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SVKMs NMIMS

School of Law, Mumbai

A Project Submitted
On
E-Contracts and issues involved

In compliance to partial fulfillment of the marking scheme, for Trimester


4 of 2014-2015, in the subject of Contract Law II

Submitted
To
Faculty
Prof. Nanda Paradhey

Submitted By:
Ms. Simran Shah
Roll No. 41
Course: BBA LLB (Hons.)
On 09.07.2014 at 03.00 p.m.

Received by
On date: _______ Time: ________

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ABBREVIATIONS:

Indian Contract Act, 1872 ICA


Information Technology Act, 2000 IT Act
Versus VS
United Nations Commission on International Trade Law UNICITRAL
Uniform Computer Information Transaction Act UCITA
Uniform Electronic Transactions Act UETA
Civil Procedure Code CPC

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TABLE OF CASES
Trimex International FZE Ltd. Dubai VS. Vedanta Aluminum Ltd.
Bhagwandas Goverdhandas Kedia vs. M/S. Girdharilal Parshottamdas
P.R. Transport Agency vs. Union of India and Others
Ratna vs. Vasutech Ltd.
Himachal Joint Venture vs. Pani Peena World Transport
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

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RESEARCH METHODOLOGY:
RELEVANCE OF THE PROJECT:
Our subject is Law of Contracts 2, where in we are studying, analysing and
interpreting the topics of Contractual Agreements. This paper aims to carry out a
research study pertaining to E-Contracts. My topic E-Contracts and issues involved'
forms a part of this subject. This topic has helped me understand an integral area
pertaining to our subject.

OBJECTIVE OF STUDY:
The Objective of this study is to research and analyse E-Contracts and issues
involved' 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, i seeked to make an attempt to answer the following
questions:

1. What is E-Contract?
2. What are the forms of E-Contract?
3. What is the current scenario of E-contracts in India?
4. What are the issues relating to E-Contracts?
5. What are the various legal frameworks in the country?
6. What are the treaties and conventions relating to E-Contracts?
7. What are the various judicial decisions and interpretations relating to E-
Contracts?
8. Difference between E-contracts and Traditional Contracts
9. 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. A
primary way of research could not be adopted for the same due to the nature of the
topic and due to lack of knowledge and skills to do the same.

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INDEX

SR. NO. TOPIC PG. NO.

1 Table of Cases 3

2 Table of Statutes 3

3 Relevance of the Topic 4

4 Objective of the Topic 4

5 Research Hypothesis 4

6 Limitations of Research 4

7 Introduction 6

8 Legal Aspect 13

9 Judicial Decisions 20

10 Comparitive Study 22

11 Conclusion 26

12 Suggestion 27

13 Bibliography 28

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CHAPTER 1: INTRODUCTION
With the advancements in computer technology, telecommunication and information
technology the use of computer networks has gained considerable popularity in the
recent past; computer networks serve as channels between for electronic trading across
the globe. By electronic trading we dont just mean the use of computer networks to
enter into transaction between two human trading partners by facilitating a
communication but electronic trading or electronic commerce also means those
contracts which are entered between two legal persons along with the aid of a
computer program which acts as an agent even when it has no conscious of its own but
also by initiating it.

An e-contract is a contract modeled, executed and enacted by a software system.


Computer programs are used to automate business processes that govern e-contracts.
E-contracts can be mapped to inter-related programs, which have to be specified
carefully to satisfy the contract requirements. These programs do not have the
capabilities to handle complex relationships between parties to an e-contract.
E-contract is any kind of contract formed in the course of e-commerce by the
interaction of two or more individuals using electronic means, such as e-mail, the
interaction of an individual with an electronic agent, such as a computer program, or
the interaction of at least two electronic agents that are programmed to recognize the
existence of a contract.
Traditional contract principles and remedies also apply to e-contracts. This is also
known as electronic contract. With the changing needs of time, a new concept of E-
Contracts or Electronic Contracts has come up with the development of Electronic
Commerce system across the globe. Electronic commerce can be defined as
Electronic buying and selling on the Internet and includes all the activities that a firm
performs or selling and buying services and products using computers and
communication technologies. 1 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 digital signatures to an electronic copy of the
1
SV Joga Rao, Computer Contracts & Information Technology Law (2nd Edition, 2005), pg. 182

