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E-Contract: Legality, Acceptance and Jurisdiction of Courts

India is in the age of a digital revolution with the internet becoming an important aspect of its people. Now with the cheap internet lifestyle of the People is changing things becoming more and more convenient.

E-Contracts is also a convenient form of a traditional contract. They are in some aspects legalized by the IT Act 2000 but still, there is very uncertainty regarding the E-contract mainly because India lacks a clear and explicit law that governs all the characteristics of the E-Contract.

There is uncertainty regarding the Legality of the E-contract and jurisdiction of the court in handling the dispute of these E-Contracts because these contracts are created in any part of the world at any time. So, this article focuses on explaining the legality of these contracts and the jurisdiction of the court in enforcing these contracts.

What is E-Contract?

E contracts are modern contracts, unlike traditional contracts they don't use papers they are digital and are generally made for swift entering into a contract for the convenience of the parties. Parties sitting on a different corner of the world can enter into an E-contract smoothly through the Digital Signature without any inconvenience and getting physically or mentally exhausted. [1]

The legality of E-Contract:

Indian Contract Act 1872 mentions the ingredient which is necessary for the valid contract those are offer, acceptance, intention, free consent, lawful consideration and object, competency of parties to contract and the possibility of performance, but nowhere in the act, it is mentioned that an agreement has to be signed or that it must be in writing.

But nowhere in the act, it is explicitly mentioned that an agreement has to be signed by pen or that it must be in writing on paper. It's a custom that is being followed so that consent of the parties can be shown and the contract can be provided as evidence for future references.

Section 4 of the IT Act, 2000, says that if any law which is applicable in India required a document or information to be in handwritten, Typewritten or Printed form then they have to consider such document or information valid if it is in the electronic form and can be used for future references.

Section 10A of the IT Act validates the E-Contract by saying that any contract can't be declared void just because it uses an electronic means to create it. If in the contract formation the communication of proposals, the acceptance of proposals, the revocation of proposals and acceptances, either of these is communicated in an electronic form as the case may be, are expressed in electronic form or using an electronic record then it's a valid contract.

The majority of state stamp laws do not specifically include electronic records within their ambit, but some state stamp duty laws do recognize electronic records within the purview of instrument. For example, Section 2(l) of the Maharashtra Stamp Act, 1958 specifically refers to electronic records in the definition of the term instrument.

Section 3 of the Evidence Act, 1872, says that all documents including electronic records produced for the inspection of the court. Section 65B of the Evidence Act provides that any information contained in an electronic record which is printed on a paper, stored, recorded or copied in optical or magnetic media produced by a computer shall be deemed to be also a document and shall be admissible in any proceedings, without further proof or production of the original, as evidence of any contents of the original or any fact stated therein of which direct evidence would be admissible.

Further, Section 47A of the Evidence Act says that when the Court has to form an opinion as to the electronic signature of any person, the opinion of the Certifying Authority which has issued the electronic Signature Certificate is a relevant fact, and Section 85B of the Evidence Act stipulates that unless the contrary is proved, the Court shall presume that:
  • the secure electronic record has not been altered since the specific point of time to which the secure status relates;
  • the secure digital signature is affixed by the subscriber to sign or approve the electronic record.
In the case of Tamil Nadu Organic Private Ltd v. State Bank of India[2] and Trimex International FZE Ltd., Dubai v. Vedanta Aluminium Ltd[3] Indian courts enforces the E-Contracts and define them as valid contracts.

Acceptance of E-Contract:

When an offer or a proposal is sent by one person to another through an electronic mode, the acceptance of an offer or a proposal must be shown through any electronic mode or by clicking on the button 'I Agree' or 'I Accept etc.

Section 12 of the IT Act 2000 deals with the acknowledgment of the electronic records, now the acknowledgment of acceptance of the E-Contract is also kind of an electronic record so this section helps us in understanding the procedure of acceptance of E-Contract.

