Unit II: Contracts and

Jurisdiction in the Cyber World

Chapter 3: Contracts in the Infotech World

3.1 Contracts in the Infotech World

The rise of the digital era has redefined the way
contracts are formed, executed, and enforced. In
the infotech world, contracts are no longer limited
to traditional pen-and-paper agreements. With e-
commerce, cloud computing, and digital services,
digital contracts have become the norm.
Types of Digital Contracts
1.Click-Wrap Contracts: Agreements where
users click “I Agree” to accept terms.
Examples: Software installations and e-
commerce websites.
2.Shrink-Wrap Contracts: Agreements included
in the packaging of software or hardware,
which the user accepts by using the product.
3.Browse-Wrap Contracts: Terms are available
on the website, and use of the site constitutes
acceptance.
The enforceability of these contracts depends on
their compliance with the legal framework,
particularly the Indian Contract Act, 1872.

3.2 Click-Wrap and Shrink-Wrap Contracts: Status

under the Indian Contract Act, 1872
Under the Indian Contract Act, 1872, a valid contract
must include the following elements:
 Offer and acceptance
 Consideration
 Free consent
 Lawful object
Click-Wrap Contracts:
 Legal Validity: Click-Wrap contracts are generally
enforceable as the user explicitly agrees by clicking
“I Accept.”
 Challenges: Issues arise when the terms are
lengthy or unclear, raising questions of informed
consent.
Shrink-Wrap Contracts:
  Legal Validity: Shrink-Wrap contracts have limited
enforceability in India, as they often presume
acceptance by mere use of the product.
 Challenges: Courts may strike down terms
considered unfair or not adequately
communicated to the user.
Relevant Case Study:
Specht v. Netscape Communications Corporation
This U.S. case highlighted the importance of making
terms easily accessible and ensuring user consent.

3.3 Distinguish Between Shrink Wrap and

Click Wrap Contracts
Shrink Wrap Click Wrap
Feature Contract Contract
Included with software/hardware Requires users to click “I Agree”
Definition packaging. explicitly.

Consent Implied upon use of the product. Explicit, through an action by the user.

Questionable if terms are not clearly Generally enforceable due to explicit

Enforceability visible. consent.

Software CD with terms printed on the

Example box. Online services like Netflix or Amazon.

3.4 Contract Formation Under the Indian

Contract Act, 1872
Digital contracts are legally valid in India under the
Indian Contract Act and the Information
Technology Act, 2000.
Requirements for Valid Digital Contracts:
1.Offer and Acceptance: Must be clear, and
acceptance can be communicated
electronically.
2.Consideration: There must be something of
value exchanged between parties.
3.Free Consent: Parties must enter the
agreement willingly and without coercion.
Key Legal Provisions:
 Section 10: Essential ingredients of a valid
contract.
 Section 65B, IT Act: Recognizes electronic
records and digital signatures.

3.5 Contract Formation on the Internet

In the digital age, contract formation is
heavily reliant on electronic communication
and automated systems. Online contracts,
including click-wrap, shrink-wrap, and
browse-wrap agreements, are common in e-
commerce, cloud services, and digital
subscriptions.
Key Steps in Online Contract Formation
1. Offer: The seller (e.g., a website or
app) provides terms for goods or
services.
2. Acceptance: The buyer accepts the
terms, usually by clicking "I Agree,"
making payment, or completing a
specified action.
3. Consideration: The exchange of
something valuable, such as money for
goods or services.
Contracts formed on the internet must
comply with general contract law, as
specified under the Indian Contract Act,
1872, and also with the Information
Technology Act, 2000, which recognizes
electronic records and signatures as valid.

3.5.1 Where Acknowledgement is Not a Part

of the Contract Formation Process: When
and Where Does the Contract Come into
Existence?
When Does the Contract Come into
Existence?
 When the Offer is Accepted: A contract is
formed at the moment the acceptance of
the offer is completed. In online
agreements, acceptance occurs when:
o The user clicks "I Agree" or a similar
button.
o Payment is processed successfully.
o The buyer performs any action that
signifies acceptance, as stipulated by
the contract terms.
  Absence of Acknowledgment: If the
terms do not require explicit
acknowledgment (e.g., in browse-wrap
agreements), the contract may come into
existence the moment the user accesses
the service or starts using the product, as
per the conditions stated.
Where Does the Contract Come into
Existence?
 Place of Acceptance: The contract is
deemed to exist where the acceptance is
received by the offeror (seller/service
provider). In online transactions:
o This could be the server location
where the acceptance is processed.
o Alternatively, it may be the
jurisdiction specified in the terms and
conditions of the contract.
 Legal Principles:
 o Section 4 of the Indian Contract Act:
Communication of acceptance is
complete when it is received by the
proposer.
o Cross-border transactions often rely
on the governing law and jurisdiction
clause in the agreement to determine
the place of existence.

