2.

INTRODUCTION
st

In the 21 century, contracts have become so common in our life that we dont even realize
that we are entering into one. The electronic age has changed the dimensions in which a contract
is generally formed.
The preamble to the United Nations Commission on International Trade Law (UNCITRAL)
Model Law on Electronic Commerce states an increasing number of transactions in
international trade are carried out by means of electronic data interchange and other means of
communication, commonly referred to as electronic commerce, which involve the use of
alternatives to paper-based methods of communication and storage of information. 1 Electronic
contracts are necessarily a result of the need for speed, convenience and efficiency. These econtracts, which are not paper based and instead they use certain forms of electronic devices for
their communication, are governed under comparatively newer set of laws, acts, statutes etc. In
most of the countries, these laws have, in fact, evolved in the last two decades of the 20 th century
which saw a rise in usage of electronic devices along with the introduction of internet and cell
phone based communications. This paper tries to examine and analyze various laws under which
e-contracts are governed in India and abroad. Further, it has also been tried to scrutinize whether
the Indian Information Technology Act conforms to UNCITRAL Model Law on Electronic
Commerce and also to The United Nations Convention on the Use of Electronic
Communications in International Contracts.

3. ESSENTIALS OF AN E-CONTRACT
Just like paper based contracts, e-contracts also have some necessary ingredients which are as
follows2:

An offer needs to be made.

The offer needs to be accepted.
There has to be a lawful consideration.
There has to be an intention to create legal relations.
The parties must be competent to contract.
There must be free and genuine consent.

1 See UNITED NATIONS PUBLICATION, UNCITRAL MODEL LAW ON ELECTRONIC COMMERCE with
GUIDE TO ENACTMENT 1996 with additional article 5 bis as adopted in 1998 1 (1999).
2 See ASIAN SCHOOL OF CYBER LAWS, E-COMMERCE: LEGAL ISSUES 100-103 (2012).

An Analysis of E-Contracts

The object of the contract must be lawful.

There must be certainty and possibility of performance.

A discussion on each of these ingredients is out of the scope of this paper.

4. CLASSIFICATION OF E-CONTRACTS
Shrinkwrap agreements and Clickwrap agreements are the common types of contracts
used in electronic commerce.

4.1. SHRINKWRAP AGREEMENTS

The shrinkwrap licenses gets its name from packages (usually of retail software) covered in
plastic or cellophane shrinkwrap, having written licenses, mostly unsigned, which state that
acceptance on the part of the user to the terms of the license is indicated by opening the
shrinkwrap packaging or other packaging of the software, by use of the software or by some
other specified means.3 It is worth noting that these contracts are not merely limited to software
industry.4
As far as the enforceability of shrinkwrap licenses is concerned, Judge Easterbrook has held
that unless their terms are objectionable on the grounds applicable to contracts in general,
shrinkwrap licenses are enforceable.5 But it also needs to be noted that courts should take into
account the popularity of shrinkwrap licenses and the reasons for their use when deciding
whether to enforce them, because such licenses threaten the policy objectives of federal
copyright law.6

3 See 13 LEXISNEXIS BUTTERWORTHS WADHWA NAGPUR, MULLA INDIAN CONTRACT AND SPECIFIC
RELIEF ACTS 162 (13TH ed. 2010).
4 See ASIAN SCHOOL OF CYBER LAWS, E-COMMERCE: LEGAL ISSUES 119 (2012).
5 See ProCD, Inc. v. Zeidenberg, 86 F. 3d 1447 (7th Circ. 1996) at 1449.
6 See Contract Law - Shrinkwrap Licenses - Seventh Circuit holds that Shrinkwrap Licenses are Enforceable
ProCD, Inc. v. Zeidenberg, 86 F. 3d 1447 (7th Cir. 1996), 110 HARV. L. REV. 1946, 1951 (1997).

