CYBER LAW

UNIT-4 DIGITAL CONTRACT & E- COMMERCE

I. MEANING & NATURE OF E-CONTRACT

1. Section 2(h) of the Indian Contract Act, 1872 tells us that the term ‘contract’ is an
agreement that is enforceable under the law. Interestingly in the case of an E-contract,
the essence of section 2(h) is it still sustained by only tweaking the mode in which the
contract comes into existence.
2. Hence an E-contract is an agreement that is enforceable under the law and is in all
respect drafted, negotiated, and executed digitally. Unlike a traditional contract which
is paper based, the contract or digital in their entirety.
3. In an E-contract, though there is an absence of a physical meeting of all parties, a
meeting of minds present absolutely. The party communicate with each other over all
over the internet or through telephonic media.
4. An E-contract is a step ahead of traditional pen-paper contracts and comes into
existence through electronic and digital mediums.

II. ESSENTIALS OF A VALID E-CONTRACT

An E-contract in order to be valid will have to comply with the provisions of the Indian
Contract Act. The essential elements of a valid contract our laid down as under—
1. Offer and Acceptance: An E-contract, Like a traditional contract, must include a clear
offer and acceptance. This can be facilitated through email exchanges, digital forms or
online platforms where parties agree to come electronically.
2. Consideration: Consideration in E-contracts refers to the value exchanged between
parties, such as monetary payments, services or goods. It is a essential for the contracts
enforceability.
3. Intention to create Legal Relationship: There must be an intention to create legal
obligations between the parties.
4. Capacity and Consent: All parties involved in an E-contract must have the legal
capacity and give informed consent. Digital platforms offer include verification
processes to ensure that parties are of legal age and fully understand the contract terms.
5. Legality: The contract’s subject-matter must be legal for the agreement to be
enforceable. Contracts violating legal requirements, Such as those involving illegal
activities or prohibited terms, or void and unenforceable.

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 III. Parties involved in an E-contract/E-message
The exchange of messages involves a sender and receiver, referred to, with respect to an
electronic message as the originator and addressee respectively.
A third-party, the intermediary is also often involved in the exchange of electronic messages.
The intermediary includes any online facilitator that provides service with respect to the
communication of the message.

DEFINITIONS
1. ORIGINATOR: Section 2(za) of IT Act, 2000 defines originator as—“originator
means a person who sends, generates, stores or transmits any electronic message or call
any electronic message to be sent, generated, it stored or transmitted to any other person
but does not include an intermediary”.
2. ADDRESSEE: Section 2(b) of the IT Act, 2000 defines addressee as— “Addressing
means any person who is intended by the originator to receive the electronic record but
does not include the intermediary”.

IV. TYPES OF E-CONTRACTS

1. Contracts entered into through E-mails: E-contract may be in the form of a contract
that is entered into by way of communication through an electronic medium like emails.
This involves the discussion of various stages of the formation of the contrast such as the
communication open offer, acceptance etc and other negotiation of the various terms of the
contract through the electronic medium. The contract that is entered into is non- instantaneous
and negotiable. The model law and the IT act provides the rule applicable to the formation of
contract in this manner.
2. Standard form of E-contracts: Alternatively, E-contract can take the form of non-
negotiable and instantaneous contracts of the following types—

CLICK- WRAP AGREEMENTS

1. This is the most common form of E-contract found online. It consist of a list of terms
and conditions, to which the party can either agree by clicking on the “I agree” icon or
disagree by clicking the “cancel/I disagree” icon.
2. We provide active indication of acceptance on the part of the consumer with respect to
the terms and conditions before–
a. Using the service; or
b. Accessing the content; or
c. Making a purchase
3. There is no scope for any negotiation in these contracts. The party only has the option
to reject or accept the terms of contract in their entirety.
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 4. A common example of this is found in the disclaimer on websites, where an internet
user is allowed to access the website only on accepting the terms and conditions found
in it.
5. This type of E-contract is also commonly used in software licenses, Where the
installation of the software occurs only upon excepting the terms and conditions. In
case the terms and conditions are rejected, the installation will abort.

CASE: Forrest v. Verizon Communication Inc.

In this case, a forum selection clause present in a clickwrap agreement was enforced. It was
held that the fact that only portion of the agreement could be view in it scroll box did not imply
that the notice to the user was in adequate.

CASE: Costar Realty Info. Inc v. Field

It was held that clickwrap agreement would be binding even if the user had failed to read the
contract before accepting it.

