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DR. RAM MANOHAR LOHIYA

NATIONAL LAW UNIVERSITY

2017-18

Drafting of Pleading and Conveyancing

Final Draft
ONLINE AGREEMENTS

SUBMITTED TO: SUBMITTED BY:

Ms.

(Assistant Proffessor.) Enrol- 15010

Dr. RMLNLU, Lucknow Section - B

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ACKNOWLEDGMENT

I would really like to thank Ms. Shakuntla Sangam(Asst. Professor law, RMLNLU) for
allowing me to make a project on this topic. She also guided me throughout the process of
the making of the draft.

I would also like to thank God for giving me strength to complete my final draft. I
would also like to thank my parents for encouraging me to work on the topic. Last but
not the least I would like to thank my friends who helped me to find more on the topic
and prepare a research paper of my best efforts.
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TABLE OF CONTENTS

ACKNOWLEDGMENT...............................................................................................................2

TABLE OF CONTENTS...............................................................................................................3

INTRODUCTION..........................................................................................................................4

Definition:....................................................................................................................................5
Shrink Wrap Contracts.................................................................................................................5
(2) Cyber contracts:......................................................................................................................6
3) Click Wrap Agreements...........................................................................................................7

LEGAL ISSUES.............................................................................................................................7

E-contracts:...................................................................................................................................7
Stamping of contracts...................................................................................................................8
Data Protection:............................................................................................................................9

CONCLUSION.............................................................................................................................11
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INTRODUCTION

An Online contract is a contract modelled, executed and enacted by a software system. Computer
programs are used to automate business processes that govern E-Contracts. It aims at:1

 To create a secured atmosphere of transacting online with alternative mode to paper and
writing. To create an electronic documentation system which will safeguard the
contracting parties on par with the traditional mode of contracts?

 To create statutory status monitoring/verifying authorities for such electronic

transactions.

 To check frauds, intentional and unintentional transactions to promote and build

confidence in genuine online transactions.

 To create necessary legal structure to oversee such transactions to establish standard rules
and regulations for smooth functioning of online transaction.

 To make Digital Signature legally valid and incorporating the same with the existing legal
regime of contracts, sale of goods, evidence and consumer acts.

Definition:
The UNCITRAL Model Law on Electronic Commerce 2 instead of defining an EContract, it
,merely states 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.3

A transaction formed by electronic messages in which the messages of one or both parties will
not be reviewed by an individual as a routine step in forming of the contract.

The Information Technology Act, 2000, defines ‘data’ as a representation of information,

knowledge, facts, concepts or instructions which are prepared or have been prepared in a
1
Insights to e-contracts by Sachin Rastogi
2
Model of 1999
3
Article 11, communication of data messages, UNICITRAL Model Law on E-Commerce, 1996
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formalised manner, and is intended to be processed, is being processed or has been processed in a
computer system or a computer network, and may on any form (including computer printouts,
magnetic or optical storage media, punched cards, punched tapes) or stored internally in the
memory of the computer.4

According to UNCITRAL Model Law, ‘data messages’ means ‘ information generated, sent,
received or stored by electronic, optical or similar means including, but not limited to Electronic
Data Interchange(EDI), electronic mail, telegram, telex or telecopy.34

Shrink Wrap Contracts

'Shrink Wrap contract' refers to license agreements or other terms and conditions of a contractual
nature. Such terms or license agreements can only be read and accepted by the customer after
opening the product. In this the people agree to the terms by using the software which they have
already purchased. When software is licensed, it is packed in such a way that a note is attached at
the top of the packaging which contains the terms and conditions for the use of such software.
Once the package is opened by the user, the user is deemed to have read such conditions and will
be bound by them.5

4
S.2(o) of Information Technology Act, 2000
5
Ragvendra S. Srivastava- Online contracts
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The term Shrink wrap describes the plastic wrapping which is used to cover software boxes but
that does not mean that such contracts are limited to software industry only. The license is
contained inside a plastic shrink wrapped box containing the software. The idea behind this is
that by breaking the seal i.e. pulling off the plastic wrap, the user agrees to the terms of the
license. Thus, a Shrink Wrap license can be defined as an unsigned agreement between the
purchaser of a mass market computer software program and the computer software company that
developed the concerned software. This license purports to define the terms of the transaction as
well as placing contractual conditions on the purchaser's use of the software.