An Analysis of E-Contracts

4.2. CLICKWRAP AGREEMENTS

Clickwrap agreements are mostly found as part of the installation process of software
packages. They are also known as click through agreements or clickwrap licenses. 7 These
contracts may often provide that the end user will abide by the rules of the online site, or be
entitled to privacy protections provided in the system rules, pay for goods or services purchased
at the site, waive any claims that the online site is liable for errors or harms suffered by the user,
not infringe others intellectual property rights, not violate other applicable laws or lose access to
the site if the rules are violated.8

5. APPLICABLE LAWS
In India, The Information Technology (Amendment) Act, 2008, hereinafter referred as IT
Act, governs the validity and other issues related to electronic contracts. Section 10A of IT Act
relates to the validity of e-contracts which states:
Where in a contract formation, the communication of proposals, the acceptance of
proposals, the revocation of proposals, the revocation of proposals and acceptances, as the case
maybe, 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.9
This provision complies with the UNCITRAL Model Law on Electronic Commerce. 10 It is a
point noteworthy that due to certain issues which arised after the adoption of UNCITRAL Model
Law on Electronic Commerce, the General Assembly of the United States adopted a
comparatively mature international agreement in 2005, with certain amendments to the previous
7 See Supra note 4.
8 See 13 LEXISNEXIS BUTTERWORTHS WADHWA NAGPUR, MULLA INDIAN CONTRACT AND SPECIFIC
RELIEF ACTS 164 (13TH ed. 2010).
9 See Sec. 10A of The Information Technology (amendment) Act, 2008.
10 See Art. 11 (1) of UNCITRAL Model Law on Electronic Commerce (1996).

An Analysis of E-Contracts
one. This agreement, The United Nations Convention on the Use of Electronic Communications
in International Contracts (ECC) is currently undergoing the ratification process. This agreement,
as well as the previous one, provides rules and guidance needed by countries as well as private
commercial parties struggling with how to adapt to the growing use of electronic
communications in international trade. In fact, no one can dispute the need for a system of rules
to guide countries as well as private commercial parties through the many new developments and
issues that arise.11
The European Parliament and the Council of the European Union came up with the EC
Directive which makes it mandatory for the member states to ensure that their legal systems
allow the contracts to be concluded by electronic means.12
In cases where there is no particular prescribed form in which the receipt of electronic record
has to be acknowledged, section 12(1) of IT Act is the governing law. 13 Basically, the whole
section 12 talks particularly about the acknowledgment of receipt. Similarly, Section 13 of IT Act
is also a very important provision which decides the time and dispatch of electronic contract
along with the receipt of electronic record.
In P.R. Transport Agency v. Union of India &Others 14, the question as to the place of
completion of an e-contract, and hence, the place where cause of action arises was considered
at length by the High Court of Allahabad. In this case, P.R. Transport Agency, hereinafter
11 See KLUWER LAW INTERNATIONAL, THE UNITED NATIONS CONVENTION ON THE USE OF ELECTRONIC
COMMUNICATIONS IN INTERNATIONAL CONTRACTS: AN IN-DEPTH GUIDE AND SOURCEBOOK xxix (1st ed.
2008).
12See Directive 2000/31/EC of the European Parliament and of the Council of 17 July 2000 on certain
legal aspects of information society services, in particular electronic commerce, in the Internal Market
(Directive on electronic commerce), EC Directive 2000/31, O.J. L178/1 17 July 2000.
13 See Sec. 2(1)(t) of Information Technology (amendment) Act, 2008, which defines electronic record
as data, record or data generated, image or sound stored, received or sent in an electronic form or micro
film or computer generated micro fiche.
14 P.R. Transport Agency v. Union of Indian & Others, AIR 2006 All 23.

