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INTERNATIONAL JOURNAL OF LAW

MANAGEMENT & HUMANITIES
[ISSN 2581-5369]
Volume 3 | Issue 6
2020
© 2020 International Journal of Law Management & Humanities

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1 International Journal of Law Management & Humanities [Vol. 3 Iss 6; 01]

An Analytical Study on E-contract: Its Legal

Validity and Jurisdiction
JAIMALA CHAHANDE1

ABSTRACT
An evolution and tremendous development in the computer system and information
technology along with the increase in the innovations related to the internet services, the
E-commerce flourishes since last decades. E-contract is an essential part of E-commerce.
E-contract is legally recognized by Law, thus the trust of consumers on E-commerce
increases day by day. The COVID-19 pandemic situation further helps to grow the E-
commerce and E-contracts. In India, E-contract is governed by so many Laws. The
provisions of the Indian Contract Act, 1872 are generally applicable to validate the E-
contracts similar to the general contracts. The provisions of The Information Technology
Act, 2000 (IT Act) gives statutory recognition to E-contracts. The provisions of the Indian
Evidence Act, 1872 makes the E-contract enforceable. An E-contract crosses the
jurisdictional boundaries as it can be created from any place in the globe. This raises the
question of jurisdiction of the court in case of any dispute between the parties to E-
contracts.

This paper has analyse the E-contracts along with the traditional contracts in India.
There are the issues arising in E-contracts regarding Legal Validity and Jurisdiction of
E-contracts as it is created from anywhere and anytime in the World. So, this paper
explains the legal validity of E-contract and describe the jurisdiction of E-contract in
India.

I. INTRODUCTION
E-commerce (Electronic-Commerce) is the well-known and widespread kind of business
nowadays globally. E-commerce is the transactions of business deals and selling and buying
of the goods and services virtually i.e. through the online platform. An evolution and
tremendous development in the computer system and information technology along with the
increase in the innovations related to the internet services (5G), the businesses of the E-
commerce flourishes since last decades. As E-commerce is the fastest, universal and easily
accessible or executable kind of business, so it becomes popular among the people of today’s

1
M.Sc. LLM, NET, SET, Visiting Faculty at PGTD of Law, Nagpur (July 2019- March 2020)

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technosavy and busy generation. E-contract (Electronic-Contract) is an essential part of E-

commerce. E-contract is legally recognized by Law, thus the trust of consumers on E-
commerce increases day by day.

In addition to the above developments in E-commerce, the COVID-19 pandemic situation

especially during the lockdown period some consumers who were unaware and unwilling to
enter into the E-commerce and ultimately into the E-contract because of the lack of faith in
the online transactions, are forced to enter into the E-contract. This situation further helps to
grow the E-commerce and E-contracts. Even after the starting of unlock period, most of the
consumers now rely on E-commerce and enter into E-contract every day to buy their basic
needs as the faith on E-contract is growing. The business communities also enter into E-
contract to transact their business deals as it is fastest and trustworthy way to do business now
a days. So, E-commerce and E-contracts are the need of the hour.

E-contract is the execution of commercial transactions electronically or digitally. The

formation and validation of E-contracts requires to fulfil the essential conditions similar to
the traditional contracts i.e. paper-based contracts, only the difference is that it is created and
executed electronically by using the internet services. In India, E-contract is governed by so
many Laws, primarily under the Indian Contract Act, 1872; The Information Technology
Act, 2000 and The Indian Evidence Act, 1872. The Indian Courts also recognized and give
judgements in the favour of E-contracts.

This paper has analyse the E-contracts along with the traditional contracts in India. There are
the issues arising in E-contracts regarding Legal Validity and Jurisdiction of E-contracts as it
is created from anywhere and anytime in the World. So, this paper explains the legal validity
of E-contract and describe the jurisdiction of E-contract in India.