(2) Cyber contracts:

A cyber contract is “a contract created wholly or in part through communication over computer
networks.”43 It can be created entirely by e-mails where an offer or acceptance is evident or they
can be made by a combination of electronic communications, paper documents, faxes and oral
discussions.

3) Click Wrap Agreements

The third kind of cyber contract is the Click Wrap Agreement. In an online licensing of a
software where a particular software is downloaded from a website, the concept of a "Shrink
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wrap" license will not apply as there is no physical medium through which the software is
delivered to the user. In such an event the problem of making the terms and conditions of use
binding on the user poses a problem. 6 This problem is however solved with the advent of "Click
Wrap" agreements. Click-wrap is the electronic equivalent to the shrink-wrap method and allows
users to read the terms of the agreement before accepting them. Instead of tearing the shrink-
wrap, the enforceability of click-wrap is through the simple act of clicking the "accept" button,
without any need for a signature and without an opportunity to change or amend the conditions.
A "click wrap" agreement is also referred to as a "click through" agreement or a "click wrap
license". It is mostly found over the Internet, either as a part of installation process of various
software packages or in other circumstances where agreement is sought using electronic media.
A "click-wrap agreement" sets forth the rights and obligations between parties. The term "click-
wrap" is derived from the fact that such online agreements often require clicking with a mouse on
an on-screen icon or button to signal a party's acceptance of the contract

LEGAL ISSUES

E-contracts:
 Electronic contracts are governed by the basic principles provided in the Indian Contract Act,
1872 ("ICA"), which mandates that a valid contract should have been entered with a free consent
and for a lawful consideration between two adults. Section 10A of the Information Technology
Act, 2000 ("IT Act") provides validity to e-contracts. So, both ICA and IT Act needs to be read
in conjunction to understand and provide legal validity to e-contracts. Further, section 3 of the
Evidence Act provides that the evidence may be in electronic form. The Supreme Court
in Trimex International FZE Ltd. Dubai v. Vedanta Aluminum Ltd 7has held that e-mails
exchanges between parties regarding mutual obligations constitute a contract.

In an online environment, the possibility of minors entering into contracts increases, more so

with the increasing usage of online medium among teenagers (read minors here) and their
preference to shop online or purchase online goods/services. It becomes crucial for an online
business portal to keep such possibility in consideration and qualify its website or form stating
that the individual with whom it is trading or entering into the contract is a major.
6
Supra, fn 49
 Please see http://psalegal.com/upload/publication/assocFile/Dispute-Resolution-Bulletin-Issue-
7

VI06072010011120PM.pdf for details.
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Stamping of contracts
Stamping of contract is yet another issue. An instrument that is not appropriately stamped may
not beadmissible as evidence unless the necessary stamp duty along with the penalty has been
paid. But payment of stamp duty is applicable in case of physical documents and is not feasible
in cases of e-contracts. However, as the payment of stamp duty has gone online and e-stamp
papers are available, it can become a possibility later that stamp duty might be asked on e-
contracts as well.

The other crucial issue is the consent and the way offers are accepted in an online environment.
In a click wrap and shrink wrap contract, the customers do not have any opportunity to negotiate
the terms and conditions and they simply have to accept the contract before commencing to
purchase. Section 16(3) of the ICA provides that where a person who is in a position to dominate
the will of another, enters into a contract with him, and the transaction appears, on the face of it
or on evidence adduced, to be unconscionable, the burden of proving that such contract was not
induced by undue influence shall lie upon the person in a position to dominate the will of the
other. So, in cases of dispute over e-contracts the entity carrying out the e-commerce will have
the onus to establish that there was no undue influence. Further, section 23 of the ICA provides
that the consideration or object of any agreement is unlawful when it is forbidden by law, or is of
such a nature that if permitted, it would defeat the provisions of any law; or is fraudulent, or
involves or implies injury to the person or property of another, or the Court regards it as immoral
or opposed to public policy.

