E-Contracts in India

24 August 2021
by Archana Balasubramanian
An electronic Contract refers to a contract that takes place through e-commerce, often
without the parties meeting each other. It refers to commercial transactions conducted and
concluded electronically. A customer drawing money from an ATM is an example of an
electronic contract. Another instance of e-contract is when a person orders some product from
an online shopping website. Globalization and the diffusion of technology have accelerated
the presence of e-commerce companies throughout the world. Online auctions are also
gaining popularity whereby buying and selling take place through bidding using the Internet.
In this post, we outline the various types of contracts and legal issues with the enforcement of
such contracts.
Types of E-Contracts
Three common kinds of electronic contracts are browse wrap, shrink wrap and click wrap
contracts.
 A browse wrap agreement is intended to be binding on the contracting party by the
use of the website. Such contracts are usually used by websites wherein the continued
use of a website by a user is deemed to be acceptance of its revised terms of use and
other policies.
 A shrink wrap contract is a license agreement where the terms and conditions of the
contract are enforced upon the consumer as soon as he opens the package. Such
contracts can be generally observed in the case of buying of software products. The
license agreement indemnifies the user for any copyright or intellectual property
rights violation of the manufacturer as soon as the buyer opens the pack (containing
the software product).
 Click wrap or click-through agreements require the user to manifest his consent or
assent to the terms and conditions governing the licensed usage of the software by
clicking the "ok" or "I agree" button on the dialog box. A user may choose to disagree
or reject the terms by clicking cancel or closing the window. Such a user will not be
able to buy or use the service upon rejection. One regularly comes across such a type
of contract during online transactions, while downloading software or creating an e-
mail account. Unlike shrink wrap agreements where the terms of the agreement are
hidden inside the box, in the case of click wrap agreements, all the terms and
conditions are accessible prior to acceptance, either in the same window or through a
hyperlink.
In India, there are no concrete judicial precedents on the validity of shrink-wrap and click-
wrap agreements. However, courts in other countries have dealt with such type of
agreements.
In the US, the courts have held that shrink-wrap agreements are enforceable as long as they
do not violate the general principles of contract law and that even though the specific terms of
bargain were not disclosed until after the sale, the contract had been validly formed by the
purchaser's conduct.
Similarly, Click Wrap contracts are also enforceable in the US.1 The Appellate Division of
Superior Court of New Jersey held that a valid and binding contract is entered into by the
plaintiff by clicking the "I Agree" option and that the former is bound by the resultant
contract.
Validity of E-contracts
Along with traditional agreements the Indian Contract Act, 1872 has also accorded
recognition to oral contracts provided they are made by the free consent of parties competent
to contract, for a lawful consideration and with a lawful object, and are not expressly declared
to be void. Thus, nothing in the Indian Contract Act prohibits the enforceability of electronic
agreements if such agreements possess all the essentials of a valid contract.
Free consent is a quintessential characteristic of a valid contract. Generally, there is no scope
for negotiations on E-Contracts and it is usually a 'take it or leave it' transaction. Indian courts
have dealt with instances where the terms of the contract were negotiated between parties
wherein one party to the contract was in an unfair dominant position and have held unfair
contracts as void.
In the case of LIC India v. Consumer Education and Research Centre, the Supreme Court
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. He has either to accept or leave the service or
goods in terms of the dotted line contract. His option would be either to accept the
unreasonable or unfair terms or forgo the service forever."
The focal point is the bargaining power of the parties, for instance, wherein a person accepts
unfair terms of contracts to obtain goods or services or means of livelihood. However, the
courts would not intervene in situations where the parties are at equal or almost equal
bargaining positions. Thus, if a consumer was to take the defence of an E-Contract being
unreasonable and the existence of disparity in the negotiating power of the parties, he shall
also have to prove that the services or goods sought by him under the E-Contract were of
absolute necessity and also that he had no other means for availing the goods or services.
Execution of E-contracts
In India, there is no regulation to govern E-Contracts. Recognition and regulation to E-
Contracts are provided by some of the provisions of the Information Technology Act, 2000
and the Indian Evidence Act, 1872. The I.T. Act contains detailed provisions for attribution,
acknowledgement and dispatch of electronic records and secured electronic procedures. The
recent amendments to Maharashtra Stamp Act provide that the term 'document' includes an
electronic record.
The IT Act recognizes that communication of proposals, acceptance of proposals, revocation
of proposals and acceptances, as the case may be, could be expressed in electronic form or by
means of an electronic record, and shall not be deemed to be unenforceable solely on the
ground that such electronic form or means was used for that purpose.