II. HISTORICAL BACKGROUND OF E-CONTRACTS

E-contract is an essential part of E-commerce, so need to study the history of it before
knowing about the E-contract. E-commerce simply related to the selling and purchasing of
the goods and hiring of services over the internet. With the advancement in digital technology
and networking increased the growth of E-commerce globally.

In the 1960s businesses were using Electronic Data Interchange (EDI) to conduct e-
transactions2. In 1991,3 E-commerce was widely accepted when the Internet had used for

2
money.howstuffworks.com/history-e-commerce.htm The History of E-commerce BY DAVE ROOS The
History of E-commerce | HowStuffWorks.
3
www.ukessays.com/essays/information-technology/a. A Brief History of E Commerce Information
Technology Essay

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commerce. With the invention of the World Wide Web in 1990, a large number of companies
started to provide their services through the website. For example, Amazon and eBay which
were among the earlier companies that transformed E-commerce.

In India, the concept of E-commerce was first introduced in the late 1990’s through Rediff.
An Indian Railway Catering & Tourism Corporation Limited (IRCTC) was the first company
to generate E-commerce portal in India.

The United Nations Commission of International Trade Law (UNCITRAL) adopted the
Model Law on E-commerce in 1996. The General Assembly of UN in January 1997
recommended that the countries should consider this model while enacting or revising their
laws.4

Accordingly, the Indian Parliament enacted the Information Technology Act in 2000, to
legalise the E-commerce transactions in India and to keep pace with the globalisation of the
trade and transactions with the development of computer technology.

The Rules and Regulations governing the E-commerce and ultimately the E-contract are
provided under following International Conventions and Conferences.

The Brussels Convention on Jurisdiction and Recognition of Enforcement of Judgments in

Civil and Commercial Matters, 19685; Convention On The Law Applicable To Contractual
Obligations, 19 June 1980 (known as “the Rome Convention”)6; the Hague Conference on
Private International Law (HCPIL)7 30 June 2005 has issued a Convention on Exclusive
Choice of Court Agreements concluded in Civil and Commercial Matters; and United
Nations Convention on the Use of Electronic Communications in International Contracts
(New York, 2005)8.

III. E-CONTRACTS
With the fastest development in Information Technology, it becomes easy to enter into E-
contract for business transactions. It is feasible to enter into such contract instantly by the
exchange of communication of offer and acceptance between the parties by electronic mode.
E-contract is one of the important parts of E-commerce. E-contracts designed to sale and
transmit the products and services online to the addressee.

4
Prof. G. C.V. SUBBA RAO, LAW OF CONTRACT I & II, 26-27(11th ed S. Gogia & Company).
5
See eur-lex.europa.eu › legal-content › TXT › uri=CELEX: 1968 Brussels Convention - EUR-Lex.
6
For details see eur-lex.europa.eu › legal-content › ALL Convention on the law applicable to contractual
obligations.
7
www.hcch.net › instruments › conventions › full-text Convention of 30 June 2005 on Choice of Court
Agreements.
8
uncitral.un.org United Nations Convention on the Use of Electronic.

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Nowadays we all enter into E-contract on a day to day life, for example, to purchase grocery,
books, vegetables, garments, travel booking, Airlines and railway ticket, playing games,
watching online movies, hiring a cab etc. so, we are accustomed to the E-contract very easily
every day.

E-contract has a similar meaning as traditional contract (paper-based contract), i.e. “Contract
as an agreement enforceable by law.”9 However, the only difference is that it carried out
through online mode of communication without the parties directly meeting face to face.

