Chapter 1 – E-Contracts in India

Introduction:
IT has connected the whole world and created the notion of a globalized world. It has proved itself to be a connecting
point for individuals, cultures, societies, and Governments. In the era of economic development, IT defined new
concepts of commerce in the form of electronic commerce and mobile commerce.
The basis of any commerce online or offline is the formation of contracts. The sudden shift from the traditional method
i.e. paper-based communication to an electronic mode of work challenged the traditional notion of validity,
enforceability and admissibility of e-contracts. For any new system to evolve and create its credibility requires the
following essential characteristics i.e. authentication, integrity, confidence.
Concept of E-Contract:
Online contracts or E-Contracts represent the formation of a series of contractual obligations in an online environment.
From a legal perspective, an online contract follows the same prerequisite as being followed in an offline (physical)
contract. At a basic level, online contract formation requires online/offline proposal by one party and its online
acceptance by the other party.
E-Contract:
The Information Technology Act 2000 (IT Act) or the Indian Contract Act 1872 has not defined the term “Electronic
Contracts or Online Contracts”. However, the Information Technology Act 2000 as amended by the Information
Technology (Amendment) Act, 2008 deals with “validity of contracts formed through electronic means.”
Section 10A of the IT Act, 2008 gives legislative validity to E contracts. It says that “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.”
Q1. Explain the Essentials of an e-contract under the Indian Contract Act 1872.
1. Offer: The website/webpage displaying the goods or services of the seller along with the price is an invitation to an
offer. The customer makes the offer by putting things into a virtual basket or shopping cart.
2. Acceptance: The acceptance is implied by the offeree agreeing to supply after the offer has been made by the
customer in relation with the invitation to offer. Thus, an offer is revocable at any time until the acceptance is complete
as against the offeror like until payment made or order accepted is intimated.
3. Consideration: Like in a traditional contract, consideration needs to be present. The payment by the customer is the
consideration for the seller supplying goods or services. The obligation on the part of the seller is the services or goods
are agreed to be supplied.
4. Intention to create lawful relations: The parties must intend to create legal relations between them. If there is no
intention on the part of the parties to create lawful relationships, then no contract is possible between them. Usually,
agreements of a domestic or social nature or general information are not contracts and therefore are not enforceable.
5. Capacity to contract: Any party entering into an e-contract is required to be competent to contract failing, which the
agreement shall be void ab initio.
6. Free Consent: Usually, in online contracts, especially when there is no active real-time communication between the
contracting parties, eg: between a website and the customer who buys through such a site, the click through process
ensures free and genuine consent.
7. Object must be lawful: Online contract also requires adhering to the object being lawful.
Q2. Discuss the Features of an E-contract under the Indian Contract Act 1872.
Two main parties: Originator and Addressee.
1.​ Originator according to the IT Act, 2008 is a person who sends, generates, sore or transmits any electronic
message to be sent, generated, stored or transmitted to any other person and does not include an intermediary.
2.​ An Addressee according to the IT Act, 2008 is a person who is intended by the originator to receive the
electronic record but does not include any intermediary.
3.​ The parties do not, in most cases, meet physically.
4.​ There are no physical boundaries.
5.​ No handwritten signature and in most times, no handwriting is required.
6.​ Jurisdictional issues are a major setback on e-contracts in case of breach.
7.​ Contracts which are excluded from e-contracting:
8.​ First schedule to the IT Act, 2000:
•​ A negotiable instrument (other than a cheque)
•​ A power-of-attorney
•​ A trust
•​ A will
•​ Any contract for the sale or conveyance of immovable property or any interest in such property
Q3. Explain/Discuss/Elaborate/Identify the Types of E-Contract under the Indian Contract Act 1872.
1. Electronic Data Interchange (EDI)
a. Electronic Data Exchange is the oldest form of electronic contracts existing between Business to Business (B2B)
forms of transactions. It consists of standard business messages being transmitted from one computer to another
computer.
b. It is based on a standard or code that is agreed between the parties like generating or processing inquiries or
transmitting information in the form of purchase orders, invoices, shipping notices, export import information, carrier to
carrier waybill etc. In these cases the parties have to rely on using the same EDI messaging standard.
c. To some extent there is similarity between EDI and emails contracting as both are electronic generated messages to be
transmitted through electronic means. The difference is with regards to the internal structure and content of the data
message.
2. Shrink Wrap Agreement
The term “shrink wrap agreement” refers to the purchase agreements that are attached to shipped products, usually
bound by shrink wrap (plastic wrapping) that contain terms of conditions. Shrink wrap agreements can include the
following terms:
Licenses
Rights of use
Fees and payments
Warranties and
Limitation of liability

