Rising Legal issues and Challenges for E-Contracts

Rising Legal issues and Challenges for E-Contracts

Author:B. Jayasurian, Saveetha School of Law.

Abstract

Due to the development of the technology the usage of E- contracts was found to be high. But usage of such contracts without adequate legal framework will definitely lead to jeopardy and work counterproductive to the business.  In India, The Indian Contract Act, 1872, The Information Technology Act, 2000 and The Indian Evidence Act, 1872 plays a vital role in determining the validity of the e-contracts. And the major issues on e – contracts arise pertaining to capacity to contract, free consent, applicability, authenticity and confidentiality. Though the Indian legal system adequately addresses the issues of such, the situation gets elevated day by day with the development of technology.

Generally, A contract is “an agreement enforceable by law”[1] and when it comes to an e-contract or electronic contract, it is said to be a contract which is drafted and signed in an electronic form. Moreover, such contracts are executed through the internet.[2] Due to the development of technology, the ecommerce and e- contracts were introduced which resulted in drastic change in the world of contracts. But this development has also given a bit of fear on the legal validity of the e-contracts. As in which it is because there are certain possibilities in which that arise in the execution of the e-contacts where the aspect of free consent, authenticity, confidentiality, capacity and applicability of laws on the contracts in which that was made.

Moreover, in the case Trimex International FZE Ltd. v. Vedanta Aluminium Ltd.[3] the Supreme Court had ignored the argument that the communication and exchanges over emails does not constitute as a contract and mentioned that “once the contract is concluded orally or in writing, the mere fact that a formal contract has to be prepared and initiated by the parties would not affect either the acceptance of the contract so entered into or implementation thereof, even if the formal contract has never been initiated” In this developing world, the usage of e-contracts was found to be much efficient in all means when it is compared with the traditional form of contract and on the other hand the legal issues on its validity are also getting increased day-by-day.

Online Agreements

Generally, there are three major kinds[4] of online agreements which is,

  • Shrink – wrap Agreement
  • Click – wrap Agreement
  • Browse – wrap Agreement
  • Shrink – Wrap Agreement (does not exist in India)

These kinds of agreements are generally used for a licensing agreement to purchase a software. And under these contracts the terms and conditions provided are enforced by the person buying it.

Click – wrap Agreement

These kinds of agreements are generally used getting the consent of the user regarding the terms and conditions of the contract with the use of “I Agree” or “OK” or “I Accept”. And this appears when the software /product on its usage and if the person doesn’t agree to such then the person shall not be able to such.

Browse – wrap Agreement

These kinds of agreements are generally found in our website daily where it generally links the parties and the terms like, ‘user policies’, ‘terms of service’, “terms of use” or “terms of service” shall be found in such kind of contracts.

Issues and Challenges

Capacity to Contract

First of all, in order to enter into an agreement, he/she must have legal competence and capacity but in the context of online agreements the nameless people often enter into a contract and here the service provider has no idea about the person who enters or clicked on “I Agree”. Under the Indian Contract Act, 1872. Sections 10, 11 & 12 it is said that competence and its criteria must necessarily needed to be followed but here there’s no identity on identifying the capacity of the person.

Free consent

Free consent is considered to be one of the essential components in order to enter into a contract/agreement and moreover there is no scope of negotiation is present in the aspect of online agreements which is a major issue for the parties/users. Moreover, in the case of LIC of India Vs Consumer Education and Research Centre [5]the Supreme Court has held that “In dotted line contracts there would be no occasion for a weaker party to bargain as to assume to have equal bargaining power”. On concluding, it can be said that the user party must be prudent while giving consent.

Authentication

The electrification authentication aspect became quite unreliable due to the external or third parties or illegal access to the domain or sites or to the agreements. As in which it is because due to the development of the technology some people get easily entered into the official site which results in illegal authentication and moreover due to nameless access the service provider has no idea about the authentication and the reply.

Court Jurisdiction

E-contracts has wide scope and shall take place in wide geographical areas and so that if any issue arises the case gets filed in different regions and the defending suits will also be placed in a region which would be far apart and such results in situation where the court will find it difficult on finding its place of jurisdiction in order to resolve the issue in which that is raised.

Conclusion

The Indian legal system has the capacity to address the issue adequately but, the technology gets developed day by day which seeks more attention and regulations in order to deal with the issues in which that is raised. E-contracts are used widely nowadays and such must be regulated properly in order to avoid jeopardy.

Reference

  1. The Indian Contract Act, 1872
  2. Kapil Raina, Evidentiary Value Indian of E-Contracts, Legal Service India.
  3. The Information Technology Act, 2000
  4. The Indian Evidence Act, 1872
  5. Dr. S. Sethuram, Deepa C. Kumar, E-Contracts in India: The Framework, Issues and Challenges, International Journal of Emerging Innovation in science and Technology.
  6. Sharma Vakul, “Information Technology, Law and Practice”, Universal Law Publishing Co. 2004.

[1] The Indian Contracts Act 1872 § 2(h).

[2] Kapil Raina, Evidentiary Value of E-Contracts, Legal Service India.

[3] Trimex International FZE Ltd. v. Vedanta Aluminium Ltd, 2010 (1) SCALE 574.

[4] Dr. S. Sethuram, Deepa C. Kumar, E-Contracts in India: The Framework, Issues and Challenges, International Journal of Emerging Innovation in science and Technology.

[5] 1995 AIR 1811

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