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contract. There is no need for delayed couriers and additional travelling costs in such a
scenario.
In a global commercial environment, parties are entering into different types of
transactions. These may include lease agreements, contracts governing the sale and
purchase of goods, negotiable instruments, loan agreements and the like. In order to
support electronic transactions in a similar way as conventional transactions electronic
contracts are required, which perform the same function and meet the same
requirements as conventional contracts. Out of the basics of the contract law and the
contracting process described in the previous sections, the following legal
requirements can be summarized upon electronic contracts:
Clear identification of the contracting parties
Clear indication of the subject of the contract
Clear indication of the time period of validity
The contract has to have valid signatures of the involved parties certifying their
acceptance of the liabilities laid down in the contract. The signature should be
accompanied by a date indicating the start of the contract validity.
Non-repudiation, i.e. nobody should be able to change the content of the
contract after the contract is signed.

FORMS OF E-CONTRACTS
An electronic contract is an agreement created and signed in electronic form in
other words, no paper or other hard copies are used. For example, you write a contract
on your computer and email it to a business associate, and the business associate
emails it back with an electronic signature-indicating acceptance. An e-contract can
also be in the form of a Click to Agree contract, commonly used with downloaded
software: The user clicks an I Agree button on a page containing the terms of the
software license before the transaction can be completed.

Categorization of the contracts can be of two types i.e. web-wrap agreements and
shrink-wrap agreements. We often come across these e-contracts in our everyday life
but are unaware of the legal complexities connected to it. Web-wrap agreements are
web based agreements which requires assent of the party by way of clicking the I
agree or I confirm link, for example in case EBay by which we accept the terms
and conditions mentioned by the seller. On the other hand Shrink-wrap agreements

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are those, which are accepted by a user when software is, installed from a CD-ROM
e.g. Microsoft Office software. Before analyzing these concepts we must know how
such a contract is entered into, for convenience let us assume the most simple web
wrap agreement entered between the buyer and seller through a computer network.

CURRENT SITUATION OF E-CONTRACT LAWS IN INDIA


With the change in scenario, many legislatures across the globe have implemented
laws to recognize electronic contacts, despite the initial apprehensions regarding the
same. 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. An interesting factor emerging in the world of computer technology has
been the rising of India as a major player in the computer software and resources
sector. The economics of this factor has baffled economists worldwide. A third-world
country, which ranks almost at the bottom of the development could raise to such
potential in one of the worlds most hi-tech and growth-oriented sectors, is indeed
remarkable. Indias position in the Internet industry makes it really explosive. India
will have the largest number of internet-users in Asia by this year-end. The e-
commerce scenario is also bullish. This unprecedented growth of internet, the related
regulatory fears that go with it and the need for providing a legal framework for e-
commerce in India forms the background in which the Information Technology Act,
2000 (the Act) needs to be appreciated. The Information Technology Act, 2000 was
enacted by the Indian Parliament to solve some peculiar issues which came in the
formation and authentication of Electronic Contracts.

THEORIES RELATING TO E-CONTRACTS


1. Receipt Theory:
According to the receipt theory, in cases of an electronic contract the contract
does not come into existence until the acceptance has reached the offeror. The
postal rule will not apply to electronic contracts.

ISSUES RELATING TO E-CONTRACTS

In an online environment, the possibility of minors entering into contracts increases,


more so with the increasing usage of online medium among teenagers (read minors

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here) and their preference to shop online or purchase online goods/services. It becomes
crucial for an online business portal to keep such possibility in consideration and
qualify its website or form stating that the individual with whom it is trading or
entering into the contract is a major.

Stamping of contracts is yet another issue. An instrument that is not appropriately


stamped may not be admissible as evidence unless the necessary stamp duty along
with the penalty has been paid. But payment of stamp duty is applicable in case of
physical documents and is not feasible in cases of e-contracts. However, as the
payment of stamp duty has gone online and e-stamp papers are available, it can
become a possibility later that stamp duty might be asked on e-contracts as well.