3. Click Wrap Agreements

a. A Click Wrap is an online version of Shrink Wrap Agreement. On the download of free software or purchase of the
software online, the owner of software lists out terms and conditions of use of software in the box opened. Terms and
conditions are the license rights and related to modification, deletion, alteration, unauthorized use, copying, transfer,
ownership, jurisdiction, choice of law etc. of software.
b. Depending on the nature of the software, terms and conditions of agreements may vary. Buyer after going through the
terms and conditions, has to provide his assent by clicking on the icon of “I Agree/I Accept” or “Cancel”.
c. The final choice of buyer is important for the formation of the contract. With the click on the icon the buyer, users or
downloader binds himself to the conditions specified in the agreement. There is no scope for bargaining between
buyer and seller during the contract as the terms and conditions are created by one party and access to download
is only possible if the buyer accepts the terms and conditions in toto. The above nature of the contract is also known
as “take it or leave it” agreements.
4. Browse Wrap Agreements
a. In Browse Wrap Agreements access to or use of software is allowed by the concerned website by displaying the terms
and conditions in the form of a link at the bottom of the screen which is to be opened at another page.
b. The consent is in implied form as the software is accessed and allowed by the service provider or the owner of the
websites. The nature of the agreements or the license restricts the users from distributing, copying or preparing
derivative works.
c. The Browse Wrap contract terms the conditions as “By using this site, you agree to these terms of use. If you do
not agree to these terms, you may not use this site.” The user can access the website or software without proceeding
to the terms and conditions.
5. Contract through Email
a. Electronic mail is the simplest form of entering into agreements. It resembles the traditional form of contract
governed by Indian Contract Act, 1872, where offer and acceptance happen through electronic mode of communication.
b. Email contracts require two or more parties defined under the IT Act as originator and addressee. The transmission of
electronic records in the form of offer and acceptance of the offer happens through the email addresses of the originator
and addressee. The email messages are split into various packets and sent through various ISPs and routes.
c. Once it reaches the email box of the addressee or the recipient, till the time they have not opened the email box they
may not be able to know the content of information. Therefore, even if the internet provides instantaneous services, but
formation of contracts through email messages falls in the category of non-instantaneous communication.
(Students should write up to 2 points for this question. If a detailed or specific type of e-contract is asked in the
exam students must write all the 3 to 4 points.)

Q4, Explain/Discuss the benefits of Click Wrap Agreements.

