What are E-Contracts?

 E-Contract is an aid to drafting and negotiating successful contracts for consumer and business e-commerce and related services. It is designed to assist people in formulating and implementing commercial contracts policies within e-businesses. It contains model contracts for the sale of products and supply of digital products and services to both consumers and businesses. 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 

An electronic or digital contract is an agreement “drafted” and “signed” in an electronic form. An electronic agreement can be drafted in the similar manner in which a normal hard copy agreement is drafted. For example, an agreement is drafted on our computer and was sent to a business associate via e-mail. The business associate, in turn, e-mails it back to us 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. Since a traditional ink signature isn’t possible on an electronic contract, people use several different ways to indicate their electronic signatures, like typing the signer’s name into the signature area, pasting in a scanned version of the signer’s signature or clicking an “I Accept” button and many more.

 E-Contracts can be categorized into two types i.e. web-wrap agreements and shrink-wrap agreements. A person witnesses these e-contracts everyday but is unaware of the legal intricacies connected to it.

Web-wrap agreements are basically web-based agreements which require assent of the party by way of clicking the “I agree” or “I accept” button e.g. E-bay user agreement, Citibank terms and conditions, etc.

Shrink-wrap agreements are those which are accepted by a user when a software is installed from a CD-ROM e.g. Nokia pc-suite software. 

ESSENTIAL ELEMENTS OF ONLINE CONTRACT 

1) Offer –There must be a lawful proposal or offer made by one party known as the proposer and it is the starting point of a contract. By browsing and choosing the goods and services available on the website of the seller, the consumer makes an offer to purchase such in relation with the invitation to offer made by the seller.

 2) Acceptance – When a proposal or offer is accepted by the person to whom the offer is made, it becomes a promise. The acceptance of the proposal must be unconditional and absolute and must be communicated to the proposer or the offeror. In case of an online contract, offer and acceptance can be made through e-mails or by filing requisite forms provided in the website. They may also need to take an online agreement by clicking on ‘I Agree’ or ‘I Accept’ for availing the services offered. 

3) Intention to create legal relationship – If there is no intention of creating legal relationship on the part of the parties to contract, there is no contract between them. 

4) There must be a lawful object – Parties to the agreement must contract for a legal object. A contract is only enforceable by law only when it is made for a lawful purpose. It must not defeat any provision of law and must not be fraudulent in nature. Thus, a contract on a website designed for the purpose of selling illegal substances online is a void contract. 

5) There must be a legal or lawful consideration – Consideration is one of the most important elements of a contract. The basic rule is that when a party to a contract promises to perform his promise he must get something in return for the performance of his promise. Consideration is something of some value in the eyes of law. It may be of some benefit, right, interest or profit given to the party as inducement of promise. An act constituting consideration must be moved at the desire of the promisor and must be legal, real and not imaginary. Promises that are physically impossible to perform cannot have real consideration. For eg. an online site that offers purchase of land on the moon. 

6) Capacity of parties – Parties to a contract must be capable of entering into a contract. He must attain the age of majority and must be of sound mind. He must not be disqualified from contracting by any law for the time being in force. In our country an agreement where either party is a minor has no significance. It is considered as void ab-initio. 

7) There must be free and unaffected consent – Consent which is defined under Section 13 of the Indian Contract Act, 1872 is an essential requirement of a contract. It is basically the meeting of minds of the parties. When both agree upon the same thing in the same manner, they are said to consent. In case consent is caused by coercion, it is voidable at the option of the party whose consent was so caused. 

8) Possibility of performance – The terms and conditions of agreement must be certain and not vague and must also be such as are capable of performance. An agreement to do an act impossible in itself cannot be enforced as per section 29 of the Indian Contract Act, 1872. 

Law governing e-contract 

1.) Validity of Contracts Formed Through Electronic Means. – 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. 

2.) Section (11) of Information Technology Act, 2000: An electronic record shall be attributed to the originator— (a) if it was sent by the originator himself; (b) by a person who had the authority to act on behalf of the originator in respect of that electronic record; or (c) by an information system programmed by or on behalf of the originator to operate automatically. 

Illustration 1: Pooja logs in to her web-based gmail.com email account. She composes an email and presses the ―Send‖ button, thereby sending the email to Sameer. The electronic record (email in this case) will be attributed to Pooja (the originator in this case) as Pooja herself has sent it. 

Copyright Act

 (a) The IT Act provides a wider scope to the authorities to harass ISPs in matters where their liability is the question.

 (b) Which actions can be termed as done with ‘due diligence’ is not defined anywhere in the act. 

(c) Who is an ISP? The answer to this question is not given under the IT Act. Also, the IT Act does not provide for the liability of ISP. The liability of an ISP is the same as for anyone who is simply a communication carrier. 