3.6 Terms and Conditions of Contracts

Terms and conditions are the backbone of
online contracts, defining the rights,
obligations, and limitations for both parties.
They provide clarity, ensure compliance, and
minimize disputes.
Key Components of Terms and Conditions
1. 3.6.1 Governing Law and Jurisdiction
Clauses
o Specifies which country's laws will
apply in case of a dispute.
 o Determines the court or arbitration
forum with jurisdiction.
2. 3.6.2 Limitation of Liabilities
o Limits the liability of the service
provider for damages or losses arising
from the contract.
o Common in software licenses and e-
commerce platforms.
3. 3.6.3 Warranties
o Provide guarantees about the quality
or functionality of the product or
service.
o Often limited or excluded in online
contracts.
4. 3.6.4 Non-Disclosure / Confidentiality
Clauses
o Protect sensitive information shared
between parties.
 o Essential in business-to-business
(B2B) agreements involving trade
secrets or proprietary data.
5. 3.6.5 Arbitration Clause
o Stipulates that disputes will be
resolved through arbitration rather
than litigation.
o Faster and more cost-effective than
court proceedings.
6. 3.6.6 Entire Agreement Clause
o States that the written terms
constitute the complete agreement
between the parties.
o Prevents reliance on prior oral or
written negotiations.
7. 3.6.7 Restraining Employees from
Competitive Activities
o Restricts employees from working
with competitors or starting a
 competing business post-
employment.
o Subject to scrutiny under Indian labor
laws to ensure it is reasonable.
8. 3.6.8 Software License Agreement
o Governs the use of software,
restricting unauthorized distribution,
reverse engineering, or modification.
o Includes clauses on updates,
warranties, and limitations of liability.

Practical Importance of Terms and Conditions

 Clarity and Transparency: Clearly written
terms help both parties understand their
rights and responsibilities.
 Mitigation of Risks: Inclusion of liability
limitation clauses minimizes the financial
exposure of service providers.
 Legal Enforceability: Properly drafted
terms make the contract enforceable in a
 court of law, especially in cross-border
transactions.
By addressing all these elements, online
contracts ensure a legally sound and
operationally smooth relationship between
parties.
Contracts formed on the internet have unique
characteristics compared to traditional contracts.
They involve automated systems, multiple
jurisdictions, and electronic communication.
Steps in Online Contract Formation:
1.Offer: The website displays the terms of
service or purchase.
2.Acceptance: Clicking “I Agree” or proceeding
to payment.
3.Consideration: Payment for goods/services.

3.5.1 When and Where Does the Contract

Come into Existence?
A contract comes into existence when the
acceptance of an offer is communicated to
the offeror. In the context of digital
contracts, this may occur when a user clicks
"I Agree," submits payment, or performs any
action specified as acceptance in the
agreement.
The contract comes into existence where the
acceptance is received by the offeror. For
online contracts, this could be the physical
location of the server receiving the
acceptance, or the jurisdiction specified in
the contract’s terms and conditions.
3.6 Terms and Conditions of Contracts:
Detailed Explanation
The following sections describe key clauses
typically included in online and offline
contracts. Each clause serves to define rights,
responsibilities, and safeguards for both
parties.

3.6.1 Governing Law and Jurisdiction Clauses

 Governing Law: This clause specifies
which country or state's legal system will
be used to interpret and enforce the
contract.
o Example: "This agreement shall be
governed by the laws of India."
o Purpose: Ensures clarity, especially in
cross-border contracts where parties
operate under different legal
frameworks.
 Jurisdiction Clause: Determines the
location (court, arbitration center, etc.)
where disputes will be resolved.
o Example: "Any disputes arising shall
be subject to the jurisdiction of the
courts in Mumbai."
o Importance: Prevents disputes about
the applicable legal forum and
reduces litigation complexity.
3.6.2 Limitation of Liabilities
 Defines the maximum extent of liability
that a party (usually the service provider)
will bear in case of a breach or failure.
 Common Features:
o Limits damages to a specified amount
(e.g., the value of the
product/service).
o Excludes liability for indirect or
consequential damages, such as loss
of profits or data.
o Example: "The liability of the
company for any claims shall not
exceed the amount paid for the
services."
 Purpose: Protects businesses from
excessive financial exposure while still
compensating users for direct losses.

