E-Contracts, Types of E-contracts

E-Contracts, Types of E-contracts

In today’s time, we are surrounded by the Contracts in our lives. We do daily basis contracts, some we do knowingly and some without knowingly. The contract from buying a product online to making a contract with an international identity through the internet makes an e-contract between you and another party. E-contracts are also known as digital contracts. The use of websites like Amazon and Flipkart, to buy online products is also an e-contract example. There is no need to go anywhere to buy the product online.

E-Contracts

An e-contract is a contract where the offer and acceptance, and consideration etc., are done by electronic means.  An E-contract is also a valid form of contract but there is just one important factor involved is that the E-contracts come into force with the help of the Internet or digital mode of communication. We use electronic contract signing to make such types of contracts. With the help of e-contracts, now we are able to make contacts worldwide. It provides the best opportunity for sellers to reach their consumers without any help from agents or middlemen. The person can buy the goods from the USA by sitting in India just by doing a few clicks on his electronic gadget.

E-Contract meaning

The contracts which are not paper-based and are created electronically in nature are known as e-contracts. Normally, these kinds of contracts are made for speedy entering into a contract. These types of contracts perform the best role where the parties of the contract live in the different places of the world and it is very tough to meet in reality due to far distance. They can make contracts easily and fulfil their requirement online. The e-contracts are not just saving your time and fast the process but it is also beneficial and easy for parties to store and manage the documents of the contracts. If either of the party wants to recall the terms of the contract which they forget, they can easily read it again in just a few clicks.

What is E-contract?

The e-contract takes its legal authority from section 10A of the IT act. It 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 mere on the ground that it was created electronically.” It means the E-electronic contracts, which follow the essentials of a valid contract and are made electronically, shall be enforceable by law.

In the case of the State of Delhi vs Mohd. Afzal and others, the court held that the electronic pieces of evidence are admissible as evidence in the court.

E-contract example

There are thousands of e-contract examples that we use in our daily life. Your last product which you bought from an online shopping website was an E-contract.

Freelancing is very popular in today’s time. Due to the decrease in the number of many jobs, people are doing freelancing. There are many freelancing platforms such as Upwork and Fiverr etc. which help a freelancer to do online work for a person who is sitting far away from that person. But due to the E-contract, you just accept his work offer or give him your offer for that work, if the person accepts the proposal, you can perform your part and get the specific amount of consideration.

Similarly, a person drawing his money from an ATM is also an example of an electronic contract.

The installation of software in your laptop while accepting its terms and conditions is an example of an e-contract.

Validity of E-Contracts in India

In the eye of the law, the E-contract is also considered as any other physical contract. This is also governed by the Indian contract act. Therefore, the validity of an e-contract in India will depend if it is satisfying all the essentials of a valid contract. Which are:

Formation of E-Contracts

The e-contract is also consisting an offer and acceptance. Also, it is enforceable by law. The e-contract is formed online. There are some common procedures that are used for the formation of E-Contracts:

End-User License Agreements

It happens many times that we click on “I accept” or “I accept the terms and conditions” to install software or anything while using the electronic device. It is a valid form of contract because we are accepting the proposal of the company online.

Emails

The parties to the contract may create the offer and acceptance by sending the emails to each other.

Websites

When we use the e-commerce website to purchase the online product, we will the order form where we mention our name and how many quantities of the product we want. This form is an e-contract. We fill the form and place the order. Now the order will be delivered to the address given by us.

Nature of E-contract

  • In most cases, parties do not meet physically.
  • No physical boundaries.
  • No handwritten signature
  • Most of the time, no handwriting is required.
  • These types of contracts can be used in court as evidence.
  • There is no single authority to major the whole process
  • In case of breach of contract, the jurisdictional issues are major.
  • The risk factor is high.

Essentials of E-contract

The essentials of E- Contracts are almost the same as the essentials of a valid contract. like:

Offer

There must be offered by one party to another party so that they can make the contract between each other. The offer is defined under section 2(a) of the act. Offer means the will or expression of one party to come legally into the contract with another party.

Acceptance

There is a rule that the acceptance of the offer should be communicated to the offeror. Once the offer is accepted by another party. The contract will come into existence.

