7/26/23, 12:50 PM E-contracts - iPleaders

E-contracts
By Sneha Mahawar - July 3, 2022

This article is written by Vasundhara Sivini. This article has been edited by Ojuswi
(Associate, Lawsikho).

This article has been published by Sneha Mahawar.

Table of Contents 
1. Introduction
2. What is an electronic contract (e-contract)
3. What is the legal validity of an e-contract
4. Indian Evidence Act and e-contracts
5. Kinds of e-contracts
5.1. Shrink Wrap Agreements
5.2. Clickwrap Agreements
5.3. Browse Wrap Agreements
5.4. Scroll Wrap Agreements
5.5. Sign-In Wrap Agreements
5.6. Electronic Signatures
6. Stamping of e- contract
7. Conclusion
8. References

Introduction
Like how everything in this world is becoming digitalized to meet the requirements of
this fast-paced world, the traditional pen and paper contracts have now taken the form
of the new age E-Contracts. From the simple household gasoline form registration to the
much-complicated patent registrations, everything is happening at the click of the
mouse. If 50 years ago someone would have told our parent’s generation that at the flick
of an eye, they could do business transactions with a foreign entity, they would have
assumed we are conning them. But today thanks to the digital contracts which have
come in handy, even the gen x generations are utilizing it with much zeal and
enthusiasm as it has paved their way into gen z’s digital convenience and saving them all
the hassle of traditional transactions.

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While all the digital paraphernalia makes daily tasks a piece of cake, it also imposes a
formal legal obligation known as E-Contracts.

It is still a question to wonder as to the number of E-contracts being entered into on a

day-to-day basis and that, there are several legislations governing it under our Indian
Law and worldwide legal systems.

The nitty-gritty of this fast-evolving method of fulfilling traditional contractual obligations

through modern technology is discussed ahead.

What is an electronic contract (e-contract)

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 still sustained by only tweaking the mode in which the
Contract comes into existence.

Hence, an E-Contract is an agreement that is enforceable under the law and is in all
respects drafted, negotiated, and executed digitally. Unlike a traditional contract which is
paper-based, E-Contracts are digital in their entirety. In an E-Contract, though there is
an absence of a physical meeting of the parties, a meeting of minds is present
absolutely. The parties communicate with each other over the internet or through
telephonic media. An E-Contract is a step ahead of traditional pen-paper contracts and
comes into existence through electronic and digital mediums.

What is the legal validity of an e-contract

As much as we are accustomed to performing our Contractual Obligations in the
traditional method, in the current era, we are also warming up to the idea of Electronic
Contracts largely due to the hassle-free nature of such transactions and primarily
because it is recognized by the Indian Judicature. In order to further understand as, how
is an E-Contract legally recognized under Indian Law it is imperative to emphasize the
nexus between Section 10 of the Indian Contract Act,1872 and Section 10-A of the
Information Technology Act, 2000.

Section 10 of the Indian Contract Act, 1872 provides the crucial pre-requisites for a
Contract to be legally valid. It is mandatory that a Contract satisfies the essentials
specified in Section 10 of the Contracts Act, i.e.,

1. Offer
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2. Acceptance to Offer

3. Consensus ad Idem

4. Lawful Consideration

Like traditional contracts, electronic contracts should also possess the said elements. It
should be noted that electronic contracts are specifically not referred to in the Indian
Contract Act.

Through Section 10-A of the Information Technology Act, 2000, we can procure the
validity of the contracts formulated through the electronic medium.

“Section 10-A of the Information Technology Act, 2000: Validity of contracts formed
through electronic means. – Where in a contract formation, the communication of
proposals, the acceptance of proposals, the revocation of proposals and acceptances, as
the case may be, 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.”

The nexus between Section 10 of the Indian Contract Act and Section 10(A) of the
Income Tax Act is that, when an E-Contract satisfies all the essentials under Section 10
of the Indian Contract Act, then as per Section 10-A of the Income Tax Act, it’s legal
authenticity cannot be relinquished only for the plain condition that it was digitally
conceived and executed.

Consequently, when an agreement meets all the essential conditions of a contract, it

cannot be denied validity only for the mere reason that it was electronically formulated.
In a nutshell, E-Contracts are enforceable by law and considered valid contracts.

It is substantial to ascertain the legal validity of an E-Contract for the primary purpose of
resorting to legal recourse in the event of any breach thereof.

