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LLM

ONLINE CONTRACT

Contract:

The Indian Contract Act, 1872 defines a contract as an agreement between two or more parties for the buying/selling of goods or services for a valid consideration. The essentials to a valid contract are also some of the essentials to an e-contract which are:

  1. An offer and acceptance have to be made.
  2. There should be a lawful consideration.
  3. There should be free consent between the parties to a contract.
  4. The object of the agreement should be lawful.
  5. Parties must be competent enough to contract.
  6. The contract must be enforceable by law.

The Indian Contract Act, 1872 provides a basic contractual rule that a contract is valid if it is made by competent parties out of their free consent for a lawful object and consideration. There is no specific way of communicating offer and acceptance; it can be done verbally, in writing, or even by conduct. Thus, oral contracts are as valid as written contracts; the only condition is they should possess all the essentials of a valid contract.

It was held in the case of Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas, “that ordinarily, it is the acceptance of offer and intimation of that acceptance which results in a contract. This intimation must be by some external manifestation that the law regards as sufficient. Hence, even in the absence of any specific legislation validating e-contracts cannot be challenged because they are as valid as a traditional contract is.” 

E-Contract

The Information Technology Act, of 2000 provides various procedural, and administrative guidelines and regulates the provisions relating to all kinds of electronic transactions. These include computer data protection and authentication of documents by way of digital or electronic signature. Though electronic contracts have been given recognition by the IT Act, 2000, the majority feel it less secure to get into any kind of online contract as there are no concrete judicial precedents for the validity and enforceability of online contracts in India. The 2008 amendment to the IT Section 10 gives legislative authority to E contracts. It says that “Where in a contract formation, the communication of proposals, the acceptance of proposals, the revocation of proposals and acceptances, as the case may be, are expressed in electronic form or by means of an electronic record, such contract shall not be deemed to be unenforceable solely on the ground that such electronic form or means was used for that purpose.”

E contracts are contracts that are not paper-based and are electronic in nature. These contracts are generally made for speedy entering into a contract or for the convenience of the parties. They are best made between parties who live in 2 different parts of the world and have to enter into an agreement. A digital signature is all they need to enter into a contract as a party even though both the parties to the contract are sitting miles away from each other. In this proliferating world, it is the most convenient method to enter into a contract without being physically exhausted. The 2 main parties to an e-contract are- The Originator and the Addressee.

Originator according to the IT Amendment Act, 2008 is a person who sends, generates, stores, or transmits any electronic message to be sent, generated, stored, or transmitted to any other person and does not include an Intermediary. ( In the present context, the person who initiates the process of making an e-contract sends it to the other party.)

An Addressee according to the IT Amendment Act, 2008 is a person who is intended by the originator to receive the electronic record but does not include any Intermediary. (In the present context, the party which receives the e-contract made by the other party.)

E contracts can be broadly categorized into :

  • Shrink Wrap Agreements
  • Click Wrap Agreements

Click Wrap agreements are mostly found in the software installation process. The user has to click either ‘Accept’ or ‘Decline’ to accept or reject the agreement respectively. These agreements lack a certain amount of bargain power. Choosing to make payments online or choosing to reject them is an example of using a click wrap agreement.

Shrink Wrap agreements are those which can only be read and accepted by the consumer after the opening of a particular product. The term is described after the shrink wrap plastic wrapping that is used to cover software or other boxes. Installing software from a CD into your PC is an example of a shrink-wrap agreement.

In the case of browse-wrap contracts, we usually accept the terms and conditions of the contract by clicking the button that indicates ‘I Agree’, and in the case of shrink wrap contract or purchase of a software product, assent is given by the consumer or the purchaser with tearing of the wrapper and using it. Many have the tendency of not reading the terms and conditions carefully before agreeing to such. But these actions should be taken consciously and carefully only after reading the terms of the contract properly as it leads to a valid contract and the terms can be strictly enforced against them. 

