POSITION OF ELECTRONIC CONTRACTS IN INDIA

THIS ARTICLE WAS WRITTEN BY KAVYA MATHUR A STUDENT OF NATIONAL LAW UNIVERSITY, JODHPUR.

The usage of contracts in our daily life has become very accepted and common. Right from buying fruits and vegetables from a grocery shop to withdrawing money from an ATM, myriad things are regulated by contracts. It is known to everyone that computer and internet are amongst the greatest inventions of mankind. Internet is nowadays used in almost everything, such as, e-commerce, social networking, dispute resolution, e-mails, etc. Many transactions and other forms of trade are also conducted electronically. For example, use of ATMs, online railway ticket bookings, online auctions, etc. Electronic contracts, contracts that are not paper based but rather in the electronic form, are born out of the need for speed, convenience and efficiency. Globalization and diffusion of technology has accelerated the existence of e-contracts throughout the world.

Electronic contracts can be defined as contracts formed by negotiations of two or more individuals through the use of electronic means. They are also popularly known as cyber contracts, digital contracts or online contracts. They are conceptually very similar to traditional contracts, which are paper based and wherein goods and services are exchanged for a specific amount of consideration. The only extra element they have is that the contract takes place through a digital mode of communication like the internet. Such a contract takes place often without the parties actually meeting each other.

Existence of e-contract is pulling off the need for innovativeness in the market. In the electronic age, the transactions can be completed within a few seconds and there is limited scope for delays and additional costs. The communication is no more restricted due to the constraints of place, space, distance, payment and time. Information is transmitted and received widely and more swiftly than ever before. This technology helps in reducing costs, saving time, fastening customer response and improving service quality by reducing paper work, thus increasing automation. It provides an opportunity for the sellers to reach the end of a million customers directly without the involvement of the middlemen or any other intermediaries. There is also a reduced risk of committing errors and an increased chance to reuse the content. Such contracts aim to create a secured environment of transacting online with alternative mode to paper and writing.

Initially, there was an apprehension among the people to recognize and perceive the changes brought about by this advanced technology, but now many countries have executed legislations to recognize e-contracts. The way in which they differ from traditional contracts has led to the rise of some new and interesting technical and legal challenges. However, at present, with the increase in number of internet users, e-contracts are undeniably growing further. India will have the largest number of internet-users in Asia by this year end, implying a yearly growth rate of over 273%. The growing trend of internet banking along with an increase in the number of educated and computer literate people will further support the growth of e-contracts.

The Indian Contract Act, 1872 gives a legal backing to the basic contractual rule that a valid contract may be formed if it is made by free consent of the parties, competent to contract, for a lawful consideration, for a lawful object, which is not void ab initio. The Act doesn’t favour or encourage the use of any specific way of communicating offer and acceptance. It may be done orally, in writing or even by conduct. Thus, there is no pre-requisite of writing the contracts for them being valid. Thus, nothing in the Act prohibits their enforceability if they possess all the essentials of a valid contract. Also, in the Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas case, it was held that ordinarily, it is the acceptance of offer and intimidation of that acceptance which results in a contract. This intimation must be by some external manifestation which the law regards as sufficient. Hence, even in the absence of any specific legislation validating e-contracts, their validity cannot be challenged because they are as much valid as a traditional contract is.

With the ever-growing importance and value of e-contracts in India and across the world in general, the different stakeholders are persistently trying to identify and evaluate the implications of legal frameworks relating to it. In our country, till date there are no specific definite legislations or rules protecting the transactions happening over the electronic medium. However, several laws, acting in an interlock, are trying to regulate the transactions and solve some of the particular concerns that arise in the formation and authentication of such contracts. Such laws include: The Indian Contract Act, 1872, Consumer Protection Act, 1986, Information Technology Act, 2000 and Indian Copyright Act, 1957. The authority of the transactions of e-contracts is established under the Information Technology Act, 2000. This Act also explains the reasonable mode of acceptance of the offer and rules the revocation of offer and acceptance. However, specific provisions that regulate such transactions conducted over the internet, or other medium, are vague. With umpteen number of cross border transactions being also conducted, definite laws guarding the Indian stakeholders and parties are essential. Indian laws and guidelines are gravely insufficient on this issue. Presence of multiple indirectly related laws is now creating a chaos in the smooth functioning of the e-contract transactions. In addition to this, the existing laws are silent on features of e-contracts such as payment instruments, delivery instruments and present standard practices which have been settled by the industry itself. Hence, the present law is proving inefficient, insufficient and traditional. It is unable to keep pace with time in society due to intervention of new technologies which are being used in the formation of contracts.

The need of the hour is a law which covers all the aspects extending from payment mechanisms to maintaining minimum standards in the delivery of services. A survey was conducted which was headed by Justice Fazal Ali, strongly recommended for a separate law regulating contracts based on electronic devices. The true fruits of freedom in any sphere cannot be enjoyed unless the government builds a mechanism upon which the liberties and its appendages can act. As all business through e-contract is ended through the internet without any direct physical contact, the fundamental connection is the trust of the people involved in such a contract. A law in this field will detect the criminals who have exploited the internet as a source. This will also act as a defence for the genuine people and help in further growing of such transactions. There is also a need for the creation of an authority in the Consumer Courts to look into the grievances arising out of such contracts. This will reassure speedy redressal of trials and disputes. Electronic contracts like click wrap, browse wrap and shrink wrap need to be specifically recognized and an efficient framework to govern them needs to be established, which would eventually eliminate many ambiguities encountered by the parties entering into contractual relationships through such agreements.

Hence, a legislation has to be enacted to keep a pace with the upcoming advancements in the technology which were not envisaged by the legislation makers at that time. If this is not done, there will be regulatory gaps in the system, encouraging the practice of frauds and other related crimes.