3.6.3 Warranties
 Warranties are assurances provided by
one party about the product or service's
quality, performance, or functionality.
 Types:
o Express Warranties: Clearly stated in
the contract (e.g., "The product will
function as described for one year").
o Implied Warranties: Imposed by law,
such as merchantability or fitness for
a particular purpose.
 Limitations:
o Many contracts limit or disclaim
implied warranties, especially in
software licenses or online services.
o Example: "The company provides no
warranties, express or implied,
regarding the uninterrupted use of
the software."
3.6.4 Non-Disclosure / Confidentiality
Clauses
 Protect sensitive information shared
between the parties from unauthorized
disclosure or use.
 Key Elements:
o Definition of Confidential
Information: Specifies what is
considered confidential (e.g., trade
secrets, financial data).
o Duration of Obligation: How long
confidentiality must be maintained
(e.g., 5 years post-termination of the
contract).
o Permitted Disclosures: Circumstances
where disclosure is allowed, such as
to comply with the law.
 Example Clause: "Neither party shall
disclose any proprietary information
 obtained under this agreement to third
parties without prior written consent."
 Use Case: Common in employment
contracts, software development, and
partnerships.

3.6.5 Arbitration Clause

 Specifies that disputes will be resolved
through arbitration rather than
traditional court proceedings.
 Advantages:
o Faster and less expensive than
litigation.
o Maintains confidentiality compared
to public court cases.
 Key Elements:
o Selection of arbitrators (e.g., single
arbitrator or a panel).
 o Location and governing rules of
arbitration (e.g., Indian Arbitration
and Conciliation Act, 1996).
o Binding nature of the arbitration
decision.
 Example: "All disputes arising from this
contract shall be settled through binding
arbitration conducted in accordance with
the rules of the Indian Council of
Arbitration."

3.6.6 Entire Agreement

 States that the written contract
represents the complete understanding
between the parties, overriding any prior
negotiations or oral agreements.
 Purpose: Prevents parties from
introducing evidence of prior or parallel
discussions to modify the terms of the
contract.
  Example Clause: "This agreement
constitutes the entire agreement
between the parties and supersedes all
prior agreements, whether written or
oral."
 Importance: Ensures that all terms are
explicitly stated, reducing ambiguity and
future disputes.

3.6.7 Restraining Employees from

Competitive Activities
 Restricts employees from engaging in
activities that compete with their
employer during or after employment.
 Key Types:
o Non-Compete Clauses: Prohibit
employees from joining competitors
or starting a competing business
within a specific time frame and
geographic region.
 o Non-Solicitation Clauses: Prevent
employees from soliciting the
company’s clients, customers, or
other employees.
 Enforceability:
o Subject to local labor laws; such
clauses must be reasonable in scope,
duration, and geographic reach.
o Example Clause: "The employee shall
not engage in any competitive
business within 1 year of termination
in the state of Maharashtra."
 Purpose: Protects trade secrets,
intellectual property, and business
interests.

3.6.8 Software License Agreement

 Governs the terms under which users can
use the software, defining rights and
restrictions.
 Key Provisions:
o Grant of License: Defines the type of
license (e.g., personal, non-
transferable, limited use).
o Restrictions: Prohibits activities such
as reverse engineering, reselling, or
modifying the software.
o Ownership: Clarifies that the
software's intellectual property rights
remain with the licensor.
o Updates and Support: Outlines the
terms for software updates, patches,
and technical support.
o Termination Clause: Specifies
conditions under which the license
can be revoked.
 Example Clause: "The licensee shall use
the software solely for personal purposes
and shall not attempt to decompile or
reverse engineer the software."
  Purpose: Protects software developers'
rights and prevents misuse of intellectual
property.

Importance of These Clauses

 These clauses are crucial for managing
risks, defining obligations, and ensuring
legal enforceability. They create
transparency between parties and reduce
the potential for conflicts in various
contractual agreements, both online and
offline.
Chapter - 4: Jurisdiction in the
Cyber World
Jurisdiction in the cyber world refers to the
authority of a legal body to hear and decide
disputes arising from online activities. Unlike
traditional jurisdiction, which is defined by
geographical boundaries, cyber jurisdiction
involves virtual spaces that often transcend
physical borders, leading to complex legal
challenges.
4.1 Jurisdiction in the Cyber World
Jurisdiction in the cyber world refers to the legal
authority of a country, court, or tribunal to
adjudicate matters related to activities
conducted in the digital space. It is a
fundamental legal principle determining the
power of a court to hear and decide cases. In the
context of cyberspace, jurisdictional issues arise
due to the borderless nature of the internet,
which challenges traditional concepts of
territoriality.
Key Features of Cyber Jurisdiction:
1.Borderless Environment: The internet allows
users to interact globally, making it difficult
to localize actions within a specific
geographical area.
2.Conflict of Laws: Activities in cyberspace can
implicate the laws of multiple jurisdictions
simultaneously.
3.Types of Jurisdiction:
o Subject-Matter Jurisdiction: Authority to
hear cases on specific legal topics.
 o Personal Jurisdiction: Power over the
individuals or entities involved.
o Territorial Jurisdiction: Power limited to a
defined geographical area.
Example:
A company based in the U.S. sells a product
online, which causes harm to a user in India.
Jurisdictional questions arise as to whether
Indian courts have authority over the U.S.-based
company.