The other crucial issue is the consent and the way offers are accepted in an online
environment. In a click wrap and shrink-wrap contract, the customers do not have any
opportunity to negotiate the terms and conditions and they simply have to accept the
contract before commencing to purchase. Section 16(3) of the ICA provides that where
a person who is in a position to dominate the will of another, enters into a contract
with him, and the transaction appears, on the face of it or on evidence adduced, to be
unconscionable, the burden of proving that such contract was not induced by undue
influence shall lie upon the person in a position to dominate the will of the other. So,
in cases of dispute over e-contracts the entity carrying out the e-commerce will have
the onus to establish that there was no undue influence.
Further, section 23 of the ICA provides that the consideration or object of any
agreement is unlawful when it is forbidden by law, or is of such a nature that if
permitted, it would defeat the provisions of any law; or is fraudulent, or involves or
implies injury to the person or property of another, or the Court regards it as immoral
or opposed to public policy.

By way of the IT Act and subsequent amendments to other enactments, there has been
an attempt to bring e-contracts and other forms of contract under a common umbrella.
A few of the important issues faced by the parties in course of execution of e-
contracts have been discussed below.
Section 4 of the Contracts Act, when read with Section 13 of the IT Act, implies that a
binding e-contract would take place once the acceptor of the contract dispatches the

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electronic record such that it enters a computer resource outside the control of the
acceptor.
The Supreme Court in Bhagwandas Goverdhandas Kedia vs. M/S. Girdharilal
Parshottamdas2 held that Section 4 of the Contract Act is only applicable in cases of
non-instantaneous forms of communication and would not apply when instantaneous
forms of communication (like telephone, telex etc.) are used. As Internet
communication does not consist of a direct line of communication between the sender
and receiver of e-mail, e-mail messages would come under the category of non-
instantaneous form of communication, hence attracting the provisions of Section 4 of
the Contract Act. In view of the said statutory provisions and the view taken by the
Supreme Court, it may be inferred that once the acceptance message is put in the
course of transmission by way of an e-mail, a binding contract comes into existence,
irrespective of the fact that whether such acceptance message reaches the mailbox of
the offeror or not and if successfully transmitted, whether the other party has the
knowledge of such receipt or not.
The Civil Procedure Code, 1908 allows a party to choose the jurisdiction either on the
basis of the cause of action or the place of business of the defendant. However, as per
Section 13 of the IT Act an electronic record is deemed to be dispatched at the place
where the originator has his place of business, and is deemed to be received at the
place where the addressee has his place of business. Hence, notwithstanding the place
from where an electronic record is dispatched or received, the place of contract (in
case of an e-contract), is always deemed to be the place of business of the offeror or
the acceptor. In the event, the jurisdictional option available to party on the basis of
cause of action relates to the place of dispatch or receipt of the electronic record, the
only jurisdictional avenue left out for such a party may be the place of business of the
other party. Therefore, the rights granted for an aggrieved party under the CPC may
be substantially curtailed by virtue of Section 13 of the IT Act.
Though the IT Act ensures that the judicial system in India recognize digital signature
as a valid legal tool for authenticating an e-contract. However, such an authentication
under the IT Act has also been subjected to asymmetric crypto system and hash
function, thereby substantially restricting the scope of the said authentication tool.
Further, different nations have validated different standards of electronic signature,