1. Convenience: A significant number of customers/end-users prefer to surf through websites with ease, whilst not
having to indulge in contractual technicalities or negotiations. The employment of clickwraps ensures convenience to
both parties.
2. Ensures that users are aware of applicable T&Cs: By requiring users to actively engage with the agreement before
gaining access to a product or service, clickwrap agreements ensure that users have a high awareness and understanding
of the terms they agree to. Users are more likely to read and review the terms when they are presented prominently and
explicitly, increasing their comprehension and reducing the risk of unintended consent.
3. Mitigates legal risks for businesses: Courts tend to view clickwrap agreements as more enforceable since they offer
a clearer indication of user consent. When users are required to take explicit action to demonstrate their agreement, it
becomes harder for them to later claim they were unaware of the terms or did not consent. In cases where legal
proceedings occur, businesses can rely on the clear record of user consent provided by the clickwrap agreement to
defend their position.
4. Enhanced User Experience: Click-wrap agreements are typically less intrusive than lengthy contract forms,
providing a smoother user experience. Users are accustomed to this format, making it easier for them to understand and
accept the terms quickly.
Q5. Explain/Discuss the Benefits of Browse Wrap Agreements.
1. Easy Implementation: Users do not need to click a button or check a box to prove their acceptance. No further
action is required from users as this agreement automatically applies once they use the service or browse the website.
2. User Convenience: Site owners don’t need to make the extra effort to get users to agree to their site terms. Plus,
there’s no hassle on the user’s end, positively impacting their overall site experience.
3. Reduced friction: Users can freely access or browse a site without being explicitly asked to agree to specific usage
terms. Not only does this save time but it also helps lower the rate for site abandonment.
4. Amendable: Site owners can amend the terms and conditions stated in the browse wrap agreement as they see fit.
Users do not need to agree every time a change has been made.
5. Less Intrusive: You don’t need to place pop-ups or dialogue boxes, which can negatively affect the user experience.
They can browse the site uninterrupted, which is necessary for sites that rely on high engagement and user retention.
Q6. Explain/Discuss the Limitation/Disadvantages/Issues of Browse Wrap Agreements.
1. Lack of Active-Consent: Users may need to be made aware of the browse wrap agreement’s existence which could
lead to unintentional acceptance of terms and conditions.
2. Ambiguity: The agreement can be vague or unclear, leading to misinterpretation and confusion. Users may also have
difficulty finding it, especially if it’s placed as a small link in the site’s footer.
3. Lack of negotiation: There is no opportunity for both parties to discuss and agree on the terms and conditions stated
in the agreement. Users can either take it or leave it, creating a power imbalance.
4. Awareness and Visibility: For a browse wrap agreement to be enforceable, users must be aware of its existence and
have a reasonable opportunity to review the terms. If the link to the terms and conditions is not prominently displayed or
easily accessible, it may be argued that users were not adequately informed, leading to the agreement being invalidated.
Q7. Explain/Discuss the Benefits of an E-Contract.
E-contracts offer numerous advantages for businesses in India, streamlining operations, reducing costs, and promoting
efficiency.
1. Cost Effectiveness: E-contracts eliminate the need for printing, signing, and physical delivery of documents,
reducing administrative costs. They also minimize the need for paper storage, leading to cost savings on physical space.
2. Speed and Efficiency: E-contracts enable faster contract formation and execution, reducing turnaround times and
improving productivity. They also allow for easier access to contracts, ensuring timely information dissemination and
reduced delays.
3. Enhanced Security: E-contracts can incorporate digital signatures and encryption techniques, enhancing security and
authenticity. This reduces the risk of fraud and tampering, ensuring the integrity and enforceability of the agreement.
4. Improved Record Keeping: E-contracts are stored digitally, making them easy to organize, search, and retrieve.
Digital contracts are less likely to be lost or damaged compared to physical documents.
Q8. Explain the Legal Framework of E-Contracts/ Discuss the Laws that govern or regulate E-Contracts in
India/Discuss the provisions that govern E-contracts under Indian Contract Act 1872, The Information
Technology Act 2000 and The Indian Evidence Act 1872.
In India, there are no laws and regulations that directly relate to E-contracts but some of the laws in unification regulate
them which are discussed as follows:
1. The Indian Contract Act, 1872 – includes all the rules applicable to contracts along with all the essentials required
to form a legal contract. The Act recognizes the validity and enforceability of e-contracts, provided they satisfy the
essential elements of a valid contract. Any standard contract that is paperless or in electronic form that meets the
requirements of the Indian Contract Act is an e-contract.
2. The Information Technology Act 2000 - is another significant legislation specifically addressing electronic
contracts in India. It provides legal recognition and validity to electronic records and digital signatures, making them
legally equivalent to their paper-based counterparts. It stipulates that electronic contracts are not to be denied
enforceability solely because they are in electronic form. It affirms that contracts formed electronically are legally valid
and binding, provided they meet the requirements of a valid contract as per the Indian Contract Act.
The IT Act contains several provisions relevant to e-contracts, such as:
a) Section 4: This section provides legal recognition to electronic records and states that they shall not be denied legal
effect, validity, or enforceability solely because they are in electronic form.
b) Section 5: This section grants legal recognition to electronic signatures, ensuring that electronically signed e-contracts
are valid and enforceable. Indian law provides for two types of electronic signatures: digital signatures and e-signatures