The UNCITRAL Model Law on Electronic commerce stated that “a contract can be made by
exchanging data messages and when a data message is used in the formation of a contract, the
validity of such contract should not be denied.”10 The modern law provides equal legal
treatment for the use of electronic communication and paper-based communication.11

Types of E-contracts

Following are the general types of E-contracts/Agreements-

a) Click-wrap agreement- These agreements require the user to give his consent to the
terms and conditions of the agreement by clicking “ I accept”, “Ok”, “Allow” or “I
agree” button.

b) Browse Wrap Agreements- These agreements do not require the user to give his
consent to the agreement. It stated that, automatic acceptance of the agreement by
using the website. In this agreements, terms or conditions of service provided at the
bottom of the website.

c) Shrink-wrap agreements- These agreements are formed when the user give his
consent to a printed agreement on software like CD-ROM by open in the shrink to fit
plastic wrapper over the product. The terms and conditions in such agreements are
enforced upon the user as he cannot use it without opening the wrapper.

Essentials of E-Contract:-

E-contract may be formed either through an e-mail, mobile apps, video conferencing or other
electronic media. To enter into the electronic contract, it requires the essential elements
applicable to the traditional contract. However, such contracts executed through the online
modes unlike personal meeting in the traditional contracts. The following are the essentials to
form E-contract-

9
Sec. 2 (h) of the Indian Contract Act, 1872.
10
Art 11, Communication of data messages, UNCITRAL Model Law on Electronic commerce, 1996.
11
Prof. G. C. V. Subba Rao ,Law of Contract I & II , 26-27(11th ed. S. Gogia & Company).

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1. Offer- An offer is also called as proposal. It is the first essential element for the
formation of E-contract. An electronic offer can be made through electronic modes like
e-mails etc. As per The Information Technology Act, 2000, the terms originator12 and
addressee13 in E-contract are used instead of the words proposer and acceptor used in
traditional contract. The originator is a person who send or create the electronic
message i.e. originate the electronic message and transmit it to any other person. An
addressee is a person who receives the electronic record which is sent by the originator.

Section 11 of the IT Act deals with the attribution of electronic records to the
originator, if it was sent by originator himself or by authorised person or by information
system programmed on behalf of him.

In such contracts, the addressee presumed that the electronic record is originated from
the originator itself.

However, in e-contract after sending the electronic record, the originator may not be
confirmed about the receipt of electronic record by the addressee. Therefore, it requires
the acknowledgement of the receipt of electronic record from the addressee.

2. Acceptance of an electronic offer- The originator send his offer or proposal to the
addressee through the electronic modes, the addressee if accepting it may transmit his
acceptance through any electronic modes or by clicking on button ‘I agree’ or ‘I accept’
or ‘allow’ etc.

3. Acknowledgement of receipt or communication of acceptance- Section 12 of the IT

Act 2000 deals with the acknowledgement of the receipt. As per this section, there is no
agreement about the mode of acknowledgement sent by the addressee between both the
parties, the addressee may acknowledge the receipt of electronic records by any
communication modes to know the originator as to the receipt of it by the addressee.

Further, it provides that an electronic record shall not be binding until an acknowledgement
of receipt of electronic record is received from the addressee.

If the addressee failed to acknowledge the receipt within a reasonable time, the originator
may give a notice to addressee that, he has not received an acknowledgement and again
provides reasonable time for receipt of the acknowledgement. Even after that, the addressee
failed to send the acknowledgement then the originator is entitled to deny the sending of

12
Refer Section 2(1) (za) of IT Act 2000.
13
Refer Section 2(1) (b) of IT Act 2000.

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electronic record by him. Therefore, there is no enforceable electronic contract. In the case of
Bhagavandas Kedia vs. Girdharilal,14 the Supreme Court of India on the basis of judgement
in Entores vs. Miles Far East Corporation15, 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 Alloys Ltd.,16 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.

Other essentials like free consent of the parties, competent to contract, lawful considerations
and lawful object of the Indian Contract Act discussed later in this paper in legal validity of
e-contract.

Although the E-Contract is effectively addresses under the legal system in India, some issues
like validity of E-Contract and jurisdiction of court for E-contract has to be discussed here.

