Communication is an essential element in formation of contract. Where
communication of proposal is complete it forms the contract. Communication done
through instances mode and post office mode. Through communication it binds duty
to perform on contracting party it also decides court jurisdiction of the
contract.
E-commerce is built on electronic contracts, sometimes known as
digital contracts. The word's etymology implies that it refers to a specific
type of contract created when two or more parties engage in online commerce. In
electronic mode of communication, it includes Gmail, Social media apps such as
WhatsApp, Facebook, etc. are also used for formation of contract.
Definition
The Contract Act of 1872's Section 4 addresses proposal completion, acceptance,
and revocation and says the following:
The communication of a proposal is complete when it comes to the knowledge of
the person to whom it is made.
The communication of an acceptance is complete:
as against the proposer, when it is put in a course of transmission to him so as
to be out of the power of the acceptor; as against the acceptor, when it comes
to the knowledge of the proposer.
The communication of a revocation is complete:
as against the person who makes it, when it is put into a course of transmission
to the person to whom it is made, so as to be out of the power of the person who
makes it; as against the person to whom it is made, when it comes to his
knowledge.[1]
In modern time everything going through the process of modernization and
Communication is also one of them. In Modernize world, Contract are forming
through Email, Telegraph and also some time through Chatting Apps such as
WhatsApp, Telegram, etc. So, it become very essential that mode of communication
should be very clear thought-out formation of contract.
Problem
When contract formation is through instant mode of communication its sometime
face problem related with its jurisdiction of the court, relevancy of the
contract, when contract is formed. So, it firstly become very important to clear
this problem.
There are some problems also arise when the person saw the message but it marks
unseen to the other party for example in WhatsApp when someone drops the message
two other party but he seen the message from notification he read the message
but to the other party it shows that he not yet read in the message so it
creates a great hinder in formation of the contract. Also, in Gmail when someone
sent the message and his or her message mark as junk so the people also take the
defiance that they not read the mail send by other party.
Legality of the E-Contracting
Modern world is changing at a fast pace and the mode of communication is also
changing. All over the world recognize that change and brings or form the new
laws according to the need of the hour, the Model of Ecommerce was approved in
1996 by the United Nations Commission on International Trade Law (UNCITRAL).[2]
The Model Law is accepted by the majority of the country. Model law is related
to the legislation Of Ecommerce. The Modal of Ecommerce was enacted in 1996 with
two main goals in mind: to make electronic commerce easier and to embrace and
standardize ecommerce regulations on their legitimacy and execution across state
lines.
To achieve the above objective Model law, bring certain Provisions Regarding E
commerce. Such as:
- That document should not be discriminated on the basis of the legality
because it was made in the electronic form. This provision was also adopted
by India in the IT Act.[3]
- Specifies the conditions that must be met for electronic communication
to be deemed equivalent to paper-based communication, particularly when it
comes to writing[4], originality[5], signing[6], records[7] for the purpose
of e-contracting.
In India the legitimacy of contracts created electronically is covered under the
information technology act 2000. Under Section 10 of it says –
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.[8]
It therefore clearly indicates that a proposal and acceptance on online platform
is valid and not made illegal or unbinding on the basis of that the contract is
made through online platform.
Landmark Cases regarding legality of Ecommerce
The originator must get the acceptance in order for the contract to be
established. The mail box method is used in conventional contract law to
determine if acceptance has been completed. Contract law states that when an
acceptance is sent in a way that the acceptor cannot control, the contract is
considered completed. But, in instantaneous mode of communication it was
different. In this field of instantaneous contract there are many case laws that
define the part of instantaneous mode of communication but out of all Entores
Ltd. Vs Miles Far East Corporation[9] is a Landmark case.
In that case, the Entores Ltd., were a company that is based in London was the
complaint in that particular case.
Through an instantaneous communication method known as telex, they had made an
offer to buy one hundred tons of copper cathode from the defendant Meals Far
East Corporation. Their firm was situated in Amsterdam. The complainant
attempted to sue the defendant for damages after the Dutch firm submitted an
acceptance of this offer via telex and the complainant was not satisfied with
the contract.
To determine whether the damage action should be brought under English or Dutch
law The court had to determine when the contract was accepted; if it was
accepted when it was sent, damages would be handled under Dutch law; if it was
accepted when it was received, damages would be handled under English law.
Lordship DENNING LJ Observed,
"Take a case where two people make a contract by telephone. Suppose, for
instance, that I make an offer to a man by telephone and in the middle of his
reply the line goes 'dead' so that I do not hear his word of acceptance. There
is no contract at that moment."
The facts of the case were as follows: a party in Holland received an offer by
Telex from London, and the Telex promptly accepted it. The only question that
remained was whether the contract was made in Holland or England. The Court of
Appeal determined that the telex is an instantaneous means of communication
medium and that the rules governing instantaneous communication between parties
differ from those governing post Only once the offer has been accepted does the
contract become final. And where the acceptance is received is where the
contract is created.
It is one of the most known and historical case law decision related to
communication of instantaneous mode of contract.
IN INDIA,
In India
Bhagwandas Goverdhandas Kedia vs. M/s Girdharilal Parshottamdas and
Co.[10] was a historic case regarding instantaneous mode of communication.