BROWSE WRAP AGREEMENTS

1. Browse wrap agreement list out their contract terms and conditions (usually in the form
of a hyperlink at the bottom of the website) on the website being assessed or the product
being downloaded.
2. Unlike a clickwrap agreement, where the user must expressly accept the terms and
condition by clicking on and ‘I agree’ box, a browse wrap agreement does not require
this type of express acceptance of the terms.
3. Here, the mere use of the product, for instant browsing through the website or
downloading the product will amount to the user’s assent to the contract.
4. The enforceability of this agreement is, however, dependent on whether the user had
actual or constructive notice of the terms and condition.
5. The browse wrap agreement terms the conditions as “by using this site, you agree to
the terms of use. If you do not agree to these terms, you may not use this site”.
6. However, this type of contract does not lease and scope of negotiation relating to do
that on that condition of the use and therefore it is also one-sided agreement.
CASE: Specht v. Netscape Communication Corp. 2002
The court of appeal held that a browse wrap agreement which was contained in a hyperlink that
could not be viewed unless the user is scrolled down to the next screen, did not constitute
adequate notice to the user, and the clicking on the download button did not amount to consent
to the agreement.

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SHRINK WRAP AGREEMENT
1. Shrink wrap agreements are found inside the sealed packaging of tangible product,
where one cannot see the agreement until the product has been purchased or used.
2. For example, software CDs come packaged in plastic with a notice that by tearing the
plastic, the user will be deemed to have extended to the terms of use which are enclosed
in the CD.
3. The plastic packaging usually contain some of the essential clauses of the terms of use
in brief so as to constitute adequate notice to the user.
4. Such agreements are likely to be found unenforceable on grounds of in adequate notice
to the user, unless constructive notice can be established.
5. Shrink wrap agreements for the end user license agreement which is the software
license acting as a contract between the producer and the user of the computer software
to specify the limits to which a purchaser is entitled to, as granted by the owner.
6. Thus, To ensure in force ability of a standard form E-contract, it is a sensual for the
website to provide adequate notice of the contract. A good example of such a notice is
the favourite provided conspicuously on the first page of the website– “Please read this
agreement carefully to ensure that you understand each provision. This agreement
contains a mandatory individual arbitration”.

V. Rules of Communication
Inapplicability of Standard Rules of Communication

The Contract Act prescribes detailed rules for the communication of offers, acceptance and
revocation. These rules enable the determination of whether a contract has been successfully
formed, and the time and place of formation of the contract:

1. Method of Communication: Communication may be made by any method, act or

omission that has the effect of communicating it to the other party.

2. Communication of Offer: Communication of an offer is complete when it comes to

the knowledge of the offeree.
3. Communication of Acceptance: Communication of acceptance is complete for the
offeror when it has been put into transmission to him by the offeree and is out of the
power of the offeree. Communication of acceptance is complete for the offeree when it
comes to the knowledge of the offeror.
4. Communication of Revocation: Communication of revocation is complete for the
person revoking when it is put into transmission to the other party and is out of the
power of the person revoking. Communication of revocation is complete for the other
party, when the revocation comes to his knowledge.
5. Revocation of Proposal: An offeror may revoke his offer any time before the
communication of acceptance is complete for the offeror, i.e., any time before the

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 acceptance has been put into a course of transmission to the offeror so as to be out of
the offeree’s control. A proposal cannot be revoked after such time.
6. Revocation of Acceptance: An offeree may revoke his acceptance any time before the
communication of acceptance is complete for the offeror, i.e., any time before the
acceptance comes to the knowledge of the offeror. An acceptance cannot be revoked
after such time.

VI. RECOGNITION OF E-CONTRACTS

1. Section 10A: Validity of contract is formed through electronic means— Section 10A
of the IT act provides for the recognition of contract is formed through electronic
means– “ Where in a contract formation, the communication of proposal, the
acceptance of proposal, the location of proposal and acceptance is, as the case maybe,
or expressed in electronic form or by means of an electronic record, such contract shall
not be deemed to be unenforceable solely on the grounds that such electronic form or
means was used for that purpose”.
Any stage of formation on the contract, be it a proposal, acceptance or location, may be
expressed in an electronic form or by means of electronic record.
This section uses the word ‘expressed in electronic form or by means of electronic record’. The
section does not specify how the communication reaches the other party, for instance, it does
not state that the electronic record is to be transmitted electronically through the means of a
computer.
Therefore, this section will apply even to case where an electronic record is transferred
manually, say in the form of a magnetic disc which is delivered to the opposite party by courier.

2. Article 11 of the Model Law: Section 10A of the IT act has been drafted along the
lines of article 11 of the Model Law on the formation and validity of contract.
It provides that— In the context of contract formation, unless otherwise agreed by the parties,
an offer and the acceptance of an offer may be expressed by means of data messages. Where a
data message is used in the formation of a contract, that contract shall not be denied validity or
enforceability on the sole ground that or not a message was used for that purpose.
3. No effect on Law of Contract formation: Section 10A of the IT act provides for a
new means of forming contracts but does not in any way effect the Indian Contract Act
or any other rules of contract formation.

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