Section 12 of the IT Act 2000 says that the acknowledgment of the receipt of acceptance but it hasn't mentioned any specific mode by which the acknowledgment of the acceptance should be sent, the party can send the acknowledgment of the acceptance of the through any mode they prefer.

Further Section 12 of the IT Act 2000 says that acceptance will not be considered valid if the acknowledgment of acceptance of the offer is not received by the party who made the offer.

If the party receiving the offer is failed to give the acknowledgment within a reasonable time, then the party who initiated the offer may give notice to the other party, that he has not received an acknowledgment and again provides a reasonable time for the receipt of acknowledgment. Even then also the other party is failed to provide the acknowledgment then the party who offers the contract can withdraw the contract.

In the case of Bhagavandas Kedia vs. Girdharilal[4], the Supreme Court of India based on judgment in Entores vs. Miles Far East Corporation has held that the contract is complete only at the end of the offeror where he has received the acceptance to his offer.

In Quadricon Pvt. Ltd. vs. Bajarang[5] Alloys Ltd., the Bombay High Court held that the communication by Fax is similar to Telex. The contract would be completed only when the acceptance is received by the offeror.

Jurisdiction of Court in E-Contract:

Judicial View:
Our Constitution vest the power in the courts to resolve the dispute. Jurisdiction means to which extent the courts can use their power or what area comes under the power of the particular court to take cognizance of the case to take the legal action and pass its verdict.

In India Code of Civil Procedure, 1908 defines the jurisdiction of the court which is based on the place of residence of a defendant in certain exceptions of the plaintiff or the place where the cause of action arises.

Generally, while drafting a contract a clause is inserted in, which determines the territorial jurisdiction in case of any dispute arises in the contract in the future.

The Supreme Court of India in the case of Bhagwandas Goverdhandas Kedia vs. Girdhari Lal Parshottamdas & Co[6] held that at the place of proposer where the acceptance is received shall have the jurisdiction for enforcement of contracts entered into using computer internet.

Thus, in the case of E-Contracts acceptance is completed when the offeror receives the acknowledgment of acceptance by the party to which the offer is made.

In the case of WWE v. M/S Reshma Collections[7] Delhi High Court held that:
to carry on business, the presence of the person concerned was not necessary. The bench recognized the virtual presence of e-contracts and refined the applicability of the judgment to define the meaning of the term carrying on business.

Court further held that:
since the transaction took place instantaneously and the acceptance of the offer by WWE was communicated to the customer in Delhi, the contract was concluded in Delhi and the Delhi court had jurisdiction.

Further, it held that:
When the shop in the physical sense is replaced by a virtual shop because of the advancement in technology, in our view, it cannot be said that the appellant/plaintiff would not carry-on business in India.

Because of this verdict passed by the court now, the case can be filed where the sales are made and if the sale is made across India, then the plaintiff can choose the forum of its own choice.

In the case of Himalayan Drug Company v. Sumit,[8] Delhi High Court tried the case even though Defendant belongs to Italy because the damage is done in Delhi. In this case, another test developed in India called the Effect Test says that if the impact of a particular transaction is felt in India, then the Indian Courts will have jurisdiction.

Statute View:
Section 13 of the IT Act 2000 talks about the rule of law related to the dispatch and receipt of an electronic record, now as I mentioned above E-Contract can also be treated as an electronic record so this section helps us in addressing the issue related to jurisdiction of the court in E-Contract.

Section 13(1) of the IT Act 2000 talks about the dispatch of the E-Contract through electronic transmission (E-Mails) from the offeror to the party it is offered and when it is out of the hand of the offeror to recall it and make amend in the E-Contract then it considered that the contract is communicated to the other party.

Section 13(2) of the IT Act 2000 talks about the time of the receipt of the E-Contract by the other party to which the contract has been sending by the offeror. If the other party has given the designated address (e-mail address) to the offeror then the time of the receipt of the contract will be the time when the contract enters the designated computer resource.