using Aadhaar-based authentication.
c) Section 14: This section stipulates the admissibility of electronic records as evidence in legal proceedings. It ensures
that e-contracts can be used as evidence in court, provided they meet the requirements specified in Section 65B of the
Indian Evidence Act, 1872.
These provisions collectively govern the validity, enforceability, and admissibility of e-contracts in India.
3. The Indian Evidence Act, 1872: The contacts in electronic mode should be accepted as evidence, therefore, Sections
65A and 65B in the Indian Evidence Act provide special provisions to consider electronic records as evidence.
Some other laws and regulations include the Consumer Protection Act, 2019, Foreign Exchange Management
(Non-Debt Instruments) Rules, 2019, Payment and Settlement Systems Act, 2007, Goods and Services Tax (GST) Act,
2017, Competition Act, 2002, and the Data Protection Laws (The Digital Personal Data Protection (DPDP) Act, 2023).
Q9. Explain Digital Signature under the Information Technology Act 2000.
1. Section 2 (1) (p) of the Information Technology Act, 2000 ("IT Act") defines "digital signature" as "authentication
of any electronic record by a subscriber by means of an electronic method or procedure in accordance with the
provisions of section 3".
2. Digital Signature ("DS") is an electronic signature used to secure an electronic record or digital contracts. It’s purpose
is to authenticate the document, thereby authenticating the parties to an agreement. It is used to ensure that there are no
alterations in the original data while transferring them from sender to receiver.
3. It has also become essential to authenticate the users often to ensure safety and to avoid fraud, DS cannot be imitated
by anyone else hence provides protection.
4. Basically, it provides legitimacy and assurance to the receiver that the message was generated by the known sender.
The need for digital signatures majorly arises for financial transactions, software distribution, e-commerce, etc. It could
very well be considered as a digital equivalent of a traditional handwritten signature or stamped seal.
5. However, to validate such DS, the user must register and get issued a "Digital Signature Certificate" ("DSC") from
the relevant authorities, only then can they use DS for any kind of message whether encrypted or plaintext. DS relies on
public and private key infrastructure which means that it comes with encryption standards.
Q10. Discuss the features of Digital Signatures
Digital Signature offers several key features that enhance security and efficiency in digital transactions. These features
include:
1. Authentication: It confirms the identity of the Signer by providing assurance that the document was signed by the
claimed individual.
2. Integrity: A digital signature ensures that the document has not been tampered with during transmission. Even any
modification in the document after signing would invalidate the signature.
3. Non-repudiation: The sender cannot deny the signature that he has signed digitally in the document as it has been
mathematically tied to the private key.
4. Security: It uses cryptographic algorithms to secure the signing process.
5. Efficiency: A digital signature is efficient and can be used to sign electronic documents quickly. There is no need for
physical paperwork.
6. However, there are certain instruments that cannot be entered electronically and that do not apply to the IT Act. These
instruments are listed below: –
a. A negotiable instrument (other than a cheque) as defined in Section 13 of the Negotiable Instruments Act of 1881.
b. A power-of-attorney as defined in Section 1A of the Powers-of-Attorney Act of 1882.
c. A trust deed as defined in Section 3 of the Indian Trust Act of 1882.
d. A will is defined under Section 2(h) of the Indian Succession Act, 1925.
e. Any contracts for sale or any other kind of transfer of interest in immovable property.
Q11. Explain E-Signatures under the Information Technology Act 2000.
1. The term "Electronic Signature" is defined under section 2(1) (ta) of the IT Act as "authentication of any electronic
record by a subscriber by means of the electronic technique specified in the Second Schedule and includes digital
signature".
2. Electronic Signature is less secure compared to digital signatures, however it is mainly used for the purpose of
verifying and not securing unlike DS.
3. Electronic Signature is a digital form of a "wet ink signature" which is legally binding and secure, but it does not
incorporate any encryption standards. Electronic Signatures could be in the form of an image, symbol, scanned
signature, process attached to the message or document to recognize the identity and to give consent on it.
4. The authentication of electronic signature is not executed by any trusted certificate authorities or verification service
providers, so it is not usually authorized.
5. Electronic Signatures is comparatively easy to use as compared to DS. It may be less secure and less authentic than
DS, but it still has legal validity and enforceability.
Q12. Difference/Distinguish between E-Signatures and Digital Signatures
E-Signature Digital Signature
1. It has been defined under Section 2(1)(ta) of the 1. It has been defined under Section 2(1)(p) of the
Information Technology Act, 2000. Information Technology Act, 2000.
2. It is technologically neutral, ie. no specific 2. It follows a technology-specific approach such as usage
technological process is to be followed to create an of hash functions etc.
electronic signature.
3. It can be created by using various available 3. It uses public key cryptography system to sign up for a
technologies like attaching a picture of your signature. particular message which requires a pair of keys ie. a
private key for encryption and a public key for decryption,
computed by using a hash function.
 4. It can be in the form of a name typed at the end of an 4. It involves the usage of a Cryptographic system of
email, a digital version of a handwritten signature in constructing the signature with a two-way protection
the form of an attachment, a code or even a fingerprint. system.
5. It is less authentic as compared to the digital 5. It has more authenticity as compared to the electronic
signature. signature.
6. It is verified through the signer’s identity. 6. It has a certificate-based digital 10 verification.
7. It is used for verifying a document. 7. It is used as a means for securing a document.

