E-Contracts - Legal Validity And Jurisdiction

Internet has become an integral part of our life to connect with friends or family, to pay our
bills, to book an air ticket, movie ticket or to book a hotel room. Information Technology has
made us a large global community and the advent of the internet has given business, the
chance to go out of its tradition form to electronic platform. This whole transformation in
commercial world evolved the concept of E-commerce, where commercial activities are
carried over the internet. Like the usual commercial transaction, e-commerce also includes
the formation of contracts over the internet which is known as ‘E-Contract’. E-contract forms
part and parcel of e-commerce.

E-Contract:- In simple words, e-contract means an agreement which is entered on internet

by competent parties, with free consent and lawful consideration, without any malafide
interest, to create a legal relationship between the parties. Like an ordinary paper contract, an
electronic contract or e-contract is also governed by the codified provisions of Indian
Contract Act, 1872.

Therefore, an e-contract also cannot be validly executed unless it satisfies all the essentials of
a valid contract, such as:
(a) Offer and Acceptance;
(b) Lawful consideration;
(c) Lawful object;
(d) Free consent;
(e) Parties to be competent to contract;
(f) Intention of parties to create legal relationship;
(g) Certainty and possibility of performance;
(h) Not be expressly declared to be void; and
(j) Compliance with formalities under different laws governing the agreement.

E-contracts and I.T. Act:- The Information Technology Act, 2000 gave e-contracts/records
statutory recognition. Section 11 of Information technology Act, 2000 states: “An electronic
record shall be attributed to the originator—
(a) if it was sent by the originator himself;
(b) by a person who had the authority to act on behalf of the originator in respect of that
electronic record; or
(c) by an information system programmed by or on behalf of the originator to operate
automatically.

Section 12 of the I.T. Act, 2000, deals with ‘Acknowledgement of receipt.’ Section 13
provides provisions for “Time and place of despatch and receipt of electronic record.” The IT Act
also recognizes "digital signatures" or "electronic signatures" and validation of the
authentication of electronic records by using such digital/electronic signatures. The contents

1|Page
of electronic records can also be proved in evidence by the parties in accordance with the
provisions of the Indian Evidence Act, 1872.

Jurisdiction of Courts under E-Contracts:- Now, the question arises in case of any dispute
arising out of e-contract, which Court would have territorial jurisdiction to try the dispute?
The Code of Civil Procedure, 1908 prescribes the manner of determining the jurisdiction of
civil courts in India, based on the following two fundamental principles:
(i) the place of residence of the defendant; and
(ii) the place where the cause of action arises.

E-contracts are not physically signed or executed and are executed in a virtual
space, therefore imposing the traditional principles of jurisdiction can be challenging.
However, Section 13 of the IT Act governs the provisions relating to time and place of
dispatch and receipt of an electronic record, and addresses the issue of deemed jurisdiction in
electronic contracts, as under:
(1) "...Save as otherwise agreed to between the originator and the addressee, the despatch
of an electronic record occurs when it enters a computer resource outside the control of the
originator.
(2) Save as otherwise agreed between the originator and the addressee, the time of receipt
of an electronic record shall be determined as follows, namely:
(a) if the addressee has designated a computer resource for the purpose of receiving
electronic records,
(i) receipt occurs at the time when the electronic record enters the designated computer
resource; or
(ii) if the electronic record is sent to a computer resource of the addressee that is not the
designated computer resource, receipt occurs at the time when the electronic record is
retrieved by the addressee;
(b) if the addressee has not designated a computer resource along with specified timings, if
any, receipt occurs when the electronic record enters the computer resource of the addressee.
(3) Save as otherwise agreed to between the originator and the addressee, an electronic
record is deemed to be dispatched at the place where the originator has his place of business,
and is deemed to be received at the place where the addressee has his place of business.
(4) The provisions of subsection (2) shall apply notwithstanding that the place where the
computer resource is located may be different from the place where the electronic record is
deemed to have been received under subsection (3).
(5) For the purposes of this section:
(a) if the originator or the addressee has more than one place of business, the principal
place of business, shall be the place of business;
(b) if the originator or the addressee does not have a place of business, his usual place of
residence shall be deemed to be the place of business;
(c) "usual place of residence", in relation to a body corporate, means the place where it is
registered."
Therefore, the place of contract in an e-contract for the purposes of determining
jurisdiction (i.e., the place where the cause of action arose) would be deemed to be

2|Page
where “the originator has his place of business and where the addressee has his place of
business” as held by the Hon’ble Court in P.R. Transport Agency vs. Union of India &
others. However, Section 13 of the IT Act is subject to the mutual agreement of the
contracting parties with respect to the agreed place of contract, but it is recommended that all
parties in their electronic contracts provide for a specific clause on jurisdiction.

While, the IT Act and judicial interpretations related to contracts in general, have
to a certain extent clarified the jurisdictional aspect of e-contracts but the absence of any
specific geographical boundaries the determination of territorial jurisdiction for e-contracts
becomes more difficult and which led the process of execution and implementation of such
contracts more complicated.

References:
1. Rastogi Sachin, Insights Into E-Contracts In India, 1st Edition, 2013.
2. Information Technology Act, 2000.
3. P.R. Transport Agency vs. Union of India & others, AIR 2006, All 23.

3|Page