4.2 Questioning the Jurisdiction and Validity of

the Present Law of Jurisdiction
The rapid evolution of technology has exposed
gaps in traditional jurisdiction laws:
1.Challenges in Cyber Jurisdiction:
o Identifying Territoriality: Since data
moves across borders instantaneously,
determining the "location" of an online
act is challenging.
 o Lack of Consensus: Different countries
adopt varying standards for asserting
jurisdiction.
o Anonymity of Users: Many internet users
operate anonymously, complicating the
identification of the responsible party.
2.Issues with Current Legal Frameworks:
o Existing jurisdiction laws were designed
for physical spaces and do not
adequately address virtual interactions.
o Ambiguities in international treaties
regarding cyber jurisdiction lead to
inconsistent rulings.
3.Example: In cross-border e-commerce, if a
customer files a complaint about a defective
product, it is unclear whether the jurisdiction
belongs to the country of the buyer, the
seller, or the server hosting the website.

4.3 Civil Law of Jurisdiction in India

In India, the principles of jurisdiction for civil
matters are governed by the Code of Civil
Procedure, 1908 (CPC), and these principles
extend to the cyber world.
Key Provisions of the CPC:
1.Section 20: Courts have jurisdiction where
the defendant resides, carries on business, or
where the cause of action arises.
2.Territorial Jurisdiction: A court can exercise
authority only within its geographical
boundaries.
Application in Cyberspace:
1.Jurisdiction in online contracts depends on
where:
o The contract was signed.
o The performance of the contract
occurred.
o The breach took place.
2.Indian courts apply these principles to cyber
disputes involving e-commerce, online
defamation, and cyber fraud.
Case Example:
In Casio India Co. Ltd. v. Ashita Tele Systems Pvt.
Ltd., the Delhi High Court held that if a website is
accessible in Delhi and targets consumers there,
Delhi courts can exercise jurisdiction.

4.4 Cause of Action

Cause of action refers to the set of facts that give
rise to a legal claim and justify the right to sue. In
the context of the cyber world, determining the
cause of action involves identifying the location
and event that led to the legal dispute.
Relevance in Cyber Jurisdiction:
1.In cyberspace, the cause of action could arise
from:
o Defamatory content posted online.
o Breach of an online contract.
o Cybercrimes such as hacking or phishing.
2.The determination of the cause of action
influences:
o The choice of court.
o The applicable laws.
Challenges in Cyber Cause of Action:
 The harm may occur in multiple locations
simultaneously (e.g., a defamatory blog
accessible worldwide).
 Pinpointing the origin of the harm can be
difficult due to anonymized or decentralized
online systems.
Example:
If defamatory content is published on a global
website, the cause of action might be said to
arise in all locations where the website is
accessible.

4.5 Jurisdiction and the Information Technology

Act, 2000
The Information Technology (IT) Act, 2000
governs cyber activities in India and provides a
framework for jurisdiction in cyber-related cases.
Key Provisions:
1.Section 1(2): The Act applies to offenses or
contraventions committed outside India if
they affect individuals or entities in India.
 2.Section 75: Jurisdiction is extended to
offenses committed by any person,
irrespective of nationality, if the act involves
a computer system located in India.
Implications:
 This provision allows Indian courts to
exercise jurisdiction over cybercrimes
committed abroad that impact Indian
individuals or businesses.
Example:
If a hacker based in a foreign country attacks an
Indian company’s server, the Indian courts can
assert jurisdiction under Section 75.

4.6 Foreign Judgments in India

The enforcement of foreign judgments in India is
governed by Section 13 and Section 44A of the
Code of Civil Procedure, 1908.
Recognition of Foreign Judgments:
1.Indian courts recognize foreign judgments
only if:
 o They are passed by competent courts.
o They are based on principles of natural
justice.
o They do not contravene Indian laws or
public policy.
2.Grounds for Non-Enforcement:
o Judgment obtained through fraud.
o Judgment contrary to Indian law.
o Lack of proper jurisdiction by the foreign
court.
Application in Cyber Disputes:
 In cross-border cyber cases, Indian courts
may enforce foreign judgments if they meet
the above criteria.
 However, disputes often arise due to
differences in cyber laws across jurisdictions.
Example:
If a U.S. court orders the removal of defamatory
content from a website hosted in India, Indian
courts will enforce the judgment only if it aligns
with Indian law.