ISSUES AND CHALLENGES OF E-

CONTRACTS

SUBMITTED TO
PROF.AMRITA MALIK
PROFESSOR, CONTRACT-2

SUBMITTED BY
DEEPAK.P
BBALLB (3NDYEAR 6TH SEMESTER)
ROLL NO: 17BBLB015

1 CMRU-SOLS, BENGALURU
 TABLE OF CONTENTS
INTRODUCTION AND MEANING Page 3 and 4
OF E-CONTRACTS
KINDS OF CONTRACTS Page 4 to 6
LEGAL FRAMEWORK OF E- Page 6 to 10
CONTRACTS
POSITION OF E-CONTRACTS IN Page 10
INDIA
E-CONTRACT: INTERNATIONAL Page 10 to 12
SCENARIO
CONCLUSION,CITATIONS AND PAGE 12 and 13
REFERRENCES.

RESEARCH METHODOLOGY
The research methodology undertaken in this study is doctrinal in nature and the approach to the
study is analytical. The data that has been referred to in the study is secondary data that has been
collected through various online sources and also offline sources like the Indian contract Act, IT
Act, Manupatra, books and other available sources.

CMRU-SOLS, BENGALURU
2
2
 INTRODUCTION AND MEANING
E-Contracts are often basically defined as those contracts which happen through e-commerce
and this can be done virtually. People don’t meet physically while making this contract. These
contracts are generally very like the paper based commercial contracts within which the
commercial transactions conducted and concluded electronically. With the advancement of
technology and therefore the globalization, it's accelerated the presence of e-commerce
companies throughout the globe.
E-commerce is prospering with a high level of internet onrush worldwide and therefore the rise
of internet users. High speed and a geographic absence have contributed greatly to the
expansion of e-commerce, which is that the key advantage of the net. For illustration, a buyer in
India should purchase goods from a merchant within the us with just some clicks of the mouse,
without having to depart their home or office. In an electronic world called electronic contract or
just e-contract or on-line contracts, e-commerce caused a replacement kind of contracting.
Electronic contracts are ordinarily known to several folks. the foremost common contracts are
“End User License Agreement” or the EULA where the installation of software or
terms/conditions/ user agreement on the website requires a click on the ” I agree ” button.

It also can be seen that both normal contracts made physically by two people which are of E-
contracts share the identical fundamental essentials. Now talking about our country, India, the
Indian Contract Act, 1872 governs all agreements and contracts, including online contracts.
Simply put, a contract may be a legally binding agreement. the elemental essentials of a
legitimate contract are mentioned in Section 10 of the Indian Contract Act:

1.A party offer and therefore the other party’s acceptance.

2.Mutual agreement among the Parties.
3.Intense legal relationship building.
4.Contracting parties should be legally able, i.e. be over the age of 18 years, have soundness of
mind, 
5.The purpose of the contact is legal and isn't contrary to government policy, e.g. a prohibited
drug’s agreement isn't a legitimate contract.
6.The agreement should have consideration
7.The agreement should be capable of being performed.
8.The contract terms are to take care.

A contract wont be valid until the above conditions are fulfilled. In India both the Indian
Contract Act 1872 and therefore the Information Technology Act 2000 should be complied with
in accordance with a legitimate e-contract. an internet contract is legally binding on the user
when he/she clicks on the ” I agree ” button if the above essential terms are met.
There was primarily a fear between the law-makers to spot this contemporary technology, but

CMRU-SOLS, BENGALURU
now many countries have enacted laws to acknowledge electronic contracts. the standard law
involving to contracts isn't equal to address all the problems that arise in electronic contracts. the
IT Act describes a number of the irregular issues that arise within the establishment and
confirmation of electronic contracts.

Within the outline of the Indian Contract Act 1872, parties are liberated to contract on any terms
they choose. Indian Contract Act comprehends of limiting factors subject to which contract could
also be entered into, executed and failure enforced. It only provides a top level view of rules and
regulations which govern foundation and concluding of the contract. The rights and duties of
parties and terms of agreement are definite by the contracting parties themselves. The court of
law acts to enforce agreement, just in case of default.
Now lets take a glance at the various styles of E-contracts.