2
1966 SCR (1) 656

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which may act as a hurdle with respect to enforcement of cross border contracts.
The probability of loss of data/records on account of technical errors cannot be ruled
out in case of e-commerce. However, unlike the Uniform Computer Information
Transactions Actin the United States, the IT Act does not capture provisions for such
situations.
On the Internet, as in the off-line world, a contract is formed when there is a bargain
in which there is a manifestation of mutual assent to the exchange and a
consideration. Various forms of online conduct can constitute an offer or acceptance,
and black letter contract law states that the maker of an offer has the right to define
how the offer may be accepted. Thus, on the Internet, one may post an offer and
define any other reasonably appropriate online conduct ("click here to accept offer")
as the only permissible way to accept the offer. However, demonstrating that a given
act was intended to constitute acceptance of an offer is easier if the conduct defined,
as "acceptance" is clear and unambiguous. Requiring the purchaser to type "I accept"
in a box is better than stating, "hit any key to accept."
The rule that the offeror is the "master of the offer" means, among other things, that
an offer may dictate that a limited class of persons can only accept it. The ability to
define the class of persons who may accept an offer takes on additional significance
online due to the cross-jurisdictional nature of Internet communications. Online offers
which may be accessed by the entire world may be illegal when made to persons in
certain jurisdictions, or when directed toward certain classes of person such as
minors. Securities brokers, insurance companies, and others, whose ability to solicit
business in regions where they are not licensed or registered is strictly circumscribed,
use such disclaimers in an attempt to avoid regulatory difficulties in those
jurisdictions. The good news is that regulators seem to be giving substantial weight to
such disclaimers in determining whether web pages accessible in their jurisdiction
constitute violations of local law.
As in the off-line world, an offer must be distinguished from a mere advertisement or
display of goods as to which inquiries of interest are invited. But if an advertisement
meets the requirement of an offer, that is if it manifests an intent by one party to be
bound upon the acceptance by another party, the offer is good until withdrawn and
can be accepted by anyone to whom it is directed. Any ambiguities on this score are
relatively easy to avoid online, perhaps easier than in the off-line world, given the
formalities that necessarily accompany an invitation to enter into an online contract

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(exchange of identity information, credit card information and the like).
It is a general principle of contract law that a party can be bound by the acts of agents
endowed with apparent authority to act on its behalf. An agent has apparent authority
if a party acts in such a way so as to make it reasonable for a third person to believe
that the agent is acting on its behalf. In the online world, a computer program may act
as an online agent, and a party will presumably be bound by offers and acceptances
performed by a computer or program acting on a party's behalf.

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CHAPTER 2: LEGAL ASPECT
THE INFORMATION TECHNOLOGY ACT, 2000 AND INDIAN CONTRACT
ACT, 1872
The objectives of the Information Technology Act, as outlined in the preamble, was to
provide legal recognition for E-commerce transactions, facilitate Electronic
Governance and to amend the Indian Penal Code, Indian Evidence Act 1872, the
Bankers Book Evidence Act 1891 and the Reserve Bank of India Act 1934. The Act
also established a regulatory framework for cyber laws and lays down punishment
regimes for different cyber crimes and offences. With regards to Electronic Contracts
and provisions for online contracting the provisions of the IT Act, 2000 are more or
less similar to the provisions of UNICITRAL Model Laws albeit a few minor changes.
The Indian IT Act,2000 however does not have any express provision regarding the
validity of online contracts. The reason being the technical definition of contract under
Indian Contract Act,1872. The Indian Contract Act 1872 accords statutory effect to the
basic common law principle that a valid contract may be created if it is made by free
consent of parties, competent to contract, for a lawful consideration and with a lawful
object and which is not expressly declared void.3 The Contract Act does not prescribe
any particular method for the communication of offer and acceptance. 4 Thus, there is
no requirement of writing for the validity of contracts, except in such cases where the
requirement of writing is specifically mandated by law. Therefore, the validity of
online contracts could not have been challenged solely on technical grounds even
before the Information Technology Act came into force. While Section 3 provides
authentication to electronic records (including E-Contracts) while can be done through
digital signatures or a form of electronic acceptance to the terms of a contract. Section
4 and Section 5 provide legal recognition to electronic records and digital signatures
respectively. Thus if a person through electronic medium gives his assent to some
specific terms of the contract, he would not be in a position to refute it later. The
electronic records thus formed are considered to be valid for all purposes and shall be
retained in case of a dispute arising as to the terms of the contract, as in accordance
with provisions of Section 7.

