Things that you must know about E-Contracts!


The Internet has changed people’s way of communicating. Plus, the way people are doing business has also changed the Internet and electronic data exchange. It developed a new kind of trade and trade called e-commerce. E-commerce is increasing with a high level of internet penetration worldwide and the rise of internet users. High speed and a geographic absence have rendered greatly to the growth of e-commerce, which is the key advantage of the Internet. For example, a buyer in India can buy products from a vendor in the United States with just a few clicks of the mouse, without having to leave their home or office. In an electronic world called electronic contractor normally e-contract or on-line contracts, e-commerce brought about a new form of contracting. Electronic contracts are generally known to many of us. The most general 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.

Contracts and Validity

In India, the Indian Contract Act, 1872 directs all agreements and contracts, including online contracts. Only put, a contract is a legally binding agreement. The fundamental essentials of a valid contract are addressed in Section 10 of the Indian Contract Act:

  • A party offering, and the other party’s acceptance.
  • Mutual agreement between the Parties.
  • Intense legal relationship fabricating.
  • Contracting parties should be legally able, i.e. be over the age of 18 years, have the soundness of mind, solvent etc.
  • The view of the contact is legal and is not contrary to government policy, for instance a prohibited drug’s sales agreement is not a valid contract.
  • The agreement should be provided by means of cash or in any kind i.e. consideration
  • The agreement should be good of being performed.
  • The contract terms are sure.

A contract cannot be stated to be valid until the above conditions are fulfilled. In India both the Indian Contract Act 1872 and the Information Technology Act 2000 should be made with in accordance with a valid e-contract. An online contract is normally binding on the user when he/she clicks on the ” I agree ” button if the above requirements terms are met.

Types of Online Contract

Online contracts can be of three types as underneath:

1.    Shrink-wrap agreements

Shrink wrap contracts are generally a licensing agreement for software purchases. In the case of shrink-wrap agreements, the terms and conditions for access to such software products shall be applied by the person buying it, with the initiation of the packaging of the software product. Tightening-up agreements are generaly the agreements that are accepted by users, for example, Nokia pc-suite, at time of installing the software on a CD-ROM. A few times, after loading the product onto your computer, additional conditions may only be observed and then, if the buyer doesn’t comply, he has an opportunity to return the software product. The shrink-wrap Agreement renders protection by exonerating the product manufacturer of any violation of copyright or intellectual property rights as soon as the purchaser tears the product or the coverage for accessing the product. Nonetheless, the validity of shrink-wrap agreements does not exist in India with a stable judgment or precedent.

2.    Click or web-wrap agreements

Click-wrap contracts are web-based contracts that need the user’s consent or consent through the “I Accept,” or “OK” button. The person must accept the terms of use of the particular software with the clickwrap agreements. Person who disagree with the terms and conditions cannot use or purchase the product after cancellation or refusal. Someone almost time to time observes web-wrap agreements. The terms of use shall be set down before acceptance by the users. For example, online shopping agreement, etc.

3.    Browse-wrap agreements

A browsing wrap agreement can be called an agreement which is to be binding on 2 or more parties through the use of the website. In the event of an agreement on browsing, an ordinary person of a given Website is to accept the terms and conditions of use and other website policies for continuous use. We normally see such kinds of online contracts in our daily lives. Although this online agreement is emerging common in all of our businesses, there is no precise judicial precedent regarding its validity and enforceability.

Formation of Online Contracts or Electronic Contracts

Like an ordinary contract, e-contracts comprising of an offer and acceptance are enforceable. The partcipation of the parties, such as exchanging e-mails or acceptance of a condition or terms or by downloading can also imply a contract. Different procedures are available for forming electronic/online contracts:

Email: The parties may make a valid contract by exchanging e-mail communications. Offers or acceptances can be completely exchanged via e-mail, or combined with paper documents, faxes, and oral debates.

Website Forms: In many circumstances, an e-commerce website offers for sale goods or services that are ordered by customers, by filling in and submitting an on-screen order form. The seller will enter into a contract once the order has been taken. The products and services can be fulfilled off-line physically. A contract would also be valid for the terms of use of a website once the user accepts the contract by clicking “I Agree.”

