possible if terms are multiple pages, user should be
able to easily navigate back and forth
(v) All terms and conditions governing access and use (e.g. user terms, privacy
policies, etc.) should be consistent and work together in a coherent manner
(vi) The terms and conditions should always be accessible to the user (i.e.
before, during and after the review and acceptance process) and be capable
of being retained by the user consider automatically emailing terms to
end user confirming terms and conditions immediately after users'
agreement to same
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C) Compliance with Legislation & Laws:

(1) Adherence to electronic commerce legislative requirements concerning formal
requirements of electronic contracts (e.g. statutory obligations concerning
writing, signatures, record retention, use of electronic agents, etc.).
(2) If the law requires specific agreement or consent to a particular type of term
(e.g. privacy legislation), the format of the consent / consent process should
comply with that legal requirement
(3) Avoid terms and conditions that are unconscionable or greatly unfair (also
includes avoiding practices / contracting processes and structures that might
also be considered to be unconscionable or particularly onerous)
(4) If some terms and conditions are, or could be construed as, unusual, unfair or
unduly onerous, use efforts to highlight such terms and conditions (bold
typeface, capital letters, etc.)

D) Third Parties:
(1) It is not unusual for many web site operators to use the services of third parties
in the performance of some web site services that is transparent to the user.
Often the user ends up (unbeknownst to the user) on a third party site that
remains branded by the original web site operator, but which has the
different terms and conditions of the third party service provider, resulting in a
potential contractual conflict of terms. Therefore ensure the design of the web
site contemplates this issue when using third party sites.
E) Acceptance of Terms
(1) Evidence of acceptance of terms that is sufficiently clear and positive as to
demonstrate actual consent to be bound by terms (e.g. clicking a button or icon
or typing in the specified words of agreement or rejection)
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(2) Examples of clear words of agreement include "I agree," "I accept," "I
consent," or "I assent."
(3) Do not use vague or ambiguous phrases such as "OK", "Continue," "Next"
"Submit," or "Enter."
(4) Together with the mechanism for indicating acceptance (icon, button, words,
etc.) include a statement that indicates the consequences of acceptance. For
example: "By clicking on the Yes' button you acknowledge and confirm that
you have read, understand and agree to be bound by the terms and conditions
set out above".
(5) Consider requiring the user to type their name or provide some other (legal)
form of unique identifier to assist in confirming identity and intent to be bound
by the terms and conditions
(6) Avoid acceptance by conduct depending on the structure and
circumstances, such manner of acceptance creates significant risk of nonenforceability
(7) The acceptance process should provide a reasonable method to avoid, or to
detect and correct, errors that could be made by the user in the review and
acceptance process
F) Changes and Records
(1) If circumstances warrant (significant transactions / risk) consider logging
mechanism that tracks specific users assent to terms and conditions
(2) Consider version control issues concerning changes to the terms and conditions
over time (i.e. so you can be certain which specific version of the terms and
conditions a user will have agreed to)
(3) Avoid rights of one party to unilaterally amend the terms and conditions

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(4) Ensure a notice mechanism of proposed changes to the terms and conditions
exits and that provides means for ensuring the users acceptance of the
proposed changes
(5) Compliance with legal requirement for record keeping and form of records (as
noted above) if records to be kept in electronic format.

G) Consequences of Non Acceptance:

(1) If the user does not agree with the presented terms, such non-agreement should
result in the user being denied access to whatever the click-through agreement
is granting the user (i.e. without agreement to the terms, the user should not be
able to complete the transaction).