TYPES OF E-CONTRACTS:-
1.Employment Contracts:
The Information Technology is decided by manpower in Indian circumstance and thus
employment contracts are alive. With a high decline rate in addition because the confidentiality
implicated within the work employment contracts become essential. aside from that, Indian
Labour practices are supported difficult labour laws and not that of the hire and fire processes
of the start stages. during this aspect, copyright problems with software evolution acquires
critical importance. aside from that contracts for on-the-spot development and sending the
manpower abroad and department subdivision will play a important role employed contracts.
Firms hiring personnel overseas aside from their department must include the related contract of
the place of activity.

2..Consultant Agreements:
The normal requirements of Indian Contracts Act of 1872 will apply on any consultant
agreement. But specifically, IT industry where the infrastructure to function is low and
connectivity is extremely advanced, consultancy with experience marketing and business
development and technology development may be a very controlling manner of contract. Here
proper care should be taken in Consultant agreements where problems with holding Rights,
privacy will play an crucial role. If proper care isn't taken it should end in the
value of concern and loss of clients.

3.Contractor Agreements:
As manufacturing institution subcontract their business, IT also subcontracts their work thanks
to changing orders and would similarly want to cut-off on the value of normal manpower and
related lawful and financial problems. At the identical time in business organization, hard labour
laws just like the Contract Labour (Abolition and Regulation) Act of 1970operative, may
lead to a unique kind of legal development. However, if proper care is taken to subcontract
keeping the wants of the contract Act and therefore the Contract Labour abolition act the
expected goals are often met. Here again privacy, consumer liability and replica right issues
assume great value and high care to be taken in representing of such contracts.

CMRU-SOLS, BENGALURU
4.Sales, Re-Seller and Distributor Agreements:
When it involves software and Internet dealings, though the command of middle men are done
away with, it still requires a count of network and thus mentioned issues acquire force in
this dimension of business. In first place one has to see whether software is taken into account as
a good within the Sale of products Act.
Basically,Software is a programme of instructions, which operate the system or hardware to
function in a planned mode. This gives arise to an effort to classify and define in legal terms of
the unclear nature of software in comparison with other products. The code and its source can be
understood as information is planned in a way to operate the system leading to the conclusion
that it is not a property and not a good in the legal intellect.
In the case of  Aerodynamics Systems Product v. General Automation limited(1), the
argument raised by the defendants was that though software may be an issue of matter of sale,
software by itself could be a pure information, and also the transmittal of software could be
a service and not sale of products.

There's also another explanation of Software to be considered as Goods

where it's considered thereto of a book containing information, which is taken into account as
goods under the Sale of products Act. because the value of the book isn't the plain worth of the
inlet jacket, paper and materials utilized in its creation, but it's one amongst that of the
worth of the data that's limited in it. Software may also be a product –a floppy, or a CD-ROM or
just stored in magnetic disk but the worth is way over that of a noticeable device.

Due to this, software value in terms of application is calculated as goods for the aim of judicial
classification. Having constituted it pretty much as good for the distribution, the re-seller
agreement should make sure of the aspect of Monopoly Limiting Trade Activity, provincial
authority and other tax means.

5.Shrink Wrap Contracts:

A Shrink Wrap contract is that the former license agreement mandatory upon the client after
they purchase software. Before they tear the sealed package to use it, they're made aware by
tearing the quilt or the wrap, that they're able to abide by the license agreement of the
manufacturer. this can be done so on protect the interests of the manufacturer and also that the
patron cannot duplicate the package, copy it or sell it or donate it to others purchasable of the
software. The license, which is contracted and enfolded within the product, which becomes
enforceable and brought as consent before the client tears the package. the same old sections that
are a part of the shrink-wrap license are that of:

a) prohibiting illegal creation of copies

CMRU-SOLS, BENGALURU
b) prohibiting payments of the software
c) prohibition of contrary engineering, E-compilation or adjustment
d) prohibition of usage in additional than one computer definite for that purpose
e) disclaimer of contracts in respect of the merchandise sold
f) limitations of responsibility

The reason and business sense is that to protect the manufacturer of the package, because it is
straight forward to repeat, operate and duplicate under other name. Critiques contend that shrink-
wrap license agreement is in contradiction of the essential principle of contract of offer,
consideration and acceptance because the licensee is unsettled. Several cases to the
current effect are dispensed in US courts.