3
S.10, Indian Contract Act,1872
4
S.3, Indian Contract Act, 1872

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Section 13 of the IT Act,2000 explains and clarifies, inter alia, when the receipt and
dispatch of electronic records take place and is meant for ascertaining of the time of
dispatch and receipt of information, which is a relevant factor in many contracts. This
provision acts as a functional equivalent of offer and acceptance in case of Electronic
Contracts and provides these contracts with equal legal certainty as the paper based
contractual agreements do.5 Section 13 of the Information Technology Act, therefore,
only offers a framework for understanding the formation of E-contracts in India. It
does not, in any way, alter or modify the existing substantive law of contract. In order
to ascertain the formation of electronic contracts, one has to read Section 13 together
with Section 4 of the Contract Act which enunciates certain rules regarding the
communication of proposals, acceptance and revocation: The communication of a
proposal is complete when it comes to the knowledge of the person to whom it is
made. The communication of an acceptance is complete,as against the proposer,
when it is put in a course of transmission to him, so as to be out of the power of the
acceptor; as against the acceptor, when it comes to the knowledge of the proposer

Section 13 of the Information Technology Act comes in handy when applying these
rules to E-contracts. For example, in the case of an acceptance made by an electronic
record, a combined reading of the two sections will evolve the following rules. The
communication of an acceptance is complete as against the offeror, when the
electronic record is dispatched such that it enters a computer resource outside the
control of the originator (acceptor) and as against the acceptor, when the electronic
record enters any information system designated by the offeror for the purpose, or, if
no system is designated for the purpose, when the electronic record enters the
information system of the offeror, or, if any information system has been designated,
but the electronic record is sent to some other information system, when the offeror
retrieves such electronic record.

Two new sections Section 7A and 10A in the amended Act6 reinforce the equivalence
of paper based documents to electronic documents. Section 7A in the amended Act
makes audit of electronic documents also necessary wherever paper based documents
are required to be audited by law. Section 10A confers legal validity & enforceability

5
C.M. Abhilash, E Commerce laws in Developing countries: An Indian Perspective
6
IT Amendment Act, 2008

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on contracts formed through electronic means. These provisions are inserted to clarify
and strengthen the legal principle in Section 4 of the IT Act,2000 that electronic
documents are at par with electronic documents and e-contracts are legally
recognized and acceptable in law. This will facilitate growth of e-commerce activity
on the internet and build netizens confidence7.

THE ELECTRONIC COMMERCE ACT,1998


With the advent of new technological reforms, the Indian Government and
Legislatures had to think upon to bring relevant changes to the current existing
contractual laws in the country, helping them to strengthen in accordance with the
increasing needs of the society. Howerver, Justice Abu Fazal committee refused to
recommend any changes in the current structure of Indian Contract Act,1872 to make
them relevant to the latest technological developments. A remedy was found by the
Indian Parliament by implementing a separate legislation which updated the current
Indian laws in accordance with the Internet revolution in the country.
The Electronic Commerce Act,1998 was enacted by the parliament to deal with
issue of electronic contracts. It was based on the recommendation of the committee
that the future contracts would largely be based on online and electronic forms of
communication and acceptance due to its smoothness and fastness. The Electronic
Commerce Act included acts which were borrowed from technologically advanced
countries such as Singapore, Malaysia, UN State of Texas, Utah, Illinois and Florida
and modified in accordance with needs of Indian state to deal with various forms of
electronic contracts. The Electronic Commerce Act was passed keeping in view all the
electronic activities which create a contract, and the rights and liabilities covered by it.

The Act is divided into fifteen parts, the main provisions of which are as follows:

Part II of the Act addresses electronic records and electronic signatures. It provides
that, with limited exceptions, electronic records and signatures should be accorded the
same treatment as paper records and signatures for purposes of complying with

statutory writing, signature, evidentiary and record keeping requirements.

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Karnika Seth, IT Act 2000 vs. 2008

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Part III of Act addresses the integrity and authentication of secure electronic records
and secure electronic signatures. Secure electronic records and signatures define
specific categories of records and signatures that are afforded greater evidentiary
presumptions because of their enhanced reliability and trustworthiness.