In this case, through a phone conversation, the respondent M/S Girdharilal
Parshottam Das and Co. received an agreement from the appellant Bhagwandas
Goverdhandas Kedia Oil Mills to provide the seeds. Due to the appellant's
inability to furnish the items, the respondent was sued by the complaint in
Ahmedabad. The defendant in the present matter accepted an offer that the
plaintiffs from Ahmedabad made to buy certain commodities from them in Khamgaon.
The matter brought up What was the contract's jurisdiction, and where was it
accepted?
Most judges thought there was no justification for applying the post office rule
to telephone conversations and instead favored adhering to the English rule as
established in the Entores Ltd. decision.
Lordship SHAH J Observed,
According to Section 4, the contract is not implied to be formed in the capacity
of the acceptor at one location and the purpose at another. He went on to add
that since the Indian Contract Act's draft did not allow for the use of the
telephone, the section's language should only apply to correspondence sent by
mail. In other words, the contract is completed when the offer is accepted.
Lordship HIDAYATULLAH J Observed,
He stated and persuaded that the wording of Section 4 is sufficiently flexible
to cover telephone conversations; the code should not entirely disregard the
language of the Act when the words of acceptance are spoken into the phone and
incorporated into the offer's transmission, making them beyond the acceptor's
control; since the communication is immediate, the contract is created right
away.
In this case, it was made abundantly evident and clear that the court's
jurisdiction was established and that all modes of communication-instantaneous
or post office-were legitimate. Instantaneous communication is covered by
Section 4 of the Indian Contract Act, Paragraph 1, while post office
communication is covered by Section 4 of the Indian Contract Act, Paragraph 2.
Objective Of E-contracting
A e-contracting does not have only the drawbacks it's also have an advantage
compared to the post office communication such as –
- It was quicker than communicating through the postal service and more practical since it could be transmitted as soon as the promisor or promisee signed, or accepted it.
- Paper contracts are susceptible to a variety of risks, including water damage, theft, and forgeries. Top-tier electronic contract suppliers offer a range of virtual and tangible security measures to guarantee the interaction which keep contract protected against tempering and unwanted access.
Capacity of contract
For an online or offline contract to be formed and be valid, the parties'
capacity at the moment of creation is crucial. The agreement of both competent
parties at the moment of contract formation is required under the fundamental
principle of contracts. The parties' ability is necessary in relation to the
being aware of the nature and significance of the deal that was engaged upon.
Section 11 Of Indian Contract Act says-
Every person is competent to contract who is of the age of majority according to
the law to which he is subject, and who is of sound mind and is not disqualified
from contracting by any law to which he is subject.[11]
Although the aforementioned fundamental rule is constantly in jeopardy, in the
event of an e-contracting where age and other verification not done properly for
example contract formed in single click but when the contract is formed through
email, the parties have the opportunity and time to verify each other's ability
using a variety of methods, including digital signatures or e-signature
technology. Because e-signature and digital signatures are governed by state
laws, parties can determine each other's capability.
Lawful Object
A legitimate object is one of the necessary requirements for a contract to be
deemed valid. The contract's purpose and compensation ought to be legitimate.
This idea also applies to contracts made online. When a contract is formed, it
is crucial that both parties affirm that the goal of a contract shouldn't be
illegal. Section 10 Of Indian Contract Act says-
All agreements are contracts if they are made by the free consent of parties
competent to contract, for a lawful consideration and with a lawful object, and
are not hereby expressly declared to be void.[12]
Because of its nature, the internet allows for spontaneity, anonymity, and
simple information access for everybody involved. When there are cross-border
exchanges of any kind, it exposes the parties to other socioeconomic and
political cultures, which gives rise to a variety of ethical and socially
problematic concerns. As a result, section 10 of the Indian Contract Act must be
followed in the contract. Whether it was an offline or online contract, it was
required.
Conclusion
A contract created during electronic commerce among two or more parties via
electronic form or means of communication for the transmission of electronic
records is known as an e-contract. With parties entering into contracts from
different countries and the ability for a cause of action to begin anywhere,
jurisdiction is a key concern in e-contracts. When it comes to cross-border
contracts, the issue of jurisdiction is significant.
The jurisdiction rules let
parties to choose a forum by consent from both parties. When it comes to
settling future legal problems between parties to a contract, choice of law is
important. Determining the law that will apply in future conflicts is crucial
because it offers clarity. Choice of legislation is crucial for resolving
potential legal disputes between contract parties. Because it provides clarity,
deciding which law will be applied in future conflicts is essential.
End-Notes:
- Indian Contract Act 1872, s 4
- Founded in 1966, the United Nations Commission on International Trade Law (UNCITRAL) is an arm of the UN General Assembly tasked with advancing gradual simplification and uniformity of international trade law.
- UNCITRAL Model Law of E-Commerce 1996, Article 5
- UNCITRAL Model Law of E-Commerce 1996, Article 6
- UNCITRAL Model Law of E-Commerce 1996, Article 8
- UNCITRAL Model Law of E-Commerce 1996, Article 7
- UNCITRAL Model Law of E-Commerce 1996, Article 10
- Information Technology Act 2000, s 10
- Entores v Miles Far East Corp [1955] 2 QB 327.
- 1966 AIR 543, 1966 SCR (1) 656
- Indian Contract Act 1872, s 11
- Indian Contract Act 1872, s 10
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