IV. LEGAL VALIDITY OF E- CONTRACT

To enforce any contract it must be valid i.e. legally binding or accepted under law. The
provisions of the Indian Contract Act, 1872 are generally applicable to validate the E-
contracts similar to the general contracts. An E-contract have to satisfy all the essentials of a
valid contracts as specified under the Section 10 of The Indian Contract Act, 1872.

In addition to it, E-contract is validated and enforceable under the Section 10-A of The
Information Technology Act, 2000 and The Indian Evidence Act, 1872.

Essentials of Valid E-contract

To validate an E-contract it is precondition to satisfy the provision of the Sec. 10 17 of the

Indian Contract Act, 1872(ICA) as follows-

1. Free consent,

2. Competent to contract,

3. Lawful consideration,

4. Lawful object,

5. Not expressly declared to be void.

14
Bhagavandas Kedia vs. Girdharilal, AIR 1966 SC 543: 1966 (1) SCR 666.
15
Refer Entores vs. Miles Far East Corporation, 1955 (2) QB 327.
16
Quadricon Pvt. Ltd. vs. Bajarang Alloys Ltd, AIR 2008 Bom 88.
17
Refer Sec10 of The Indian Contract Act, 1872 (Bare Act).

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1. Free consent18: - The consent to be free must not cause by coercion, undue
influence, fraud, misrepresentation, or mistake. In E-contract, face to face contact is
not possible so contract is made by just clicking the terms and agreements in such
contracts.

2. Competent to contract:-

Any person is competent to contract19 if he is a major, of sound mind and not disqualified by
law in force to contract. In E-contract, the verification of the competence of the contracting
parties is very difficult. For example, minor may enter into the contract by
misrepresentation. So, the online originators should take precautions by inserting the
condition as to the capacity in the term of the offer. Such terms must be confirmed first by
the addressee to be true and then offer can be accepted.

3. Lawful consideration:-

Consideration means something in return. The Indian Contract Act, provides that “an
agreement without consideration is void.”20

4. Lawful object:-

Object of the contract must not be fraudulent, immoral, or opposed to public policy21 etc.

5. Not expressly declared to be void:-

An agreement must not have been declared void by any law in force in India.

This shows that, E-contracts are also valid like traditional contracts if it follows the above
essentials.

The provisions of The Information Technology Act, 2000 (IT Act) gives statutory
recognition to E-contracts under the Sec. 10-A. This section22 provides the legal binding of
E-contract. It stated that the communication, acceptance and revocation of proposals in an
electronic form or by electronic records are enforceable. This section is based on the Article
11(Formation and validity of contracts) of the UNCITRAL Model Law of E-Commerce,
1996.

Electronic Signature

A digital signature is a mathematical technique to validate the authenticity of message,

18
Refer Sec. 14 of The Indian Contract Act, 1872 (Bare Act).
19
Refer Sec. 11 of The Indian Contract Act, 1872 (Bare Act).
20
Refer Sec.25 of The Indian Contract Act, 1872 (Bare Act).
21
Refer Sec. 23 of The Indian Contract Act, 1872 (Bare Act).
22
Refer Sec. 10-A inserted by the Information Technology (Amendment) Act, 2008(Bare Act).

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software or electronic documents. An electronic contract can be created by digital signatures

is recognized by the laws in India. In E-contract, it is imperative to know that the
authenticity of such contract, which is proved by ‘electronic signature’23recognized under IT
(Amendment) Act, 2008.

In J.Pereira Fernandes SA vs. Mehata,24the defendant a Director of the company sent an

unsigned E-mail to the claimant to stop the process of company. In this case the Court of
Chancery held that offer sent through an unsigned E-mail is not sufficient.

That means to authenticate any E-contracts, it is necessary to have an electronic signature of

the originator and addressee. The IT Act provides legal recognition to electronic signature
under the Sec.5 of the Act. Wherein it is provided that any matter or document shall be
authenticated by affixing the handwritten signature or any mark on it is recognised as an
electronic signature.