Part IV of the Act addresses issues of electronic contracting. This Part deals with the
form in which an offer and an acceptance may be expressed and legal recognition of
contracts formed in an electronic medium. This Part aims to provide increased legal
certainty as to the conclusion of contracts by electronic means. Section 15 of part IV
specifically states that the offer and acceptance in case of an electronic contract may
be expressed by means of electronic records or digital signatures and the offer and
acceptance would thus given be valid for the purpose of contract. This section adopts
the basic rule that offer and acceptance may be accomplished through the use of
electronic exchange. There are a number of additional contractual issues that may
arise, including acceptance that varies from the terms of an offer, and cases where an
offer is made electronically and accepted in writing (or vice versa).8 The Act adopts a
more general approach, simply giving recognition to electronic records as a means of
forming a contract. This section also includes provisions governing the formation of
contracts through the use of electronic agents, providing that enforceable agreements
may be formed through the use of electronic agents.

Parts V, VI, VII, VIII and IX of Act address the legal issues related to the use of
digital signatures. Although the electronic contracting sections of the Act have been

drafted to be technologically neutral, Parts V IX has been included to establish rules

for the use of the most prominent current technology. Thus, a digital signature issued
in accordance with Part V will be presumed to be a secure electronic signature.

Part X of the Act addresses the acceptance and use of electronic records and
electronic signatures by governmental entities. This section authorizes any department
or ministry to accept electronic filing of documents and to issue permits, licenses or
approvals electronically. This section also empowers any department or ministry of the

8
Dr. Gokulesh Sharma, Various aspects of E-Mail Contracts

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Government to specify the conditions and procedures for electronic filing or retention
of documents.

The Electronic Commerce Act defines the essentials of a valid E-Contract as


following:
1. That there should be complete reliable electronic record.
2. That there should be highly secure electronic record.
3. That there should be complete reliable electronic signature. If the document is
signed by digital signatures then it should be deemed to be secure electronic signature
and then it shall be secured electronic record.
4. That there should be interaction of electronic agents that confirm or indicate the
existence of contract. Here all the journal principals of Indian Contract Act for a valid
contract may be held applicable.
5. That the attribution must be between originator and addressee, either by self or by
authorized agent.
6. That there should be acknowledgement of receipt of both parties as per wishes of
the parties themselves.
7. That the contract in parties should apply ordinary prudence to keep away any kind
of fraud representation etc. The contracting parties must also assure that the computer
working is free from virus or any other kind of problem which may damage or destroy
the e contract itself. Both parties must assure fairness as far as possible.
8. That the e contract shall be deemed to be original record and it shall be admissible
in the evidence.

UNICITRAL MODEL LAWS


UNICITRAL Model Laws do not define the electronic contracts in any manner.
However they do provide for the enforceability of an electronic contract. The
UNICITRAL Model Law on Electronic Commerce, instead of defining an electronic
contract, merely states that a contract can be made by exchanging data messages and
when a data massage is used in the formation of contract, the validity of such contract
should not be denied.9 However, the Article 2B of the US Uniform Commercial Code
which was later incorporated into the Uniform Computer Information Transaction Act

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Sarabdeen Jawahitha, Noor Raihan Ab Hamid; E-Contract and the Legal Environment

17
1999 states that an electronic contract is a transaction formed by electronic messages
in which the messages of one or both parties will not be reviewed by an individual as
routine step in forming the contract. This explanation replaces the writing
requirement with a record to equate electronic record with paper records and
accepted electronically formed contract as valid.

UNICITRAL MODEL LAW ON ELECTRONIC COMMERCE,1996


In the year 1996, the United Nations Commission on International Trade
Law(UNICITRAL) adopted model law on Electronic commerce.
Article 11 of the UNICITRAL Model Law on Electronic Commerce,1996 provides for
the formation and validity of contracts via the communication of offer and acceptance
being carried in form of data messages and the contract formed in such manner is
prescribed as valid for all reasons. Article 16 of the Model Laws also hold the
contracts formed via data messages applicable on contracts related to carriage of goods
as well. The contract thus formed by the offer and acceptance of data messages would
be considered as good as a contract formed in writing or by any such traditional
means.
The principles expressed in the Model Law are also intended to be of use to individual
users of electronic commerce in the drafting of some of the contractual solutions that
might be needed to overcome the legal obstacles to the increased use of electronic
commerce. The decision to undertake the preparation of the Model Law was based on
the recognition that, in practice, solutions to most of the legal difficulties raised by the
use of modern means of communication are sought within contracts.10
India is a signatory of the UNICITRAL model laws on Electronic Commerce,1996
and based on this the Indian Legislature passed the IT Act, 2000.