However, courts in other countries such as the US, have dealt with the validity and enforceability of contracts such as shrink wrap and click wrap contracts. It was held in the famous case of ProCD. Inc. vs. Zeidenberg ``that the very fact that purchaser after reading the terms of the license featured outside the wrap license opens the cover coupled with the fact that he accepts the whole terms of the license that appears on the screen by a keystroke constitutes an acceptance of the terms by conduct.” Thus, it is confirmed that shrink-wrap agreements are valid contracts and are enforceable against the purchaser of the software. But the enforceability of the shrink-wrap agreement is extended as far as the general principles of the contract are not violated. The validity of the click wrap agreement was first considered when the Court for the northern district of California upheld in the famous case of Hotmail Corporation that “the defendant is bound by the terms of the license as he clicked on the box containing

An online contract is simply a communication between two parties in regard to the transfer of goods/services. And as per the Indian Evidence Act, any e-mail communication and other communication made electronically is recognized as valid evidence in a Court of law. By considering the points, it can be concluded that the contract that follows the communication is valid too and Indian law thus recognizes the validity of online contracts. 

Difference between contract and E-Contract

ContractsE-Contracts
It requires the traditional signatures of the partyIt needs the digital signatures
The contracts are drafted on the paperThese are drafted digitally
Parties are physically present at the time of the contractThere is no need to present physically while making the contract
They took heavy transaction costLow transaction cost
More time consumingThese are time-saving contract
The risk factor is very low, almost secureThere is a high risk involved in the E-contracts

Conclusion

The citizens of India are encouraging the concept of Digital India, but there is no definite legislation relating to the transactions done over computerized communication networks. Several laws such as The Indian Contract Act, 1872, Information Technology Act, 2000, Indian Copyright Act, 1957, and the Consumer Protection Act, 2019  to some extent are working and acting on resolving issues that arise relating to the formation and validation of online contracts. The Information Technology Act, 2000 is the Act that governs the transactions conducted over the internet and explains the considerable mode of acceptance of the offer and provides the rules for revocation of offer and acceptance in a vague or indefinite manner.

CONTRACT

The Indian Contract Act, 1872 defines the term “Contract” under its section 2 (h) as “An agreement enforceable by law”. In other words, we can say that a contract is anything that is an agreement and enforceable by the law of the land.

contract, in the simplest definition, a promise enforceable by law. The promise may be to do something or to refrain from doing something. The making of a contract requires the mutual assent of two or more persons, one of them ordinarily making an offer and another accepting

In simple terms, a contract means when two parties put into writing an agreement which contains certain obligations (promises) which are to be performed by such parties, and when such written agreement becomes enforceable by law, it becomes a Contract. Enforceable by law means when the agreement has acquired the force of law only for those who are a party to it and a violation of those obligations would attract legal action, including repudiation of the entire contract.

TYPES OF CONTRACT

Implied Contract

A Contract inferred by

• The conduct of person

• The circumstances of the case.

By implies contract means implied by law (i.e.) the law implied a contract through parties never intended.

According to sec 9 in so for as such proposed or acceptance is made otherwise than in words, the promise is said to be implied.

Example: A stops a taxi by waving his hand and takes his seat. There is an implied contract that A will pay the prescribed fare.

Quasi-contract

In such a types of contract, the rights and obligations arise not by an agreement but by operation of law.

Example: If Mr A leaves his goods at Mr B’s shop by mistake, then it is for Mr. B to return the goods or to compensate for the price.

E-contract

An E-contract is a contract made through the digital mode.

Example: Via Internet

Executed contract

In an executed contract both the parties have performed their promises under a contract.

Example: A contracts to buy a car from B by paying cash, B instantly delivers his car.

Executory contract

In a Executory contract both the parties are yet to perform their promises.

Example: A sells his car to B for Rs. 2 lakh. If A is still to deliver the car and B is yet to pay the price, it is an Eexecutory contract.

Partly Executed and partly executory contract

In a partly executed and partly executory contract, one party has already performed his promised and the other party has yet to execute his promise.

Example: Anuj sells his bike to Bibek. Though Anuj has delivered the bike, Bibek has yet to pay the price. For Anuj, it is an executed contract, whereas it is an executory contract on the part of Bibek since the price has yet to be paid.

Unilateral Contract

A unilateral contract is also known as a one-sided contract. It is a type of contract where only one party has to perform his promise.