An E-contract subsequent to its execution is recorded with the executing parties in electronic
form, i.e. in electronic record. The IT Act define the term “electronic record” under sec.2(t)
as “data, record or data generated, image or sound stored, received or sent in an electronic
form or micro film or computer generated micro fiche”. The IT Act also provides an
authentication and legal recognition of electronic records under the Sec.3 and 4 of this Act.

The Indian Evidence Act, 1872 has provide legal recognition to the E-contract. Section 3 of
this Act provides that the term “electronic signature”, “electronic signature certificate”,
“electronic record”, “secure electronic record”, “secure electronic signature” shall have
the same meaning as provided under the IT Act respectively. Section 3 also define the term
“Evidence”25 that “all documents including electronic records produced for the inspection
of the court are called as documentary evidence.”

The Indian Evidence Act, provides admissibility of electronic record under section 65-B,
any information contained in an electronic record, if printed or stored in CD is admissible
in the court as evidence without the further proof or production of original in any
proceedings.

In Anvar P.V. vs. P.K. Basheer & Ors.26 the nature and manner of an admission of electronic
records is under consideration before the Supreme Court of India. The Supreme Court held
that an electronic record by way of secondary evidence shall not be admissible as evidence

23
Refer Sec.2 (ta) and 3- A inserted by the Information Technology (Amendment) Act, 2008(Bare Act).
24
J. Pereira Fernandes SA vs. Mehata, (2006) 2AB ER 891 (Ch D).
25
Substituted by Act 21 of 2000 and sch. II, for “all documents produced for the inspection of the court”.
26
Anvar P.V. vs. P.K. Basheer & Ors, (2014) 10 SCC 473.

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unless the requirements of Section 65-B are satisfied.

Under Section 85-A of Indian Evidence Act, the court presume that every electronic
agreement are concluded by affixing the electronic signature of the parties. Section 85-B of
this Act, stated that court shall presume that “the secure electronic record has not been
altered since the specific point of time to which the secure status relates”; and also presume
that “the secure digital signature is affixed by subscriber with the intention of signing or
approving the electronic record.”

Hotmail Corporation vs. Van $ Money Pie Inc.27, this is the first case where U.S. District
Court, California decided the validity of a Click-wrap contract’s term of service through e-
mail agreement.

In Rudder v. Microsoft Corporation28Ontario Superior Court of Justice, Canada, the issue

was discussed about a clause which binds an individual to be upheld even if that clause is
not seen and whether the Click-wrap licenses are valid or not. In this case, Rudder argued
that the particular clause was not valid as it was not adequately brought to the attention of
the user. The provision was important that it required special notice. The Court held that the
Clause was enforceable and Click-wrap agreements “afforded the sanctity that must be
given to any agreement in writing.”

The validity of E-contract is also recognized by the Indian courts in various cases.

In case of Trimex International FZE Ltd., Dubai vs. Vedanta Aluminium Ltd. 29 the Supreme
Court of India held that “the contract between the parties was unconditionally accepted
through e-mails was a valid contract which satisfied the requirements of the ICA.”

Hence, the E-contract is valid and enforceable according to the provisions given under the
Indian Contract Act; The Information Technology Act and The Indian Evidence Act like the
traditional contracts.

V. JURISDICTION OF THE COURTS UNDER E-CONTRACT

Jurisdiction is an extent of the power of the court to hear a case i.e. to take cognizance of the
case and to make legal decisions and judgements. It is the legal authority of the court to
resolve the dispute.

E-contract involves instant communication of offer and acceptance. Wherein the contract is
complete at the end of originator where acceptance is received.

27
Hotmail Corporation vs. Van $ Money Pie Inc., 47 U.S.P.Q. 2d 1020, 1998 WL 388389.
28
Rudder v. Microsoft Corporation, (1999), 2 CPR (4th) 474.
29
Trimex International FZE Ltd., Dubai vs. Vedanta Aluminium Ltd, 2010 (1) SCALE 574.

