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Communication Of Proposal And Acceptance By Email Or Other Electronic Mode

Communication of proposal and acceptance by email or other electronic mode is largely considered as an informal mode of communication. Due to this many people make contracts, offers, acceptance and revocation just for the sake of negotiation purpose, thinking it not to be a formal contract with no legal obligations. But the case is not so, it is one of the important modes of formal communication and especially in the Covid times it has gained immense value. This topic of research has its roots not only in Indian contract act 1872, but also in the Information technology act, 2000.

The section 10A of the IT act provides the legislative authority to the online contracts and also states the validity to the online contracts as well. The part to provide legislative authority to online contracts came through an amendment in the IT act in 2008. Through this research paper we would throw some try light on the validity of the contracts entered through online mode and email and also[1] about the legal perspective of the same.

First to start with the topic one needs to understand the basic terms of �acceptance� and �proposal� to get better understanding. So these words have been describes in the Indian contracts act, 1872. Going by the act �Proposal means one has to signify his willingness to do an act or not. This action of his will make the other one understand his choice to enter into a contract.

Now to proceed with let us know what is acceptance with respect to communication. Acceptance is defined as when your proposal to offer gets accepted it is called as acceptance. The acceptance is the second essential for a valid contract. Acceptance should not be conditional and once if it is communicated it cannot be revoked after that, but can be revoked before the acceptance is received by the offeror.

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To start with, first question is to understand is what do you mean by a contract? Section 10 of the Indian Contract Act, 1872 describes contract as an agreement enforceable by law. Now, next task is to find out the essentials which make an agreement a contract. It does not matter whether it�s the online mode or offline mode to form a contract; the basic essential to form a contract remains the same.

So, let us first look into these essentials which make an offer or proposal into a contract:

  1. Offer and Acceptance:
    This means that there should be a �lawful offer� and lawful acceptance. This implies that the offer and acceptance must satisfy the requirements of the Indian contract act in relation thereto
  2. Intention to create legal relationships:
    There must be an intention of parties to enter into a legal relation and obligation. This is because agreements of social and domestic nature cannot be enforced.
  3. Capacity of parties:
    the parties to contract must be competent by law to enter into contracts and create binding legal relationships.
  4. Free consent:
    One of the most essential elements for the formation of the contract is free consent. If the consent is not obtained freely it may render contract void or voidable. Consent must not be obtained through coercion, undue influence, fraud, misrepresentation and mistake.
These are the basic essentials which one should have to enter into a contract to make an agreement into a contract.

Now to understand the validity of the online contracts lets first understand that whether the postal rule in case of letters be applied in this case or not to make the contracts valid.

The postal rule which is applied in the case of communication through letters states that, when acceptance is given by post, the communication of the acceptance is complete as against the proposer, when the letter of the acceptance is posted. Thus, a mere posting of letter of the acceptance is sufficient to conclude the contract. The letter posted must by completely stamped and addressed. Against the offeree, the acceptance is completed when the offeror reads about the acceptance. The same can be highlighted from the case of Bhagwandas vs. Girdhari Lal & Co.

The Indian Contract Act, 1872 nowhere answers this question, but it nowhere restricts it too. E-mail contracts are similar to the normal contracts made through offline mode and are governed by the provisions of the Indian Contract act. These contracts can also be not made if the basic essential are not satisfied.

The basic essentials to a contract in online form are:

  1. Terms of agreements must be agreed upon by both the parties in the same manner (consensus ad idem
  2. There should be intention to create legal relation
  3. Vital terms of the contracts must be agreed upon
  4. Terms and conditions must be clear in the online mode
  5. Contract must be enforceable by law
  6. Parties must be competent to enter into a contract
All the terms and statues of the email contract must be read in with reference to the Indian Contract act and not in suspension to it. Also, for the recognition of the contracts through online mode signature must be put on the contract to signify acceptance to the terms and conditions of the contract.

Talking about the validity of the contracts through email, Information technology act, 2000 makes them valid. But it expressly states that, they can�t just become invalid on the aspect that there is acceptance and proposal through online mode of communication. Section10 of the IT Act talks about the same.

Another aspect to this situation is that the Evidence act, 1872 also tells us that email contracts can also be presented as evidence in the court of law with proper online signature of the parties to contract.

State of Delhi vs. Mohd Afzal and Ors:

This case held that �electronic records are also permissible as evidence in the court of law. If someone challenges this evidence, then the person challenging must have to prove it that why is it wrong and on which basis.

From this case we can see that online evidence is also accepted in the same way as the normal evidence. Also, it follows the same procedure as of the normal evidence. This case shows us that the online evidence can also be accepted as valid evidence in court of law.

Case Laws
Now let us look at some case laws in respect to the online mode of communication:
  1. Goel & Anor vs. Grant & Anor:

    In this the company went into the process of administration. The organizers thought that they had potential claim against the third parties. There was an exchange of emails between the outsider and the two company shareholders, discussing the possible claim to be taken by the two shareholders. The shareholders claimed that the contract through email was a legally binding contract as there was a formal agreement. But the Administrator stated that there was no proper offer that was there for acceptance. So no binding contract was formed. Afterwards the court held the point of the administrator to be valid and held the contract annulled.

    From this case we case see that whether there is a online or an offline contract, the basic conditions to make a contract must be fulfilled. In this there was no offer, but emails were exchanged just as a purpose of communication and to know about the matter. There was no intention to create any legal relationships, also there was no acceptance from the other side as there was no offer made and finally there was no consideration as well
  2. Trimex International FZE Limited, Dubai vs. Vendata Aluminium Ltd.:

    In this case law the parties agreed on all the terms and legally entered into a contract through emails. The Supreme Court held the contract valid as the contract was entered through proper consent, there was a intention to create legal relationships and was followed by due procedure of law. The court did not annul the contract because it was through email.

    This shows that the contracts through email and other online mode can also be valid if all the essentials to a contract are satisfied. Thos also shows the validity of the communication through online mode in the Indian courts.
  3. Bhagwandas Goverdhandas kedia vs. Girdharilal Parshottamdas and Co. and Ors.[2]

    In this case the two parties to contract made the conditions clear over telephonic conversation, which is deemed to be an instantaneous form of communication. In this case the acceptance is made as and when the offer is made as it is assumed that the parties are at the same place. But in this case, the acceptance is completed when a �yes� is heard by the offeror.
In this case the court held that in instantaneous mode of communication the acceptance will be completed when it reaches the offeror. This case highlights the importance of instantaneous offer.

After knowing about the validity of the online contracts in Indian context and the key essentials to form an online contract, we can conclude that there are not many cases which talk about the contracts formed through online mode. It is still debatable as to when email contracts are concluded and are binding. Yet when we read Indian Contract Act, 1872 with the Information technology act, 2000, we get to know that these define the online contracts and contracts through emails.

Also in the Covid times, where everyone is shifting to online mode there is a need to bring a separate legislation in India so as to bring better validity to the contracts and make them legally binding. It should also be made more protective so that people could rely more on these modes of communication by legal status to the concept of digital signature. When the social distancing has become the norm for life, there is a need to make ratify the international conventions and a make a more reliable law for India in response to the online contracts and contracts made through email.

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