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Chapter 3 ROLE OF JUDICIARY

I .CASES
1. Landmark case
P.R. Transport Agency vs. UOI & Ors. AIR 2006
In The High Court Of Allahabad
(1) Appellants: P.R. Transport Agency through its partner Sri Prabhakar Singh Vs.
Respondent: Union of India (UOI) through Secretary, Ministry of Coal, Bharat
Coking Coal Ltd. through its Chairman, Chief Sales Manager Road Sales,
Bharat Coking Coal Ltd. and Metal and Scrap Trading Corporation Ltd.
(MSTC Ltd.) through its Chairman cum Managing Director
(2) Background of the case
(i) Bharat Coking Coal Ltd (BCC) held an e-auction for coal in different lots.
P.R. Transport Agencys (PRTA) bid was accepted for 4000 metric tons of
coal from Dobari Colliery.
(ii) The acceptance letter was issued on 19th July 2005 by e-mail to PRTAs e-mail
address. Acting upon this acceptance, PRTA deposited the full amount of Rs.
81.12 lakh through a cheque in favour of BCC. This cheque was accepted and
encashed by BCC.
(iii)
BCC did not deliver the coal to PRTA. Instead it e-mailed PRTA saying
that the sale as well as the e-auction in favour of PRTA stood cancelled "due
to some technical and unavoidable reasons".
(iv)
The only reason for this cancellation was that there was some other
person whose bid for the same coal was slightly higher than that of PRTA.
Due to some flaw in the computer or its programme or feeding of data the
higher bid had not been considered earlier.
(v) This communication was challenged by PRTA in the High Court of
Allahabad. [Note: Allahabad is in the state of Uttar Pradesh (UP)]
(vi)
BCC objected to the territorial jurisdiction of the Court on the
grounds that no part of the cause of action had arisen within U.P.
(3)

Issue raised by BCC

(i)
The High Court at Allahabad (in U.P.) had no jurisdiction as no part of the
cause of action had arisen within U.P.
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(4)

Issues raised by PRTA

(i)
The communication of the acceptance of the tender was received by the
petitioner by e-mail at Chandauli (U.P.). Hence, the contract (from which
the dispute arose) was completed at Chandauli (U.P). The completion of the
(ii)

contract is a part of the cause of action.

The place where the contract was completed by receipt of communication
of acceptance is a place where 'part of cause of action' arises.

(5)

Points considered by the court

(i)
With reference to contracts made by telephone, telex or fax, the contract is
complete when and where the acceptance is received. However, this
principle can apply only where the transmitting terminal and the receiving
(ii)

terminal are at fixed points.

In case of e-mail, the data (in this case acceptance) can be transmitted from
anywhere by the e-mail account holder. It goes to the memory of a 'server'
which may be located anywhere and can be retrieved by the addressee
account holder from anywhere in the world. Therefore, there is no fixed

(iii)

point either of transmission or of receipt.

Section 13(3) of the Information Technology Act has covered this difficulty
of no fixed point either of transmission or of receipt. According to this
section ...an electronic record is deemed to be received at the place where

(iv)

the addressee has his place of business."

The acceptance of the tender will be deemed to be received by PRTA at the
places where it has place of business. In this case it is Varanasi and
Chandauli (both in U.P.)

(6)

Decision of the court

(i)
The acceptance was received by PRTA at Chandauli / Varanasi. The
(ii)

contract became complete by receipt of such acceptance.

Both these places were within the territorial jurisdiction of the High Court
of Allahabad. Therefore, a part of the cause of action had arisen in U.P. and
the court had territorial jurisdiction.

2. Other Judicial Decisions:

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(1) Delhi High Court recently in the case of Himachal Joint Venture vs. Pani
Peena World Transport has described email contracts to be valid for all
purposes. This case law has followed the earlier decision of Honble Delhi
High Court itself, in Ratna vs. Vasutech Ltd. The verdict of Honble Supreme
Court in Citi Bank vs. TLC (Manu / SC / 3879 / 2007) 9 and the Honble
supreme court has also said in the case of Cable network vs. CNN that in case
of email contracts it is the duty of the parties to prove that everything is
bonafied and genuine and nothing has been concealed and no fraud or any
other kind of technical or electronic mistake has been committed.
(2) The Supreme Court in Trimex International FZE Ltd. Dubai VS. Vedanta
Aluminum Ltd. has held that e-mails exchanges between parties regarding
mutual obligations constitute a contract.