1
Hotmail Corporation v. Van Money Pie Inc., 1998 WL 388389 (N.D. Cal.).
Further recognition is accorded under the Indian Evidence Act, whereby the
term document includes computer output that is any information contained in an electronic
record which is printed on a paper, stored, recorded or copied in optical or magnetic media
produced by a computer (hereinafter referred to as the computer output). Such information in
conformity with the conditions of Section 65B shall be admissible in any proceedings,
without further proof or production of the original, as evidence of any contents of the original
or any fact stated therein of which direct evidence would be admissible.
Electronic signatures
The Information Technology (Amendment) Act, 2008 substituted the term 'digital signature'
with the term 'electronic signature'. A digital signature is technology specific and is
irreversibly unique to both the document and the signer. However, an electronic signature is
technology neutral and generic. There is no standard for electronic signatures. It can be a
typed name or a digitized image of a handwritten signature. The substitution of the term
'digital signature' with 'electronic signature' is meant to broaden the spectrum of E-contracts
in an e-commerce world. It is pertinent to note that other counties like the U.S. have also
enacted suitable legislation to provide that a signature may not be denied legal effect solely
because it is in electronic form or because it does not follow the prescribed technological
process.
Recognizing the change in the execution of commercial transactions the Supreme Court
disregarded the argument that exchanges over e-mail did not qualify as contracts and held
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."2 Thus, a corollary may be drawn that e-mails conveying the clear intention of
parties to enter into a contract can be treated as a binding contract.
Maharashtra Stamp Act
Section 3 of the Maharashtra Stamp Act provides that every instrument mentioned in
Schedule I to the Act is chargeable with Stamp duty. This implies that stamp duty is also
payable on contracts entered in electronic form if such an instrument is listed in Schedule I.
The term 'execution'3 in the aforementioned Act is used to mean 'signed' and 'signature'.
Explanation to this section provides that the term 'signed' and 'signature' include attribution to
electronic records as per section 11 of the Information Technology Act. The term signed with
reference to a person who is unable to write his name includes 'mark'. 4 Thus, an instrument
can be validly executed in electronic form.
Further, the Maharashtra E – Registration and E-Filing Rules, 2013 facilitates online payment
of stamp duty and registration fees. The Rules also make appending of electronic signatures
or biometric thumbprint mandatory, thereby further giving recognition and legal validity to e-
contracts.
Further Stamping Requirements
2
 Trimex International FZE v. Vedanta Aluminium Limited, India.
3
Section 2(i) of the Maharashtra Stamp Act.
4
Section 3 (56) of General Clauses Act, 1897.
One of the important documents evidencing an online transaction is the receipt, provided by
the online vendor to the customer at the end of a transaction.
Receipt, as per the Indian Stamp Act, 1899, includes any note, memorandum or writing,
whereby any money or any bill of exchange, cheque or promissory note is acknowledged to
have been received.
Whereas the Maharashtra Stamp Act, has no requirement for stamping a receipt, the Indian
Stamp Act, 1899 mandates that a receipt for any money or other property, the amount or
value of which exceeds INR 5000 (Rupees Five Thousand) shall be stamped. Hence,
although the entire transaction is conducted online, without the signing of any document
between the seller and the buyer, it is essential to have the receipt, which evidences the entire
transaction, stamped.
Difficulties
While there have been large strides in bringing the legal framework up to speed with new
technology and resultant transactions through E-Contracts, it can be said that the legal
framework pertaining to E-Contracts in India is still in the nascent stages as compared to
other countries. E-Contracts like Click Wrap, Browse Wrap and Shrink Wrap need to be
specifically recognized and an efficient framework to regulate them needs to be provided
which would consequentially eliminate many ambiguities and blind spots encountered by
parties while entering into contractual relationships through these types of agreements.
Typically, most e-contracts such NDAs which are executed and scanned to the other party as
well as click wrap agreements on e-commerce websites containing "electronic signatures"
may be rendered unenforceable on account of the series of judgments read with stamp laws in
this regard. Difficulties are encountered when courts refuse to give effect to the terms of such
e-contracts including arbitration agreements contained therein. In a recent Bombay High
Court decision, the Hon'ble Bombay High Court held that interim measures under section 9
of the Arbitration and Conciliation Act cannot be granted if the agreement, from which the
dispute arises, is chargeable with stamp duty but is unstamped or insufficiently stamped.
Similarly, recent amendments to the stamp laws (as of 24th April 2015) have increased the
maximum penalty for non-stamping to 4 times as compared to double the stamp duty payable
earlier.
However, the recent Supreme Court judgment 5 on this point disregarding formalities for the
formation of a valid contract gives some respite to stakeholders in the e-commerce sphere. 

5
Trimex International FZE v. Vedanta Aluminium Limited, India.