6. source code Escrow Agreements

In software development many principal firms who participate in development are keen to
protect the source code of the software, which is that the most appreciated and cautious apart of
the PC programme. Copyright owners of such source code may should disclose this to countless
developers who are developing definite software supported the source code. In these conditions,
the copyright owner will credit the source code to specified source code escrow agents who will
release the code on the event of the merchandise upon agreed terms. In cyber contracts, such
agreements and also the terms and conditions to contract with the escrow agents becomes vital.

LEGAL FRAMEWORKS OF E-CONTRACTS

With the growing importance and value of e-contract in India and across the globe, the
various stakeholders are continuously identifying and evaluating the nuances of legal
outline referring to it. The participation of various service providers within the transaction of e-
contract, which incorporates a payment gateway, the most website, the bank or card verification
website, the protection authorization website and therefore the final service provider which
might also comprise the agent has made the E-contract business more complex. Therefore, the
requirement for amendable it's augmented. In India, till date there are not any definite legislation
or guidelines protecting the buyers and sellers of products and services over the electronic
medium. However, several laws acting in unification try to control the business transactions of
E-contract. They are as follows:
 Indian Contract Act,1872
 Consumer Protection Act,1986
 Information Technology Act,2000
 Indian Copyright Act,1957
CMRU-SOLS, BENGALURU
.Like any other varieties of business, E-contract business also works on the premise of contracts.
it's therefore, structured by the Indian Contract Act, 1872. Any valid and legal E-contracts is
designed, completed, and enforced as parties replace paper documents with electronic
parallels. The contracts are move in between the service providers or sellers and buyers.

Earlier, there was no definite law to manage the intermediaries like verification service providers
and shipping service providers to safeguard that the merchandise or service is truly delivered.
However, the govt has recently acquainted the data Technology (Intermediaries Guidelines)
Rules 2011. the particular scope of the protection provided under these regulations would only
be known after judicial interpretation of the provisions.However, now it's been explained that
even foreign intermediaries delivered to produce service is sued in India.

The payment gateways is footing a fully important position because the primary processor of the
payment for the merchants were brought into the legal framework after proclamation of the
Payment and settlement Systems Act, 2007 (PSS Act, 2007). The PSS Act, 2007 likewise
because the Payment and Settlement System Regulations, 2008 made under the Act came into
effect from August 12, 2008. Further, the Federal Reserve Bank of India, issued additional
guidelines initiating all such gateways and payments processors to register under the said act.

The authority of the transactions of E-contract is established under the data Technology Act,
2000 (IT Act, 2000). It explains the reasonable mode of acceptance of the offer. IT Act, 2000
also rules the revocation of offer and acceptance. However, definite provisions that regulate E-
contract transactions conducted over the web, mobile phones, etc. are vague. With numerous
cross border transactions also being conducted over the web, specific law guarding the Indian
customers and Indian businesses are essential and Indian laws are gravely insufficient on this
issue.

In a bid to safeguard security, the govt has made digital signatures necessary in several E-
contract transactions mainly within the government to government (G2G) or government to
business (G2B) framework with a view to safeguarding the identity of the transacting parties. E-
contracts transactions on these modes require digital signatures as essential parts. they're used for
the verification of the electronic contracts. These are controlled by the IT Act, 2000 which
provides the outline for digital signatures, their issues and verification. The Act thus tries to
safeguard that trust between both the parties is maintained through verification of identities and
help prevent cyber-crimes and ensure cyber security practices.

In the light of the above discussion, it's to be said that this laws in respect of the rules of E-
contract and its related operations aren't suitable serving the aim. Propagation of laws is creating
a confusion within the smooth procedures of the E-contract accomplishments. Further, this laws
are salient on features of e-contract like payment instrument and delivery instrument and present
standard practices which are settled by the industry. The Federal Reserve Bank of India,
however, has tried to support the electronic payment mechanism through various orders, but such

CMRU-SOLS, BENGALURU
orders can only act as a stop-gap procedure. the foremost important order during this regard was
the appliance of second factor verification all told Indian Payment Gateways. Commonly
recognized as Verified by Visa or MasterCard Secure Code, this had made card transactions on
the web moderately safer.