Chapter 4 : COMPARATIVE STUDY

I .DIFFERENCE BETWEEN E-CONTRACTS AND TRADITIONAL

CONTRACTS
In e-commerce, the meaning and role of contract did not change, but the form of it
9 AIR 2008 SC 118
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undergone a great change:

1. Change in business environment The contractual environment being different,
fundamentals differ in traditional and E-contracts. Traditional contracts take place
in the real world, where the two sides can deal face-to-face. However electronic
contracts take place in the virtual space, the two parties to a contract seldom meet
each other. Their identity is established by the password, or any other mechanism
for authentication, identification or certification.
2. Adopts a different form A traditional contract undergoes various changes when
it takes the form of an e-contract. Offer and commitment to the time of dispatch
and receipt of the contract is much lesser compared to the traditional complex
procedure of formulating a contract. Even something as fundamental as paper work
which can later provide for evidence of the contract is missing, however in case of
an E-contract the substitute to paperwork is text which is communicated and agreed
upon by both the contracting parties.
3. Divorce from traditional method Electronic contract information is contained
in the data message; there is no distinction between originals and copies.
Traditional methods to sign and seal cannot be due to the lack of physical
involvement of a human.
4. The rights and obligations of parties to the contract differ In an electronic
contract, not only are the rights and obligations of the entity determined by the
clauses of the contract, but also, there is a special form of the contract arising from
the formal rights and obligations, such as digital signatures and legal relationships.
In the substantive rights and obligations of legal relations, some in traditional
contracts do not attach great importance to the rights and obligations. In the
electronic contract, those are very important, such as information disclosure
obligations, protection of privacy obligations.

II .E-CONTRACTS IN INDIA
Contracts have become so common in daily life that most of the time an individual
does not even realize that he/she has entered into one. Right from hiring a cab,
shopping at the local grocer, signing up for a music class, to buying airline tickets
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online, innumerable things in our daily lives are governed by contracts. Therefore it
is important to study the law of contracts relevant in India.

1. The Indian Contract Act, 1872

It governs the manner in which contracts are formulated and executed in India. It
governs the way in which the provisions in a contract are implemented and codifies
the effect of a breach of contractual provisions.
It provides a framework of rules and regulations, which governs formation, and
performance of contract. The contracting parties themselves decide the rights and
duties of parties and terms of agreement. The court of law acts to enforce
agreement, in case of non-performance.
2. Electronic contracts
Taking an example of a contract in which the two contracting parties are an Indian
exporter and an American importer. One option would be that one party first draws
up two copies of the contract, signs them and couriers them to the other, who in
turn signs both copies and couriers one copy back. The other option is that the two
parties meet somewhere and sign the contract.
In the electronic age, the whole transaction can be completed in seconds, with both
parties simply affixing their digital signatures 10 to an electronic copy of the
contract. There is no need for delayed couriers and additional travelling costs in
such a scenario.
Initially, there was a certain level of apprehension amongst the legislatures to
recognize this modern technology. However, now, mostly because of the necessity,
which arose due to the increasing number of E-contracts being entered into, many
countries have enacted laws to recognize electronic contracts. The conventional
law relating to contracts is not sufficient to address all the issues that arise in
electronic contracts.
As far as India is concerned, the conventional law relating to contracts i.e. The
Indian Contract Act 1872 was quite unequipped to deal with the issue of Electronic
Contracts. The Information Technology Act, 2000 was enacted by the Indian
10 Digital Signature Certificates (DSC) are the digital equivalent (that is electronic format) of physical or paper certificates.
Examples of physical certificates are drivers' licenses, passports or membership cards. Certificates serve as proof of identity of
an individual for a certain purpose; for example, a driver's license identifies someone who can legally drive in a particular
country. Likewise, a digital certificate can be presented electronically to prove your identity, to access information or services
on the Internet or to sign certain documents digitally.

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Parliament to resolve some peculiar issues which mushroomed in the process of

formulation and authentication of Electronic Contracts.