An Analysis of E-Contracts
referred as PRTA, participated in an e-auction for coal organized by Bharat Coking Coal Ltd.
(BCC). PRTAs bid was accepted and the acceptance letter was issued on 19 th July, 2005 by email to PRTAs e-mail address. Acting in furtherance to this acceptance, PRTA deposited the full
amount of Rs. 81.12 lakh through cheque in favour of BCC which was accepted and encashed.
But, BCC did not deliver the coal to PRTA. Instead it informed PRTA through e-mail that the
sale as well as the auction in favour of PRTA stood cancelled due to some technical and
unavoidable reasons.
The reason for cancellation was that there was some other person whose bid was slightly
higher than that of PRTA, but due to some technical flaw in the programming or feeding of data
in the computer, the higher bid had not been considered earlier. This was, hence, challenged by
PRTA in the High Court of Allahabad.
BCC contended that the Allahabad HC had no jurisdiction as no part of the cause of action
has arisen within U.P. In response to that, the counsel, on behalf of PRTA, submitted that

The communication of the tender was received by the petitioner by e-mail at Chandauli
(U.P.). Hence, the contract was completed at Chandauli. The completion of the contract is

a part of the cause of action;

The place where the contract was completed by receipt of communication of acceptance
is a place where part of cause of action arises.
The High Court of Allahabad, applied section 13(3) of the Information Technology Act to

determine the place of acceptance of contract and came to the conclusion that the acceptance was
received by PRTA at Chandauli/Varanasi and the contract became complete by receipt of such
acceptance. Moreover, since both these place 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.
The reasoning, as given in the judgement, is based on section 13(3) which says:

An Analysis of E-Contracts
an electronic record is deemed to be received at the place where the addressee has his
place of business15
Since the place of business of PRTA was Varanasi and Chandauli, hence these were the
places where the electronic record was deemed to be received.

6. CONCLUSION
In the final analysis, it is worth noting that the IT Act has taken a prescriptive approach,
where technology is specifically prescribed in a statute. In India, the issues concerning the
dispatch of communication or acceptance in the context of contract formation have long been
addressed with reference to English case law. But with the evolution of IT Act at the same time
when Electronic Communications Act in England has been brought, Indian courts will be at
much more liberty to determine the cases with an unbounded rationality, although it cant be
ignored that the application of English case laws is still possible to E-Contracts to those facts
where there is no role of electronic communication involved. Assent in contracts plays a vital
role by giving them legitimacy. Electronic signatures are meant to ensure the legitimacy of the
person signing the contract.16 But it has also been observed by many that in todays electronic
environment, the requirement of assent has withered away to the point where a majority of courts
now reject any requirement that a party take any action at all demonstrating agreement to or even
awareness of terms in order to be bound by those terms.17
I have, further, come to this conclusion that general contract rules, with some refinement,
suffice for both the paper and electronic contracts. This is just the beginning of the new era, as
time passes and technologies develop, more complicated issues will definitely give rise to more
laws, more precedents et al.

15 See Sec 13(3) of The Information Technology Act, 2000.

16 See LEXISNEXIS BUTTERWORTHS, ELECTRONIC SIGNATURES IN LAW 2-3 (2003).
17 See Mark A. Lemley, Terms of Use, 91 Minn. L. Rev. 459, 465 (2006).

An Analysis of E-Contracts

7. BIBLIOGRAPHY
7.1. BOOKS REFERRED

Pollock and Mulla, Indian Contract and Specific Relief Acts, 13 th Edition, 2010 Reprint,

LexisNexis Butterworths Wadhwa Nagpur Publications.

J. Beatson, Ansons Law of Contract, 28th Edition, 2002, Oxford University Press.
A.H. Boss and W. Kilian, The United Nations Convention on the Use of Electronic
Communications in International Contracts: An In-depth Guide and Sourcebook, 1 st

Edition, 2008, Kluwer Law International.

Rohas Nagpal, E-Commerce: Legal Issues, 2012, Asian School of Cyber Laws.
Stephen Mason, Electronic Signatures in Law, 1st Edition, 2003, LexisNexis
Butterworths.

7.2. WEBSITES REFERRED

www.manupatra.com
www.jstor.com
www.ssrn.com
www.legislation.gov.uk
www.uncitral.org
www.ec.europa.eu
www.eur-lex.europa.eu

www.elibraryusa.state.gov