Indian Evidence Act and e-contracts

Section 65 B of the Indian Evidence Act, 1872, reinforces the validity of Electronic
Contracts. Section 65 B pronounces that, any information that is contained in an
electronic record that is either printed on a paper, stored, recorded, or copied in an
optical or magnetic media produced by a computer is deemed to be a document when
the conditions mentioned in this section are satisfied it shall be admissible as evidence
without further proof or production of the original.

Kinds of e-contracts
E-contracts are specific to the nature of the business. There are various types of E-
Contracts executed depending on the structure of the business. The amalgamation of the
conventional contracts with the proficiency of technology constitutes an E-Contract.
Below are a few of the most common types of E-Contracts:

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1. Shrink Wrap Agreements

2. Clickwrap Agreements

3. Browse Wrap Agreements

4. Scroll Wrap Agreements

5. Sign-In Wrap Agreements

Shrink Wrap Agreements

Shrink Wrap agreements are the End User License Agreements (EULA) or Terms and
Conditions, which are packaged with the products. The technique of enclosing the
product in a plastic wrap is called Shrink Wrap which declares that the customer
purchasing it is bound by the EULA.

Usage of the product is deemed acceptance by the user. Interestingly, the acceptance is
by default once the product is purchased along with the packaging being ripped and
utilized. An example of Shrink Wrap Agreements is Software Drives.

Clickwrap Agreements
Clickwrap agreements are a form of agreement used for software licensing, websites,
and other electronic media. When the user logs in to a website the terms and conditions
or the privacy policies of the website are to be accepted by the user as legal consent.
Though the user is intimated in this method about the existence of certain terms and
conditions and is required to accept the same, there is no power of negotiation.

The user clicks “I Agree” to be bound by the legal obligations. Some prominent examples
of Click Wrap agreements are Amazon, Flipkart, and Make My Trip.

Browse Wrap Agreements

Browse Wrap Agreements are online contract or license agreements commonly used in
website notices or mobile applications. The terms and conditions are provided in a
‘Hyperlink’ in some part of the website which is not beforehand intimated to the user.

There is no procedure to assent or reject the Terms and Conditions. At the onset, when
the user is aware of such terms they can scroll down and double click on the terms and
conditions to have a complete view of the same.

Scroll Wrap Agreements

The Scroll Wrap Agreements require the user to scroll down the License Agreements,
implying that it has been read by the user by scrolling down through the terms and
conditions before they can give their assent or rejection.

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Sign-In Wrap Agreements

The Sign-In Wrap agreement is a kind of E-Contract in which once the end-user has
signed into an online service or signs in to use a product the acceptance is acquired.

Electronic Signatures
In the world of Electronic Contracts, the ancillary feature that has gained tremendous
prominence is the Digital signature or the Electronic Signature. The degree of acceptance
of a Digital Signature is at varying levels across the globe, so it is essential to ensure the
validity of E- Signature ahead of execution of any International Contract digitally.

The rendering of the signature which is done by the click of a button or through checking
a box digitally is called an electronic signature.

Electronic signatures are proffered digitally, which is, unconventional in comparison to

the traditional Wet Signature.

Information Technology Act, 2000 recognizes the legal validity of a Digital Signature
Certificate (DSC) under Indian Law.

Stamping of e- contract
According to the Indian Stamp Act, 1899, stamp duty is levied on the ‘instrument’. The
term instrument engulfs every document which has a right or liability excluding a bill of
exchange, letter of credit, cheque, promissory note, bill of lading, insurance policy,
transfer of share, debenture, proxy, and receipt.

It should be noted that the term ‘document’ also includes any electronic record as
defined in Section 2(1)(t) of the Information Technology Act, 2000.

In India, electronic documents are stamped by taking a print of the document on a

stamp paper or by the method of franking or by the method of E-Stamping through the
procurement of a stamp duty certificate.

Conclusion
As the world is steadily moving toward complete digitalization and the idea of remote
operations in all fields is quickly gaining momentum it can be safe to say that E-

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Contracts is the next potent revolution that in its stride is ready to completely take over
the business field globally and as a result gradually fade away the usage of traditional
contracts in all spheres.

References
https://eprocure.gov.in/cppp/rulesandprocs/kbadqkdlcswfjdelrquehwuxcfmijmuixngudufg

https://legislative.gov.in/sites/default/files/A1872-09.pdf

https://legislative.gov.in/sites/default/files/A1872-01.pdf

https://legislative.gov.in/sites/default/files/A1899-2.pdf

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