III .ELECTRONIC CONTRACT IN UNITED STATES OF AMERICA

1. The growth in electronic commerce has proportionally increased the use of

electronic contracts. Between 1998 and 2002 most countries adapted their domestic
commercial legislation to recognize electronic contracts and signatures as legally
valid instruments. However, some under-developed countries are still in the
process of accomplishing this task. Even so, despite the inexorable expansion of ecommerce and the promulgation of laws protecting e-commerce contracts, many
businesses and Internet users do not know precisely what law applies to their ecommerce contracts.
2. The following laws constitute the basic legal framework of electronic contracts in
the United States. In addition to these specific laws, there are some international
laws that may well apply to electronic contracts if the contractual parties decide to
abide by them.
(1) The Uniform Electronic Transactions Act (UETA) It is an important U.S.
legislation applicable to electronic contracts. UETA, as expressly defined in
Articles 3 and 4, only applies to transactions related to business, commercial, and
government matters; and to transactions conducted by electronic means.
(2) The U.C. Electronic Signatures in Global and National Commerce Act (E-Sign
Act), 2001 The Act recognizes the validity of contracts entered electronically, and
where electronic signatures have been incorporated. The main purpose of this Act
was to bestow on electronic contracts, the same authority as its paper-base
counterpart.

(3) Uniform Computer Information Transaction Act (UCITA) It is a relevant U.S. set
of proposed model rules applicable to the formation of electronic contracts,
especially to those e-contracts on electronic materials, or "computer information
transactions" as the Act calls them. UCITA has not been adopted by many states
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and several of the states that have adopted UCITA have included multiple
amendments to the original UCITA text. Thus, when dealing with licensing or
transfer of computer software within the United States, it is important to check
whether UCITA"s rules have been adopted by the state legislator of the jurisdiction
at hand.

The General Dilemma

Chapter 5 : CONCLUSIONS & SUGGESTIONS

I .Conclusion
The Law of Contract is the Bedrock on which the whole superstructure is built on.
Business, trade, and commerce can flourish only when the law of the land is definite
and clear in the minds of the parties. This element of certainty should exist across all
forms of contract, whether they be negotiated in conventional form of postal
communication or the modern way of electronic communication.
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Electronic contracts facilitate transactions and agreements electronically without the

parties meeting each others. This means that the traditional contract process of offer,
acceptance and agreement to transact through electronic mode than physical mode of
paper.
E-Commerce to succeed such contracts need to be validated legally an alternate mode
of transaction through online using the latest technological developments. This is
aimed at:
1. For creating a secure atmosphere of transacting online with alternate mode to
paper and writing.
2. To create an electronic documentation system which will safeguard the
contracting parties on par with the traditional mode of contracts.
3. To create statutory status and monitoring/verifying authorities for such electronic
transaction.
4. To check frauds intentional or unintentional transactions to promote and build
confidence in genuine online transactions.
5. To create necessary legal structures to oversee such transactions.
6. To establish standard rules and regulation for smooth functioning of online
transactions.
7. To make Digital signature legally valid and incorporating the same with the
existing legal regime of contracts, sale of goods, evidence and consumer acts.
Hence, such electronic transactions will depend on the appropriate legal framework,
which recognizes electronic records or writings or digital signatures. It should
facilitate for a secure system of such transactions and should create evidentiary value
of such records.

It can finally be deduced that,

1. Electronic form of contracting has emerged as a major form of formation of
contracts and its value has increased significantly over the period of time.
2. The Indian Legislature in order to control the rights and liabilities of parties
in case of Electronic Contracts has passed the IT Act,2000 and the Electronic
Commerce Act,1998. The provisions of these acts validate the formation of

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electronic contracts. The offer and acceptance given in form of data messages
will be held valid.
3. However the provisions of the act are to be read in consistency with the
Indian Contract Act,1872 and the aim and objectives of the contract should
not be in contravention to the provisions of the Contract Act.
4. We have also seen from various judicial decisions that offer and acceptance
given in form of E-Mails would be held as valid and the contract thus formed
would be binding.
5. The Electronic Contracts are an amalgamated form of Cyber Law and
Contractual law and thus it derives its authority from both.