EULA: The End User License Agreements forms valid contracts in which end users click “I Accept” or “I Accept the Terms.”

Offer and Acceptance

The concept of offer and acceptance is the basic concept of effective communication in contract formation. In relation to this question, e-commerce poses a big problem. The offer and acceptance should be seen as they determine the exact time and place of the agreement, and thus which jurisdiction applies.

Often in e-commerce transactions among parties, they never meet. The problem is immediate and the traditional form of contract is challenged, as it makes it difficult to ensure that the parties act legally and that the transaction itself is legal and has taken the necessary steps to respect the Contract. With consideration to bilateral contracts, an offer is a clear declaration of the terms and conditions in which a person (the offeror) pledges to be bound; the other party (the offeree) accepts the offer. It’s tough to find out, on the internet, whether a website is a deal or an invitation to treat.

The words used in an online offer can genrally be considered misleading, and different legal systems can deal with these issues differently. An acceptation is an unqualified final agreement to the terms and conditions of the offer. Usually, it must be communicated to the offeror and the parties are free to vary by agreement.  E-mail is one such method of acceptance in an e-commerce environment. Acceptance of an offer becomes effective at the moment the indication of assent by the offeree reaches the offeror. E-mail is a common acceptance procedure in the field of e-commerce, but it is problematic. The ‘Postal Acceptance Rule’ states that if a Party agreed to enter into a deal by post the contract shall be deemed to have been finalised when the Offeror sends the letter of acceptance, whether the Offeree receives it or not. This rule does not apply to e-commerce.

Signature Requirement

In general, signature is signing a document with one’s own name. The central function of signing a document is to confirm the identity of the contracting parties and to give consents to the contractual terms and to refuse repudiation, that is when a person appends his signature, he cannot subsequently refuse that he was not a contracting party. A signature is not essential in accordance with the Indian Contract Act, which mentions that a valid contract may also be an oral agreement between parties. For it to be valid, thus, a contract must not be signed physically. Nevertheless, such statutes have specified requirements for signature, for instance, a transfer certificate on an immovable property cannot be valid if the signature and/or thumb impression has not been attested to by the seller to the same. In another case, the Indian Copyright Act of 1957 calls for the customer to sign. The IT Act is thus a physical signature for e-signature. Competent authorities have to sign electronically in accordance with the IT Act, but e-signatures have not been notified by the central government.

Requirement as per The Indian Stamp Act

The Indian Stamp Act and different State legislation states that documents in which rights are established or transferred must be stamped. A document not correctly stamped shall not be permitted as proof in a court of law, or even a competent authority unless it was imposed. Nonetheless, documents cannot be stamped for an online contract until this date.

Standard Form Contracts

A majority of online contracts belong to the type ‘Click-Wrap,’ a standard contract form in which all circumstances are stated on the software webpage or installation page and all parties are need to use a click on the button appropriate for the terms and conditions. In standard form contracts, there is no extent for negotiation. In few cases, the courts found certain specific contractual terms to be unconscionable and abolished. With resect to India’s position, Article 15(3) of the Indian Contract Act states that where a party holds a domination place and enters into a contract with another party, and the transaction appears unreasonable on its face or on evidence supplied, it must burden a person in the dominant position to demonstrate that that contract has not been concluded under pressure.


However, the enforceability of internet contracts is questionable, if written agreements that were signed and agreed are considered binding. While the internet is only emerging, the Internet contracts are usually well governed by the principles laid down in writing.

Often, the user of the commercial website is requested to read and agree to the terms and conditions of activities before purchasing or receiving the service provided by the site. The agreements entered into in this way are referred to as the clickwrap agreements, as the user normally specifies his agreement to the terms and conditions by clicking the button or the hyperlink marked “I agree”.

Clickwrap agreements are usually implementable and browsewrap agreements are very difficult to implement subject to traditional contractual principles. There are somewhere between shrinkwrap agreements, although recent cases support their enforceability.

Specific Exclusions

In particular, the IT Act 2000 excludes from electronic transactions the following documents:

  • 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.

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