UN CONVENTION ON USE OF ELECTRONIC COMMUNICATION IN


INTERNATIONAL TRADE
The UN Convention on Use of Electronic Communication in International Trade was
held with the objective of removing the uncertainty and legal hassles which come in
the way of International Contracts carried out through electronic means. The setting
up of a legal structure to govern such contracts would enhance the legal certainty and

10
UNICITRAL Model Law on Electronic Commerce, 1996

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help states gain access to modern trade routes.The Electronic Communications
Convention applies to the use of electronic communications in connection with the
formation or performance of a contract between parties whose places of business are
in different States. Electronic communication includes any statement, declaration,
demand, notice or request, including an offer and the acceptance of an offer, made by
electronic, magnetic, optical or similar means in connection with the formation or
performance of a contract. The word contract in the Convention is used in a broad
way and includes, for example, arbitration agreements and other legally binding
agreements whether or not they are usually called contracts.
The Electronic Communications Convention affirms in article 8 the principle
contained in article 11 of the UNCITRAL Model Law on Electronic Commerce2 that
contracts should not be denied validity or enforceability solely because they result
from the exchange of electronic communications.

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CHAPTER 3: JUDICIAL DECISIONS
P.R. Transport Agency vs. Union of India and Others11:
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. 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.
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".
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. 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.
This communication was challenged by PRTA in the High Court of Allahabad. 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.

The court in this case held that 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 and, therefore, there is no fixed point either of
transmission or of receipt.
The court interpreting the Section 13(3) of Information Technology Act, 2000 which
provides:
(3) Save as otherwise agreed to between the originator and the addressee, an
electronic record is deemed to be dispatched at the place where the originator has his

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AIR 2006 All 23

20
place of business, and is deemed to be received at the place where the addressee has
his place of business."

The acceptance was received by PRTA at Chandauli/Varanasi. The contract became


complete by receipt of such acceptance. Both these places are within the territorial
jurisdiction of the High Court of Allahabad. Therefore, a part of the cause of action
has arisen in U.P. and the court has territorial jurisdiction. Thus the contract was held
to be valid

Other Judicial Decisions:


Delhi High Court recently in the case of Himachal Joint Venture vs. Pani Peena World
Transport (Manu / DE / 002 / 2008) 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.12 (Manu / DE / 806 / 2007)
The verdict of Honble Supreme Court in Citi Bank vs. TLC (Manu / SC / 3879 /
2007)13 and the Honble supreme court has also said in the case of Cable network vs.
CNN (MANU / DE / 0022 / 2008) 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.

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.

12
AIR 2008 Del 99
13
AIR 2008 SC 118

21
CHAPTER 4: COMPARITIVE STUDY
DIFFERENCE BETWEEN E-CONTRACTS AND TRADITIONAL
CONTRACTS

In e-commerce, the meaning and role of contract did not change, but the form of it
undergone a great change:

(1) The contract of the environment is different. Traditional contracts took place in
the real world, the two sides can deal face-to-face consultation, and electronic
contract took place in the virtual space, the two companies would not even meet each
other in general, in the electronic automated trading, or even people cannot determine
whether the transaction is relatively. Their identity to rely on password authentication
identification or certification body.

(2) Contracts entered into various aspects of the change. Offer and commitment to the
time of dispatch and receipt of the contract than the traditional complex, contract
formation and the composition of the entry into force conditions are different.

(3) The form of the contract has changed. Electronic contract information contained in
the data message, there is no distinction between originals and copies cannot be using
traditional methods to sign and seal.

(4) The rights and obligations of parties to the contract are different. In the electronic
contract, there was not only determined by the contract rights and obligations of the
entity, but also there is a special form of the contract arising from the formal rights
and obligations, such as digital signatures legal relationship. 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 that very important,
such as information disclosure obligations, protection of privacy obligations.

(5) The electronic contract performance and payment of the complexity the more
traditional contract.