II .SUGGESTIONS
Although, e-contracts are gaining acceptance in large numbers,due to the lack of
clarity in some aspects, there may arise, infuture some disputes.it is advisable that
there should be a policy to promote e-contracts. Below are some suggestions which
will help promotion and acceptance of e-contracts with the general public as well as
business community:
1. The government should conduct training classesfor judicial officers as wel as
other officers of the govt. to appreciate the forensic aspects of computers and the
internet. Many a times, the judicial officers do not know the intricacies of the
new technology, and thus the quality of the judgement may suffer, and there may
be delays in judgement.
2. The Indian Contract Act requires that for an enforceable contract,the parties to the
contract must be above 18 years of age. However, the basic problem in electronic
sphere is that there is no full proof way of knowing the correct age of the
customer. Thus, in a recent case filed in the Delhi High Court, the bench asked
orally as to how minor persons are registering with online sites such as Fcaebook,
Orkut, when they do not fulfil the requirement of being above the age of 18 years.
The government must frame a policy whereby online service providers should try
to ascertain the age of the customer before such customers are registered on their
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sites. Failure to ensure this can lead to information, privacy and money of minor
customers being used and abused.
3. Presently, electronic communication is still regulated by the Indian Telegraph Act.
This Act was framed at a time when there was no idea of the internet or the
modern communications systems we have today. Therefore, to suit todays
exigencies, the ancient law is being stretched beyond imagination. There is an
urgent requirement to codify the laws relating to electronic communication as
well as e-contract and bring them into harmony with each other. We should also
take inspiration from the various international treaties and standards regarding
contracts and electronic communication so that there is no hurdle to international
commerce and business with India. Particularly, the model laws framed by
UNICITRAL are very helpful in this regard.
4. Since the electronic and communications field is very dynamic and fast-changing
area, many of the definitions and concepts provided for the lawws become very
soon outdated. Therefore, to obviate the possibility of injustice, the courts should
give high value to the evidence of experts in the computer field, who will be
having knowledge of the latest trends.
5. Idealy the parties to the contract should have freedom of contract, that is, the
terms of the contract should me mutually agreed and accepted upon by the parties.
Such acceptance can come only from open bargaining and negotiation.
Unfortunately, in e-contracts, the seller is highly advantageous situation, and he
employs it to impose unfair terms on the buyer. There is a need to regulate the
imposition of such unfair terms so that the intersts of the consumers are not
harmed. Therefore, Consumer ProtectionAct, 1986 and Competition Act, 2002
need a re-look.
The question of jurisdiction is very important as regards to e-contract. The Supreme
Court of India in a famous case held that there would be instantaneous communication
when transactions are conducted over telephone. However, later developments like the
introduction of the Information Technology Act, 2000 have seriously impacted the
instantaneous communication rule since the Information Technology provides that
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email communication is deemed to be complete when the email goes out of the
computer of the sender. Therefore, there is a serious need to revise and update the laws
regarding jurisdiction under e-contracts.

The Fine Print: Often Ignoredonly to be regretted later.

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BIBLIOGRAPHY

BOOKS
Pollock, Principles of Contract (13th ed., 1950)
Treitel, The Law of Contract, (9th ed., 1995)
SV Joga Rao, Computer Contracts & Information Technology Law(2 nd
Edition,2005), pg. 182
P. Radha Krishnan, E-Contract Modeling and E-Enactment
Legal Aspects of Electronic Contracts, Micheal Giesler,Markus Gruenz
C.M. Abhilash, E Commerce laws in Developing countries: An Indian Perspective
Karnika Seth, IT Act 2000 vs 2008
Dr. Gokulesh Sharma, Various aspects of E-Mail Contracts
Sarabdeen Jawahitha, Noor Raihan Ab Hamid; E-Contract and the Legal
Environment
UNICITRAL Model Law on Electronic Commerce,1996

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