Data Protection: 
Security of the information provided during the online transaction is a major concern. Under
section 43A of the IT Act the "Reasonable practices and procedures and sensitive personal data
or information Rules, 2011" have been proposed, which provide a framework for the protection
of data in India. Data can be personal, which has been defined as "any information that relates to
a natural person, which, either directly or indirectly, in combination with other information
available or likely to be available with a body corporate, is capable of identifying such person."

Apart from the issues detailed above there is the problem of minors entering into the click wrap
agreements online. Whilst a product supplier/service provider requests the user to confirm their
age or status before the execution of a contract, the veracity of such statement cannot be
ascertained. This problem essentially takes birth from the fact that the parties online are remotely
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situated and cannot see or verify the details of the other physically, which has often led to
another problem – identity theft. It is very easy to hack or create an account in the name of any
third party and enter into transactions. These issues need to be tackled by setting up stronger
vigilance laws.

Another question that bares its fangs with respect to e-contracts is that of jurisdiction of court.
How is it to be determined where exactly a cause of action has arisen when everything floats in
the virtual space?

In India, the issue of jurisdiction in ecommerce disputes has received some direction recently.
The Delhi High Court has in the matter of World Wrestling Entertainment, Inc.
v. Reshma Collection,8 held that the principle governing the determination of jurisdiction in case
of contracts concluded over telephone would apply with equal vigor to contracts executed over
the Internet also. Relying on the tests propounded by the Supreme Court in Bhagwan
Goverdhandas Kedia v. Girdharilal Parshottamdas & Co.,9 the Division Bench stated a website
which sells various goods and services provides not an offer but an invitation to an offer to its
customer, just as a menu in a restaurant. The invitation, if taken up by a customer in a particular
State in India (for sake of ease of reference hereinafter referred to as "Customers' State"),
becomes an offer made by the customer at such Customers' State for purchasing the goods
"advertised" on the website. When, through the mode of the software and the browser, the
transaction is confirmed and payment is made to the website operator, the operator of the website
accepts the offer of the customer at such Customers' State. Since the transaction between the two
takes place instantaneously, the acceptance by the operator of the website is instantaneously
communicated to its customer through the Internet at the Customers' State. Therefore, in such a
case, part of the cause of action would arise at the Customers' State also.

JURISDICTIONAL ISSUES:
The effectiveness of a judicial system rests on bedrock of regulations -regulations which define
every aspect of a system's functioning - and principally its jurisdiction. A court must have
jurisdiction, venue and appropriate service of process in order to hear a case and render an
effective judgment. Jurisdiction is a legal term describing which law is in effect at a given period
of time and which court's decision will be binding. Jurisdiction is the authority by which courts

8
2014 (60) PTC 452 (Del)
9
AIR 1966 SC 543. Also see Banyan Tree Holding Private Limited v. A. Murali Krishna Reddy, 2010 (42) PTC 361
(Del).
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take cognizance of and decide cases10 .

Jurisdiction is the power of the court tohear a case and resolve a dispute involving person,
property and subject matter 11 . Without jurisdiction a court's judgment is ineffective and
impotent. The word jurisdiction is of large and comprehensive import, and embraces every kind
of judicial action. Such jurisdiction is essentially of two types, namely subject matter jurisdiction
and personal jurisdiction, and these two must be conjunctively satisfied for a judgment to take
effect. Subject matter jurisdiction means the power of a particular court to hear the type of case
that is then before it. Personal jurisdiction means the power of the court to render a judgment
against a party to an action or a proceeding12 .

It is the presence of jurisdiction that ensures the power of enforcement to a court-and in the
absence of such power the verdict of the court is to say the least, of little or no use. Moreover,
only generally accepted principles of jurisdiction would ensure that courts abroad also enforce
the orders of other judicial bodies.