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The Supreme Court of India in case of Bhagwandas Goverdhandas Kedia vs. Girdhari Lal
Parshottamdas & Co30 held that “at the place of proposer where the acceptance is received
shall have the jurisdiction for enforcement of contracts entered into by means of computer
internet.”

In India, the Code of Civil Procedure, 1908 provides the manner of determining the
jurisdiction of Civil Courts, which is based on the place of residence and the place where the
cause of action arises. Generally, the contracts insert a specific clause to determine the
territorial jurisdiction to resolve the dispute arising under such contracts.

An E-contract crosses the jurisdictional boundaries as it can be created from any place in the
globe. This raises the question of jurisdiction of the court in case of any dispute between the
parties to E-contracts.

If there is any dispute among the parties belong to the same jurisdiction related to E-contract,
then such dispute can be resolved similar to the traditional contract disputes. However, the
challenges would arises when the parties to E-contract are belong to the different countries.
Jurisdictional problem in E-contract has been resolved under IT Act in India. Specifically
Section 13 of the IT Act deals with the time and place of despatch and receipt of an electronic
record and electronic contracts.

Section 13: Time and place of despatch and receipt of electronic record

This section stated that “the despatch of an electronic record occurs when it enters a
computer resource outside the control of the originator.” It provided the time of despatch of
the digital record.

The despatch means electronic transmission of the electronic record to the addressee. Here,
‘outside the control of the originator’ means he cannot recall it back and make any changes in
it specifically when it enter into e-mail server of any parties. The electronic record is
considered to be despatched when it communicate to the proposed addressee.

Sub-section 2 of the Section 13, determined the time of receipt of an electronic record. The
receipt occurs at the time when the electronic record enters the designated computer resource
if the addressee has designated it. If the addressee has not designated a computer resource
then the receipt occurs when the electronic records enters the computer resource of the
addressee.

Sub-section 3 of the above Section stated that, the place of despatched and received of an
30
Bhagwandas Goverdhandas Kedia vs. Girdhari Lal Parshottamdas & Co., AIR 1966 SC 543 : 1966 (1) SCR
666.

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electronic record of both the parties i.e. the originator and the addressee. An electronic record
is despatched from the place where the originator has his place of business and is received at
the place where the addressee has his place of business.

According to the Sub-section 4, the location of computer resource is not so important in

determining the time and place of despatched and the receipt of records between both the
parties.

As per Sub-section 5,

“if the originator or the addressee has more than one place of business, the principal
place of business, shall be the place of business;

If both the parties does not have a place of business, his usual place of residence shall be
deemed to be the place of business;

Usual place of business for corporate is the place where it is registered.”

Thus, it emphasis on principal place of business and usual place of residence to determine the
time and place of despatch and receipt of electronic record.

In case of PR Transport Agency vs. Union of India31, the above provision applied. In this
case, the Allahabad High Court had to decide the question of jurisdiction. The respondent had
sent the letter of acceptance by an e-mail to the petitioner’s e-mail address. After that, the
respondent sent another e-mail cancelling 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 on the basis of cause of
action had not arises 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, on the basis of 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 principal place of business of the originator and the addressee
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.

31
PR Transport Agency vs. Union of India, AIR 2006 All 23: 2006 (1) AWC 504.

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VI. CONCLUSION
In the recent era, the E-commerce grow exponentially so the use of E-contract increasing day
by day. Online businesses spread across the global markets and reach to the millions of
consumers. Eventually, E-contract becomes essential part to govern under statutory law to
avoid any uncertain disputes in online transactions. The E-contract in India govern under
many legislations to validate it. Indian Courts also upheld the validity and passed the
judgements in the cases related to jurisdiction of E-contract, it becomes helpful to solve the
disputes related to these issues. With the advancements in technologies, the Indian Parliament
enacts law like IT Act to accustom with modern global trade transactions. 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.

*****

© 2020. International Journal of Law Management & Humanities [ISSN 2581-5369]