The Indian legislative act and different State legislation mandate that documents within which
rights are established or transferred must be stamped. A document not properly stamped shall not
be permitted as proof in an exceedingly court of law, or maybe a competent authority unless it
absolutely was imposed (a fine of 10 times the quantity of the desired stamping duty).However,
documents can't be stamped for an internet contract until this date.

There are also some exclusions involved in E-contracts. In particular, the IT Act 2000 excludes
the following documents from electronic transactions:
 Negotiable Instruments
 Power of Attorney
 Trust Deed
 Will
 Sale Deed or Conveyance deed with respect to the immovable property of any documents
relating to any interest in an immovable property.

CASE LAWS:
Sections 11, 12 and 13 of the Information Technology(IT) Act,2000 deals with E-Contracts in
India. Lets take a look at some cases of E-Contracts.
 Mehta v J Pereira Fernandes S.A(2)
In this case, an appeal was put up against the District court judgment in which the plaintiff
company,JPF, was awarded a sum of nearly 25000 pounds on the grounds that the defendant had
promised for the same. The defendant appealed on the grounds that the guarantee was not
enforceable since it did not go along with the requirement of the statute of frauds.
The alleged guarantee arose from an email sent by Mehta to JPF’s solicitors. the e-
mail was within the following terms:

“I would be grateful if you'll kindly consider the subsequent. If the hearing of the

Petition is adjourned for a period of seven days subject to the following:

a private Guarantee to run within the amount of £25,000 in favour of your client – along with an

inventory of my personal assets provided to you by my solicitor.”

The email was unsigned but the headers indicated that it had been from Nelmehta@aol.com.
This email address also appeared on other, signed, emails sent to JPF’s solicitors.
CMRU-SOLS, BENGALURU
Mehta acknowledged that the e-mail had been sent, along with his authority, by an employee.

JPF’s solicitors telephoned Mr Mehta and accepted the proposal. Although they also sent him
a official document, this was never signed by Mr Mehta.
In the judgment, it was held that an offer sent through an unsigned E-mail is not a proper form of
communication and the mere email address cannot be taken into consideration as a signature.
Through this case it was held that signatures are compulsory even in mails sent as some of these
mails make the contract by themselves.
  P.R. Transport Agency vs. Union of India & others(3)
Bharat Coking Coal Ltd (BCC) held an e-auction for coal in numerous lots. P.R. Transport
Agency’s (PRTA) bid was accepted for 4000 metric heaps of coal from Dobari Colliery The
acceptance letter was issued on 19th July 2005 by e-mail to PRTA’s e-mail address. Acting upon
this acceptance, PRTA deposited the total amount of Rs. 81.12 lakh through a cheque in favour
of BCC. This cheque was accepted and en-cashed by BCC. BCC failed to deliver the coal to
PRTA. Instead it e-mailed PRTA saying that the sale additionally because the e-auction in favour
of PRTA stood canceled “due to some technical and unavoidable reasons”. the sole reason for
this cancellation was that there was another person whose bid for the identical coal was
slightly above that of PRTA. thanks to some flaw within the computer or its programme or
feeding of information the upper bid had not been considered earlier. This communication was
challenged by PRTA within the court of Allahabad.
The issues that were raised in this case were:
1. The communication of the acceptance of the tender was received by the petitioner by e-mail
at Chandauli (U.P.). Hence, the contract (from which the dispute arose) was completed at
Chandauli (U.P). The completion of the contract is a part of the “cause of action”.
2. The place where the contract was completed by receipt of communication of acceptance is a
place where ‘part of cause of action’ arises.
The court held that the contract was completed as soon as the PRTA at Chandauli/ Varanasi by
means of acceptance and Both these places were within the territorial jurisdiction of the High
Court of Allahabad. Therefore, a part of the cause of action had arisen in U.P. and the court had
territorial jurisdiction.
  J.K. Enterprises V. State of Madhya Pradesh and Ors.(4)
In this case, According to the plaintiff he made a proposal to the defendant, for the acquisition of
Tendu Leave of lot No. 1095 at the speed of Rs. 30/- per standard bag. it's the stand of the
plaintiff that he was never informed that his offer has been accepted. He made the offer on 11-1-
1993 and when he failed to get the acceptance till 3-3-1993, and thus by a fax message sent on 3-
3-1993 he withdrew his offer. In the return filed on behalf of defendant it's been stated that the
offer of the plaintiff dated 11-1-1993 was accepted and communication under registered cover on
the address disclosed by the plaintiff itself, was sent by letter dated 12-2-1993, which was
returned because the address was incomplete.