8. It has no expiration or validity period. 8. It is valid for up to a maximum of three years.

9. It is easily vulnerable to tampering. 9. It is more secure and highly reliable.

Q13. Identify the Contents Of a Typical Digital Certificate:

1. Serial Number: Used to uniquely identify the certificate.
2. Subject: The person, or entity identified.
3. Signature Algorithm: The algorithm used to create the signature.
4. Signature: The actual signature to verify that it came from the issuer.
5. Issuer: The entity that verified the information and issued the certificate.
6. Valid-From: The date the certificate is first valid from.
7. Valid-To: The expiration date.
8. Key-Usage: Purpose of the public key (e.g. encipherment, signature, certificate signing...).
9. Public Key: The public key.
10. Thumbprint Algorithm: The algorithm used to hash the public key certificate.
11. Thumbprint (also known as fingerprint): The hash itself, used as an abbreviated form of the public key certificate.
Q14. Distinguish between Browse Wrap Agreement, ClickWrap Agreement, Shrink Wrap Agreement and
Contract through Email

Point of Browse Wrap ClickWrap Shrink Wrap Contract through

Difference Agreement Agreement Agreement Email

Description A type of online Users are required to Terms are included A contract formed by
agreement where click a button or check inside the physical email exchanges where
users implicitly a box indicating they packaging of a both parties negotiate
agree to terms by agree to terms before product, and the and agree on terms
using the website or using a service. customer agrees by through written
service. opening the package. communication.

User Action No explicit action Explicit consent by Implied acceptance Explicit acceptance via
Required (e.g., no button clicking "I Agree" by opening the email replies or
click), just by packaging confirmations
browsing

Legal Often harder to Easier to enforce due Generally Enforceable as long as

Enforceability enforce without to clear, explicit enforceable, but offer, acceptance, and
clear notice acceptance sometimes challenged consideration are
present

Example Terms at the bottom Installing software that A software CD with Email chain where two
of a website that say requires users to click terms enclosed, parties agree to terms
"By using this site, "I Agree" to the terms stating that opening of a sale and confirm
you agree to our before installation. the package means via email replies.
Terms of Service." acceptance of terms.