 In the case of Playboy Enterprises v. Frena, a BBS operator whose bulletin board contained copyrighted photographs owned by Playboy was found liable of violating the right to display and publish the photographs. This was true even though the BBS operator did not make the copies himself, and in fact was never proven to have knowledge of their existence. In effect, this case held the BBS operator liable merely for providing a means by which copies (made by others) could be distributed to the public. If this logic were extended to ISPs in general, an ISP could be held liable for its member’s activities on the ISPs web and newsgroup servers, even without knowledge of such activity. However, it is unlikely that such a ruling would ever be made given the major impact such a position would have on the expansion of and access to the Internet. 

Trademark liability

ISPs are liable for their own activities that constitute trademark infringement. As a result, if an ISP were to advertise their services under a trademark that is confusingly similar to a mark of another party (such as Netcom, IBM Link, or CompuServe), they would be exposed to charges of trademark infringement. In addition, if an ISP’s own web page contains theISPs are in a slightly different position when one of their customers misuses a trademark of another. In this case, the ISP may very well face possible liability under the theory of contributory trademark infringement. Much like contributory copyright infringement, contributory trademark infringement liability may exist where the ISP causes or contributes to the infringing conduct of another with knowledge of the other party’s infringing activities. Although such a case has not yet been analyzed by any court, one can imagine a situation where an ISP is notified of trademark infringement on one of its customer’s web pages and yet fails to act on this notification. By analogy to the Netcom decision discussed in connection with recent ISP copyright cases above, the ISP in this case may in fact face legal action for trademark infringement.  trademarks of another, the ISP’s use of those marks would be analyzed like any other web page owner (see Bit Law’s discussion on Internet trademark infringement for more information). 

Online Trademarks Infringement

Nowadays, the Internet is the main means of communication. Although it has a high number of users, the Internet is also an ideal tool for committing offenses. The main problem regarding online trademarks infringement may arise when the internet user commits a crime through the services of the ISP, can the ISP be liable? While considering the liability of ISPs in India for trademark infringement, the following Acts are important; the first one is the Trademarks Act, 1999 and the Information Technology Act, 2000. Clause (6) of Section 29 of the Trade Marks Act, 1999 sets out what constitutes use of a registered trademark. Subsection (b) states that use is when an entity that “offers or exposes goods for sale puts them on the market, or stocks them for those purposes under the registered trademark or offers or supplies services under the registered trademark”. This can be interpreted to include service providers, whether they are ISPs or auction or ecommerce websites that facilitate infringement by stocking the goods bearing the registered trademarks. Firstly, the ISP can look for contents, which are uploaded and can filter them if they want to. But this will not be favorable for their clients as it will harm their privacy and freedom from online censorship. Again, it would be a costly affair as there is so much content that has to be filtered by the ISPs, and moreover, it is not possible to look at the content and understand if its copyright protected or not. The only other alternative that ISPs have is to make their clients sign an indemnity contract, therefore, letting them assume all responsibility in the case of any trademark infringement. From the viewpoint of any Internet Users- if ISPs are made responsible for infringements, then smaller ISPs will be forced to shut down. The larger ones will charge more as they have to deal with potential lawsuits. Ultimately, this cost will be shifted to the customers, making access to the cost of the Internet higher. However, if the ISPs are not made liable, the problem of piracy will keep on increasing. 

Due Diligence: For India, the rules for due diligence have been prescribed in the Information Technology Guidelines (Intermediaries Rules) 2011. Under these rules due diligence requires the intermediaries to take the following steps: 

• Appointment of Grievance Officers- the ISPs must appoint a grievance officer, and this must be made known to the public. 

• They must publish a) a set of rules and regulations b) a privacy policy and c) a user agreement for access to usage of their resources.

 • Intimation of consequences of non- compliance by users: The Intermediary is also required to inform the clients that in the case of non-compliance they can terminate access. 

Intermediaries: An internet intermediary is an entity which provides services that enable people to use the internet. There are many different kinds of internet intermediaries which fall into two broad categories: “conduits” and “hosts”. “Conduits” are technical providers of internet access or transmission services. Conduits do not interfere with the content they are transmitting other than for automatic, intermediate or transient storage needed for transmission. “Hosts” are providers of content services – for instance, online platforms and storage services.

 Liability of Intermediaries The Information Technology Act, 2000 has been amended in 2008, so as to broaden the definition of intermediaries and to include internet service providers, online payment sites, online auction sites, etc. According to the Information Technology Act, 2000 an intermediary must not knowingly publish, host, or initiate transmission of unlawful information. The intermediary will be liable if: 

1) It has aided or induced the commission of the unlawful act knowingly. 

2) Even after being notified by a Government agency the intermediary fails to remove any content, which is being used for some illegal activity. 

The amended Section 79 of the Information Technology Act, 2000 provides that an intermediary will be liable when it: 

1) Initiates the transmission. 

2) Select the receiver of transmission. 

3) Selects or modifies the information available in some way. 

4) Does not observe due diligence. 5) Plays an active part in the infringement of the trademark.