CMRU-SOLS, BENGALURU
Defendant further stated in their return that the alleged fax message dated. 3-3-1993 withdrawing
the offer wasn't received by the defendant because it was sent on the incorrect fax no.

Thus, consistent with the above mentioned facts the court held that because the communication
of acceptance of the offer made by the plaintiff was never made by the defendant and because
the defendant didn't communicate his acceptance within the given period of time the offeror can
withdraw his offer.

POSITION OF E-CONTRACTS IN INDIA

Lets talk about the most famous merchandise in India; Indian Railway Catering and Tourism
Corporation Limited
Indian Railway Catering and Tourism Corporation Limited (IRCTC) is certainly the most
important e-commerce site in India and in India’s answer to personal capitalist ventures. IRCTC
was founded as a subsidiary of the Indian railways for the exclusive purpose of providing
catering services and ticketing services for the Indian Railways. However, of late, it's extended
its wing and now covers sectors like flights and hotel bookings. The flagship was established in
2002 and has transformed the web travel booking business in India. IRCTC functions
both within the business to business and business to consumer segment. in step with the
information released by IRCTC, it's over 4-4.5 lakh reservations per day. In 2010-11, IRCTC
sold tickets value over Rs. 8000 Crore. It claims to change over8 lakh equivalent transactions
thereby speaking volumes about the prominence and therefore the size of their business.

The site offers the sole link for purchasing Indian railway tickets online and even agent sites
(B2B) must link them to IRCTC to supply online booking services for purchasers. IRCTC
offers an oversized option for consumers for payment of shopping for tickets online. IRCTC
however, is one in every of the few enduring e-commerce sites which charged transactions
charges from customers, which is different bank to bank.

Through IRCTS several customer enter daily into a replacement dimension of contract i.e. E-
contract. E-contract now plays a vital role both for the customer and therefore the seller.
Customer contains a lot of option to choose a product and seller through e-contract reach to large
customers.

E-CONTRACTS:INTERNATIONAL SCENARIO
The US and also the EU have affirmed the importance of protecting a replacement kind
of consumers. With the increase of electronic commerce, the role of consumers has changed
affectedly. While consumers were formerly a quiet body, today they need power in businesses.
Sellers are now during a comparatively submissive position. Their job is just too merely to
stick that product information it becomes the accountability of consumers to gauge and make
active decisions upon.

Where the precise field of argument firmness is anxious, both the US and also the EU realize the
simplest thanks to safeguard consumers can be to produce them with suitable measures for
CMRU-SOLS, BENGALURU
recompense. Consumer protection groups have created mediums where consumers can both
acquiesce e-mail based complaints when discontented with advertisements, goods or services,
and allege violators of self-regulatory codes of beliefs.

While consumer protection can tackle diverse forms, dispute resolve mechanisms are its final
insurance. Principles for dispute management are finally more attractive to devices than less
formal intended arrangements since they'll encourage more reliable conduct of consumer
benefits. In light of state practise, protection accessible by state power is very important. Some
consumers even seek reserve within the court. so as to quarter the special character of recent
business without drifting too removed from tradition, ADR mechanisms for dispute firmness
very cleverly entail state application support. Procedure for consumer protection in electronic
commerce dispute firmness must extend outside national limits. Individual states privation the
flexibility and initiative to adequately address issues associated with consumer protection within
the background of electronic market. Many of the problems that arise from cross border disputes
are impaired by the actual fact that misleading marketing practice laws vary from one
jurisdiction to alternative. Possible standard electronic consumer policies should be pertinent to
cross-border dealings to which all or most countries can subscribe.

OECD(Organization for Economic Co-operation and Development) Member States have

acknowledged the need of a global synchronized approach to cope with the difficulty of dispute
firmness in electronic business. In one imperative document framed by the OECD, Procedures
for Consumer Protection within the Context of Electronic Commerce, procedures for consumer
protection in question firmness and amends aim to safeguard consumers contributing in
electronic business without founding barriers to trade.