And if the designated address is not provided by the other party, then the time of the receipt will be the time when the contract thus sends is retrieved by the other party.

Section 13(3) of the IT Act 2000 talks about the address of the place where the contract was generated and the place where the contract is received. A contract is generated at the place where the offeror has his place of the business and it is received at the place where the receiving party has his place of business.

Section 13(4) of the IT Act 2000 says that the location of the computer source is not important in identifying the address of the place from where the contract is dispatched or received. A designated E-Mail address is important for that purpose.

Section 13(5) of the IT Act 2000 helps in determining the place and time of dispatch or receiving of the offer by emphasizing the place of business and usual place of residence. It says that:
  • If the Offeror or the other party has more than one or more places of business then the registered address of the business is the place of business.
  • if the offeror or the other party does not have a place of business, his usual place of residence shall be deemed to be the place of business.
  • Usual place of residence, about a body corporate, means the place where it is registered.
In the case of PR Transport Agency vs. Union of India[9], the Allahabad High Court applied the above provision to decide the question of jurisdiction of the court.

The respondent had sent the letter of acceptance by e-mail to the petitioner's e-mail address. After that, the respondent sent another e-mail canceling the e-auction due to some unavoidable reasons.

The petitioner challenged this communication in the Allahabad High Court, objection was raised by the respondent about the territorial jurisdiction of the Court based on the cause of action that had not arisen within Uttar Pradesh. In this case, the principal place of business of the petitioner was in the Chandauli district of U.P. and his other place of business was in Varanasi of U.P.

The Court, based on Section 13(3) of the IT Act, held that the acceptance of tender by e-mail would be deemed to have been received by the petitioner at Varanasi or Chandauli, which are the only two places where the petitioner has his place of business. As both these places fell within the territorial jurisdiction of the Allahabad High Court, the Court assumed the jurisdiction to try the dispute.

Thus, it is observed that the principal place of business of the offeror and the other party to which offer is made become the criteria to decide the jurisdiction of the Court. However, the contracting parties particularly in E-contract must insert a specific clause on jurisdiction to avoid further complications.

In the past decade, we have seen rapid growth in the increase of E-Contract not only in India but also in other counties, especially after the covid situation. E- Contracts are the future of the contracts Commerce company, Trading firms, Software Companies, etc all are using some or other forms of E-contracts like Shrinkwrap, Clickwrap, Email-Contracts, etc.

But these E-Contract has their pros but many cons to like to determine the legality of E-Contract in India there is no specific provision that validates the E-contract or has a rule which determines the acceptance of contract, place of business, Jurisdiction of court, etc.

There is a need to cover all the aspects of E-contracts in a single, comprehensive, and updated legislation to the protection of consumers and traders in E-commerce and for enforcement of E-contracts.

  1. Nikhil Nair, E-Contract, Indian National Bar Association,
  2. Tamil Nadu Organic Private Ltd v. State Bank of India, (2019) W.P. No.29807 of 2013 (India).
  3. Trimex International FZE Ltd. Dubai v. Vedanta Aluminium Ltd, (2010) Arbitration Petition No. 10 OF 2009 (India).
  4. Bhagavandas Kedia vs. Girdharilal, (1996) AIR 1966 SC 543: 1966 (1) SCR 666 (India).
  5. Quadricon Pvt. Ltd. vs. Bajarang Alloys Ltd, (1988) AIR 2008 Bom 88 (India).
  6. Bhagwandas Goverdhandas Kedia vs. Girdhari Lal Parshottamdas & Co., (1966) AIR 1966 SC 543: 1966 (1) SCR
    666 (India).
  7. WWE v. M/S Reshma Collections, (2014) FAO(OS) No. 506 of 2013 (India).
  8. Himalayan Drug Company v. Sumit, 2010 PTC 739 (Delhi High Court).
  9. PR Transport Agency vs. Union of India, (2006) AIR 2006 All 23: 2006 (1) AWC 504 (India).

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