Revocation of offer and acceptance

The parties should have the power to revoke the offer and acceptance before the time limit given in the contract.

Lawful consideration

The consideration for the E-contract should be lawful.

Lawful Object

The object of the contract should be lawful. Any contract where the object is against the public policies, the contract will be void and illegal.

Competent parties

The parties to the contract must be competent to make a contract with each other. The party should not minor, unsound mind and be forbidden by law to make the contract.

Free consent

The consent taken by all the parties to make the contract must be free consent.

Certainty of Terms

There must be the certainty of terms and conditions between both parties.

Types of E-contracts

The main types of E-contracts are:

Click-Wrap agreements

While using any website or any software, we are very familiar with the “I agree” phase, and we press the button without thinking twice. However simple it may appear, it may land us in serious trouble as it gives rise to a legally enforceable valid contract. This type of contract can be legally enforced against the user.

Click-wrap agreements are generally referred to as those agreements or long blocks which nobody reads, these blocks contain terms and conditions of the agreement. But it happens many times that we just click on I agree and continue to the next page.

After clicking on the “I agree” button, it means we accepted all written terms and conditions of the agreement. Such types of agreements are less negotiable and the user has to accept this if he really wants to use that software or any other thing related to this agreement.

For example, you have seen two options: either pay or back while sending the money. Or, while installing software

The terms of services, privacy policies, copyright policies and non-disclosure policies are commonly used for the click-wrap agreement. Since it is a convenient way with minimal hassles to enter into a contract, it is gaining a lot of popularity nowadays.

Click-Wrap Contracts

Structure of Click Wrap Agreement

A click-wrap agreement is normally provided in a check box wherein the user is asked to agree to terms of services and other information asked by the website or the software concerned. However, sometimes, for dual confirmation, the user had to press the agree button in addition to marking the check box.

Features of Click Wrap Agreement

  • These agreements are non-porous i.e., there is no other way to move ahead without clicking the “I agree” button.
  • In this type of contract, the acceptance is very clear as the user will either accept or reject the offer.
  • On the screen, the user should be informed that this is an enforceable contract and a binding on him for his action.
  • The terms and conditions of the agreement shall be in a readable font with sufficient visibility.
  • All the terms and conditions of the agreement shall be consistent with Section 10 of the Indian Contract Act, 1872.
  • The information fed by the user is generally retained by the consumer to avoid any future dispute or litigation.

Case Laws on Click Wrap Agreement

Long v. Provide Commerce, Inc. (2016)

The company was running a flower business through their website named Proflowers.com. The plaintiff purchased a flower arrangement from the website, which was advertised as a “completed assembled kit”. The feature of this item was that the item will be delivered as a “do-it-yourself” kit and the customer had to assemble it accordingly.

When the plaintiff received the arrangement, he claimed that the company had defrauded him and sued the defendant company. He claimed that though the terms and conditions were mentioned on the website, the user was not provided with a chance to go through them.

The court decided the case in the favour of the plaintiff with the reasoning that in the whole order making procedure, there was no such instance when these terms and conditions appeared on the screen.  There was an issue of accessibility and the consumer shall be compensated for the same.

The Hotmail Corporation vs. Van $ Money Pie Inc.

It was one of the first cases in which the validity of the Click Wrap Agreement was upheld by the court. The plaintiff (Hotmail) alleged that the consumer has violated the terms of the agreement as the messages and e-mails were altered after submitting them once. The defendant was also accused of violating the Computer Fraud and Abuse Act, breach of contract, fraud, misrepresentation, etc.

The court after going through the terms and conditions of the agreement clearly held that it is a valid and enforceable agreement in the eyes of the law. Since the customer has violated them, he is liable to pay compensation.

For example, you have seen two options either pay or back while sending the money. Or, while installing software.

Shrink-wrap agreements

Shrink-wrap agreements are mostly related to computer software. The software is mostly distributed in CD-ROMs. When the licensing software is opened by the person for his use, it means he accepts the terms and conditions of that software company.