Example: Anuj promises to pay Rs. 1000 to anyone who finds his lost cellphone. B finds and returns it to Anuj. From the time B found the cellphone, the contract came into existence. Now Anuj has to perform his promise, i.e. the payment of Rs. 1,000.

Bilateral contract

A Bilateral contract is one where the obligation or promise is outstanding on the part of both the parties. It is also known as a two-sided contract.

Example: Aj promises to sell his car to Bj for Rs. 1 lakh and agrees to deliver the car on the receipt of the payment by the end of the week. The contract is bilateral as both the parties have exchanged a promise to be performed within a stipulated time.

Valid contract

If the contract entered into by the parties and satisfies all the elements of a valid contract as per the act, it is said to be a valid contract.

Void contract

Section 2 (j) states as follows: “A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable”. Thus a void contract is one which cannot be enforced by a court of law.

Example: Mr Aj agrees to write a book with a publisher. After few days, Aj dies in an accident. Here the contract becomes void due to the impossibility of performance of the contract.

It may be added by way of clarification here that when a contract is void, it is not a contract at all but for the purpose of identifying it, it has to be called a void contract.

Voidable contract

Section 2(i) defines that an agreement which is enforceable by law at the option of one or more parties but not at the option of the other or others is a voidable contract.

This infact means where one of the parties to the agreement is in a position or is legally entitled or authorized to avoid performing his part, then the agreement is treated and becomes voidable.

Such a right might arise from the fact that the contract may have been brought about by one of the parties by coercion,undue influence, fraud or misrepresentation and hence the other party has a right to treat it as a voidable contract.

Illegal contract

Illegal contract are those that are forbidden by law. All illegal contracts are hence void also. Because of the illegality of their nature they cannot be enforced by any court of law.

In fact, even associated contracts cannot be enforced. Contracts which are opposed to public policy or immoral are illegal. Similarly contracts to commit a crime like supari contracts are illegal contracts.

Unenforceable contract

A type of contract which satisfies all the requirements of the contract but has technical defects is called an unenforceable contract.

A contract is said to have a technical defect when it does not fulfil the legal formalities required by some other act. When such legal formalities are compiled with, later on, the act becomes enforceable.

Difference Between Void and Voidable Contract

BasisVoid ContractVoidable Contract
NatureValid when made but subsequently becomes unenforceable.It remains as voidable until cancelled by the party
PerformanceParty cannot demand the performance of contract.If aggrieved party does not cancel it within a reason-able time, performance can be demanded.
DamagesParty cannot claim damages.Party can demand damages in certain cases.
Right or RemedyNo legal remedy is available for the void contract.Aggrieved party has a remedy to cancel the contract.
DefinitionIt means contract which ceases to be enforceable.It means an agreement enforceable by law, by one or more parties.
ReasonContract becomes void due to change in law or circumstances.If consent is not obtained freely then it is regarded as a voidable contract.

Custom as a source of law

Custom refers to the code of conduct that has the express approval of the community that observes it. In primitive societies, there were no institutions that acted as authority over the people. This led to people organizing themselves to form cohesive groups in order to maintain fairness, equality, and liberty. They started developing rules with coordinated efforts to make decisions. They eventually started recognising the traditions and rituals practiced by the community routinely and formed a systematized form of social regulation. In India, laws relating to marriage and divorce are mostly developed from customs followed by different religious communities. Additionally, several communities belonging to the Scheduled Tribes category have their own customs related to marriage. As a result of that Section 2(2) of the Hindu Marriage Act, 1955 has exempted Scheduled Tribes from the application of this Act. 

Requisites of a valid custom

  1. Reasonability: The custom must be reasonable or practical and must conform with the basic morality prevailing in the modern-day society. 
  2. Antiquity: It must have been practiced for time immemorial. 
  3. Certainty: The custom must be clear and unambiguous on how it should be practiced.  
  4. Conformity with statutes: No custom must go against the law of the land. 
  5. Continuity in practice: Not only the custom must be practiced for time immemorial, but it should also be practiced without interruption. 
  6. Must not be in opposition to public policy: The custom must adhere to the public policy of the state. 
  7. Must be general or universal: There must be unanimity in the opinion of the community or place in which it is practiced. Hence, it should be universal or general in its application.