The rules function a relation to governments, businesses, consumers, and their councils of the

characteristics of active consumer protection for electronic business. The rationale behind them
is alike thereto of the US and EU. Firstly, applicable law and jurisdiction are singled out for
likely amendment.

No broad creation of the new applicable law or principle of jurisdiction is noticed, but the
principles do define features of suitable modifications. Equality, they suggest, is one in all the
foremost important features in understanding consumer safety. the aim of the fairness is to
supply consumers level of protection not but that afforded in other varieties of commerce and to
produce consumers with eloquent contact to fair and timely dispute resolution and redress
without undue cost or burden. to complete fairness, one must provide a framework for correcting
unfairness.
Rudder v. Microsoft Corporation(5):-
The plaintiffs commenced a category action lawsuit alleging breach by Microsoft of certain
payment related terms of Microsoft’s MSN Member Agreement. The Member Agreement was
an on-line “click-wrap” agreement that required each prospective member to scroll down through
several pages of terms and conditions so indicate their agreement to the terms by clicking an “I
Agree” button before being given access to the services. Although the plaintiffs wished
to depend on several terms of the Member Agreement, in bringing the action the plaintiff’s
disputed the selection of law and forum selection clauses that the defendant Microsoft sought to
CMRU-SOLS, BENGALURU
enforce. The plaintiffs asserted that because not all of the Member Agreement was visible at just
the once they failed to receive adequate notice of such provisions which as a consequence
they weren't enforceable. The court determined that the Member Agreement was enforceable
stating that scrolling through several pages was appreciate having to show through several pages
of a multi-page paper contract and to not uphold the agreement “would cause chaos within
the marketplace, render ineffectual electronic commerce and undermine the integrity of any
agreement entered into through this medium.”

CONCLUSION
E-contract in India has definitely came a protracted way from the times of bazee.com which
underwent as the first large online retail website. At present, with the rise in number of internet
user, e-contract is organized to grow further. The growing trend of internet banking and credit or
debit cards together with the increase within the number of educated and computer literate
persons will further support this growth.the requirement of the hour is law which covers all the
aspects of e-contract extending from payment mechanism and maintaining minimum
standards within the delivery of services. Such a legislation will help to restraint the expansion of
internet sites which rise within some days so stop functioning within the absence of suitable
funds for sustenance. As all business through e-contract sites is ended through the net with
none direct physical interfaces, the most basis connections is that the trust of the
purchasers which should be engaged at any cost. A law during this field will detect the criminals
who have used the net as a source for creating quick money. this can also act a defence for the
real e-contract websites and help in further growing of business.there's also a necessity for the
creation of an authority within the consumer court to seem into the grievances arising out of e-
contract transactions. Such an authority should have experts in area like payment security. this
can embolden speedy redressal of disputes and promote e-contract transactions. E-contract
which may be a developing segment within the commercial arenas scheduled to grow and it's the
accountability of the prevailing players to confirm that growth isn't hindered by their acts and
policies.

CITATIONS AND REFFRENCES:-

Citations for case laws:-
1- https://www.coursehero.com/file/p147de28/If-care-is-not-taken-it-may-lead-to-loss-of-
business-and-loss-of-clients-53/
2- https://www.casemine.com/judgement/uk/5a8ff73260d03e7f57ea973f

3- https://legaljugaad.wordpress.com/2017/11/10/jurisdiction-of-the-courts-in-case-of-disputes-
arising-out-of-an-e-contracts-case-analysis-pr-transport-agency-v-union-of-india-air-2006-all-23-
2006-1-awc-504/
4- https://indiankanoon.org/doc/1739865/

5- https://en.wikipedia.org/wiki/Rudder_v_Microsoft_Corp

CMRU-SOLS, BENGALURU
References:-
 Avtar Singh’s, “Contract & Specific Relief”, 10th Ed.
 http://www.legalserviceindia.com/articles/ecta.htm
 https://www.indialawoffices.com/legal-articles/e-contracts-and-validity-india
 https://www.researchgate.net/publication/330281294_E-
Contracts_in_India_The_Legal_Framework_Issues_and_Challenges

CMRU-SOLS, BENGALURU