The term “shrink-wrap” refers to the plastic wrapping which covers the software boxes. This wrapping can be understood as the legally enforceable terms and conditions. As soon as the user removes that wrapping, he is entering into a contract. In simple words, a shrink-wrap agreement is a boilerplate or license agreement containing some terms and conditions packaged with the product. The customer automatically gives his consent when he uses the product.

PC programming organizations are mainly dependent upon this type of agreement. It is a sort of unsigned undertaking given by the customer while submitting to the terms and conditions.

Following are the terms and conditions which can be made through the Shrink-wrap agreements-

  • License
  • Fees and payments
  • Warranties
  • Limitations of liability

The legality of the Shrink Wrap agreement

The validity of the shrink-wrap agreement came into question in the case ProCd Inc vs. Zeidenberg. In this case, the manufacturer has included a shrink license in its packaged software. The customer purchased the software but didn’t follow the license restricting its commercial usage. To enforce the license, the appellant filed for an injunction. The court denied the injunction while stating that though the terms and conditions are not explicitly provided, the license was to be treated as an ordinary contract. Thus, it is enforceable.

Browse-wrap agreements

Browse-wrap agreements are probably seen on many websites while searching or reading anything on websites. They are some kind of pop-ups that ask you to click “OK” or “I AGREE” though, you can use the website with or without clicking there.

In this agreement, there is a hyperlink or website containing the terms and conditions over the screen of the website. When the person agrees to the above-stated terms and conditions, he can access the material available and download the product available therein.

For instance- Electronic commerce websites such as Amazon and Paytm provide a disclaimer while entering their website stating that by accessing or browsing the website, the user has consented to all the terms and conditions. The terms and conditions clause is hyperlinked.  However, it is also observed that sometimes the browsewrap clause is hidden or not explicitly shown on the website page. It may lead to conflict in the future.

Browse-wrap contracts

The legality of Browse Wrap Agreements

The legality of the Browse wrap agreement is not very clear. Unlike the click-wrap agreement, this type of agreement doesn’t ask for any explicit consent from the user. So, the court presumed that it is not binding or enforceable against the customer. The Burden of proof lies on the website owner to demonstrate that the user has complete and actual knowledge of all the terms and conditions mentioned therein.

Electronic Data Interchange

Electronic Data Interchange means to exchange any type of document of a contract by electronic means.

For example, Exchange of bills by fax.

E-mail contracts

Any type of contract where the offer and acceptance are discussed with the help of email is called an e-mail contract.

E-Commerce contracts

The digital contract which is used to buy or sell from the website online is called an E-commerce contract or online shopping contract.

Buying shoes from Amazon is an E-commerce contract

Difference between contract and E-Contract

Contracts E-Contracts
It requires the traditional signatures of the party It needs the digital signatures
The contracts are drafted on the paper These are drafted digitally
Parties are physically present at the time of contract There is no need to present physically while making the contract
They took heavy transaction cost Low transaction cost
More time consuming These are time-saving contract
The risk factor is very low, almost secure There is a high risk involved in the E-contracts

Case laws on electronic contracts

Trimex International FZE Ltd. Dubai vs. Vedanta Aluminum Ltd

It was held in the case that the offer and acceptance conveyed through the email are valid.

Tamil Nadu Organic Private Ltd. and Ors. vs. State Bank of India

The HC of Madras has applied the provisions of the IT act and overserved that the contractual liabilities could arise by the way of electronic means and such contracts are enforceable by law.

State of Punjab and Ors. vs. Amritsar Beverages Ltd. and Ors

It was observed in this case that the computer outputs in various media, papers and any other magnetic form are admissible under section 63 of the Indian evidence act.

E-Contracts FAQs

Are E-contracts legal in India?

Yes, In India, it is legal to do electronic contracts. As long as your contract is accepting the essentials of a valid contract, your contract will be legal.

What is an e-contract?

An agreement that is created electronically and fulfilling the essentials, is called an e-contract.

Why E-contracting is needed?

To make contact with a person who is far away from you, you can use an electronic contract to do a contract with that person.

Conclusion

E-contracts or digital contracts are being used by us in our daily life. It becomes most important to take care while making a digital contract with anyone. It has many benefits like time-saving, money-saving and no need to be present physically for the formation of the contract.


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