Electronic Contracts

Section 2(h) of the Indian Contract Act, of 1872 defines the term ‘contract’ as an agreement enforceable under the law. The Indian Contract Act governs the manner in which the contracts are executed and performed. The contracts which are implemented in electronic forms are called Electronic contracts (also known as E-contracts). Electronic contracts are similar to traditional contracts, the only difference it has is that the same is executed/ offered and accepted via electronic forms. Contracts entered through the exchange of e-mails, shrink-wrap contracts, clickwrap contracts, etc. are some of examples of electronic contracts. Electronic contracts are governed by various laws like the Indian Contract Act, 1872, Information Technology Act, 2000, and Indian Evidence Act, 1872. Under the present article, we will analyze the applicable laws in order to figure out the validity of Electronic Contracts.

The validity of Electronic Contracts-

As per provisions of section 10 of the Indian Contract Act, 1872, essential prerequisites of a valid contract are offer, acceptance of offer, and consensus ad idem. Similar to traditional contracts, electronic contracts should also possess the said elements. Interestingly, electronic contracts are specifically not referred to under the Indian Contract Act. Section 10A of the Information Technology Act, 2000, gives recognition to the electronic contracts which are entered into through the electronic forms. Section 10A states that the contract cannot be unenforceable on the ground that the formation, communication, and acceptance of the contract are in electronic form or electronic means. It is important to note here that section 2(r) of the Information Technology Act, 2000, contains the definition of ‘electronic form’. Electronic form means any information sent, generated, received/ stored in media, computer memory, magnetic, microfilm, optical, computer generated micro fiche, or similar device. The validity of an electronic contract is further supported by section 65B of the Indian Evidence Act, 1872. Section 65B states that any information in an electronic record printed on a paper or stored or recorded or copied in optical or magnetic media produced by a computer shall be deemed a document. Section 65B also states that such a document can be admissible as evidence in any proceedings without additional proof of the original. After going through the various provisions of law, validating Electronic Contracts, even the judgment of Hon’ble Supreme Court authenticates the same. In the case of Trimex International Vs. Vedanta Aluminium, the Supreme Court has held that even without there being the execution of the formal contract, the electronic communications constitute a legally enforceable agreement provided the contract satisfies the requirements of the Indian Contract Act.

The electronic signing of the Electronic Contracts-

Once the electronic contract is negotiated and finalized, the electronic contract is to be executed by way of an electronic signature. As per the Information Technology Act, 2000, the electronic signing means-

The electronic technique stated in the second schedule of the Act, or
The digital signature.

Interestingly, there is a lack of specific jurisprudence on electronic signing under Indian law. However, going through the Indian Evidence Act, we can categorize the document’s validity in two forms-

Documents that are presumed valid, and
Documents that are to be proved as valid.

In nut-shell, in case of any litigation, the burden to proof will rest on the party challenging the authenticity of electronic signature.

Conclusion-

Electronic contracts are already recognized in India, however, still, the traditional execution of contracts is more rampant. Due to the current COVID-19 pandemic, electronic contracts are more likely to become the new way of determining liabilities, rights, and obligations. Rather than a facility, Electronic Contracts shall become the need of the market in due time.

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Frequently Asked Questions

Common questions about Electronic Contracts: Legal Framework in India.

An electronic contract (or e-contract) is an agreement that is entered into, communicated, and accepted through electronic means or in electronic form, such as email exchanges, shrink-wrap contracts, or clickwrap agreements. These contracts are similar to traditional paper-based contracts, but the execution and performance occur digitally.

Yes, electronic contracts are legally valid and enforceable in India. Section 10A of the Information Technology Act, 2000, explicitly recognizes the validity of contracts formed through electronic means. Additionally, the Indian Contract Act, 1872, and the Indian Evidence Act, 1872, provide legal provisions supporting the admissibility and enforceability of electronic contracts.

Just like traditional contracts, electronic contracts must fulfill the essential prerequisites of a valid contract under Section 10 of the Indian Contract Act, 1872, which include offer, acceptance of the offer, and consensus ad idem (meeting of minds). The only difference is that these elements are executed and communicated through electronic means.

Electronic contracts can be executed or signed using electronic signatures, as defined by the Information Technology Act, 2000. This can be either through the electronic techniques specified in the Second Schedule of the Act or through digital signatures.

While the Indian Contract Act, 1872, does not specifically mention electronic contracts, the Information Technology Act, 2000, and the Indian Evidence Act, 1872, provide legal provisions that govern and validate the formation, communication, and acceptance of electronic contracts.

Yes, Section 65B of the Indian Evidence Act, 1872, states that any information in an electronic record printed on paper or stored or recorded in optical or magnetic media produced by a computer shall be deemed a document and can be admissible as evidence in court proceedings without additional proof of the original.

In case of any litigation challenging the authenticity of an electronic signature, the burden of proof will rest on the party challenging its validity. The Indian Evidence Act categorizes documents as either presumed valid or requiring proof of validity.

Yes, the article suggests that due to the COVID-19 pandemic, electronic contracts are more likely to become the new norm for determining liabilities, rights, and obligations. Instead of being a mere facility, electronic contracts may become a necessity in the market in due time.

In the case of Trimex International Vs. Vedanta Aluminium, the Supreme Court held that even without a formal contract execution, electronic communications can constitute a legally enforceable agreement, provided they satisfy the requirements of the Indian Contract Act.

Section 2(r) of the Information Technology Act, 2000, defines 'electronic form' as any information sent, generated, received, or stored in media, computer memory, magnetic, microfilm, optical, computer-generated microfiche, or similar devices.