(6) Changes in the form of electronic contract are closely related to contract law had a
significant impact. Such as intellectual property law, law of evidence.

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E-CONTRACTS IN INDIA
Contracts have become so common in daily life that most of the time we do not even
realize that we have entered into one. Right from hiring an auto to buying airline
tickets online, innumerable things in our daily lives are governed by contracts.

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.

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.

Electronic contracts (contracts that are not paper based but rather in electronic form)
are born out of the need for speed, convenience and efficiency.

Imagine a contract that an Indian exporter and an American importer wish to enter
into. 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 to an electronic copy of the contract.
There is no need for delayed couriers and additional travelling costs in such a
scenario. There was initially an apprehension amongst the legislatures to recognize
this modern technology, but now 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
Parliament to solve some peculiar issues which came in the formation and
authentication of Electronic Contracts.

23
ELECTRONIC CONTRACT IN UNITED STATES OF AMERICA

The growth of electronic commerce has proportionally increased the use of electronic
contracts as a faster and innovative way to carry out business. Between 1998 and
2002 most countries adapted their domestic commercial legislation to recognize
electronic contracts and signatures as legally valid instruments. Still some less-
developed countries are accomplishing this task. Even so, despite the inexorable
expansion of e-commerce and the promulgation of laws protecting e-commerce
contracts, many businesses and Internet users do not know precisely what law applies
to their e-commerce contracts. 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.

The Uniform Electronic Transactions Act (UETA) 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.

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.

Uniform Computer Information Transaction Act (UCITA) 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 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.

24
ELECTRONIC CONTRACT IN MALAYSIA

Although e-commerce is growing at a significant rate, a number of stumbling blocks


continue to hamper its development. One stumbling block relates to formation of e-
contract. There remains uncertainty whether the traditional principles of contract law
can be adapted to the needs of electronic contracting. Consequently parties might
disagree as to what point and in which country an e-contract is formed. This issue
needs to be addressed to boost the integrity of electronic transactions especially in
sale of goods since the subsequent rights and liabilities of the contracting parties will
depend on whether an agreement has been reached between them. Undeniably, the
electronic contract is significantly different from traditional contract which trigger
various new legal issues even at the initial stage of the contract. Based on Malaysian
legal practice and in comparison with United Nations Commission on International
Trade Law (UNCITRAL) Model Law on Electronic Commerce as well as United
Kingdom law and European Unions Directives on e-commerce, this paper seeks to
analyze and identify consumer issues concerning the formation of e-contracts. This
includes the discussion on the creation of legally enforceable agreement, the
appropriateness of the postal rule and its application to e-mail, the need of written
contract as well as digital signature and the uncertainty of where and when the e-
contract is formed. The paper also examines relevant Malaysian legislation on
formation of e-contract including the Contracts Act 1950, Sale of Goods Act 195,
Electronic Commerce Act 2006 and the Digital Signature Act 1997 and the adequacy
of the existing law in protecting e-consumers.

25
CHAPTER 5: CONCLUSION
It can be successfully concluded that the 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. 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
electronic contracts. The offer and acceptance given in form of data messages will be
held valid. 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. 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. The Electronic Contracts are an
amalgamated form of Cyber Law and Contractual law and thus it derives its authority
from both.

26
CHAPTER 6: SUGGESSTION
It can be suggested that though the judiciary has accepted the notion of electronic
conveyance of offer and acceptance so as to constitute a contract, there should be
much more specification in the provisions of the Contract Act itself and hence an
amendment is required to the said act.

A proposed amendment in the Electronic Commerce Act sought to add provisions


regarding Electronic Contracts in the Contracts Act, the Sale of Goods act, and other
acts as well, but the amendment was never passed by the parliament.

A law should be changed according to the changing needs of the society and the same
applies to contractual laws as well.

Future circumstances and other technological developments may suggest or compel us


to add, remould, delete, modify or otherwise change any provision of the current laws
related to electronic contracts .

These situations must be undertaken and studied minutely to thrash out a proper law
relating to e contract and other electronic activities in future better than the present
one.

27
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(2nd
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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