One of the greatest legal difficulties presented by e-commerce arises from one of the greatest
advantages of the internet-that it crosses national and jurisdictional boundaries. This immediately
raises questions relating to the area of law described by lawyers as Private International Law or
alternatively Conflict of Laws. In particular, the two immediate questions in this context are:
 which law will apply to any contract;
 (b) would the Indian courts have jurisdiction to entertain an action based upon such a
contract.

In the offline world, disputes are largely resolved through the traditional process of court
litigation which is principally structured on a territorial basis, i.e. each country has its own laws
and courts, which decide disputes falling under their jurisdiction, mostly on the basis of the
application of local laws. As long as the parties to a dispute arising on the internet belong to the
same jurisdiction, there is no problem, as the dispute in such a case would be resolved in the
same manner as any other offline dispute. For example, XYZ enterprises have their web site
through which they are selling goods manufactured by them. XYZ enterprises are based in Delhi
10
Raman Mittal, Dispute Resolution in Cyber Space; Determining jurisdictional and applicable law, in S.K.Verma
and Raman Mittal
11
Supra at 40
12
ibid
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and their customers are also in Delhi. In case any dispute arises between XYZ enterprises and
their customer, it would be resolved according to the laws applicable in Delhi. But the problem
would arise when their customers are from different countries and they are transacting with them
through their web site.

This dispute resolution mechanism, based on territoriality, faces a number of challenges when
applied to disputes arising on the Internet. The internet is by definition international and can be
accessed from almost any place on earth hence multi-jurisdictional.

On the internet digitised data may travel through various countries and different jurisdictions in
order to reach its destination. For example, a dispute may arise between two parties who entered
into contract on the internet and who belong to different countries. now, question is the courts of
which country should have jurisdiction to determine this dispute? The laws of which country
should be relied upon to determine the dispute? What laws should be used to decide a particular
dispute? These are perplexing questions currently being faced by courts worldwide because of
the transnational nature of the internet by which people can surpass borders readily and rapidly.
While most laws have territorial nexus, the internet defies the notion of territoriality.

EVIDENTIARY VALUE OF E-CONTRACTS:

It is pertinent to contextualize at this juncture that evidence recorded or stored by availing the
electronic gadgets is given the evidentiary status. For instance: the voice recorded with the help
of a tape recorder. Now -a-days, the digital voice recorder, digital cameras, digital video
cameras, video conferencing are adding a new dimension to the evidentiary regime. Justice
Gururajan, the Karnataka High Court judge has held in a civil suit that video conferencing
evidence is valid. The emergence of information and communication witnessed sea change by
elevating the status of the evidence recorded, generated or stored electronically from the
secondary to primary evidential status.

The shift in the paradigm owes to the efforts of the working group of the UNCITRAL Model law
on electronic commerce and assigning of the legal recognition to e-record or data message. The
evidentiary value of e-contracts can be well understood in the light of the following sections of
Indian Evidence Act. Sections 85A, 85B, 88A, 90A and 85C deal with the presumptions as to
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electronic records, whereas, Section 65B relates to the admissibility of electronic record224.

Section 88A and Section 90A of Indian Evidence Act.

Section 85b: Section 85B provides that the court shall presume the fact that the record in
question has not been put to any kind of alteration, in case contrary has not been proved. The
secure status of the record may be demanded till a specific time. The digital signature should also
be presumed to have been affixed with an intention of signing and approving the electronic
record. Further it has been provided that the section should not be misread so as to create any
presumption relating to the integrity or authenticity of the electronic record or digital signature in
question.

Section 88a: “The court may presume that an electronic message forwarded by the originator
through an electronic mail server to the addressee to whom the message purports to be addressed
corresponds with the message as fed into his computer for transmission, but the court shall not
make any presumption as to the person by whom such message was sent”. This section is self-
explanatory as it purports to follow the basic rules of a valid hard-copy agreement. The words
“may presume” authorize the court to use its discretionary power as regards presumption.
Sections 85A and 85B contained the words “shall presume” which expressly excluded this
discretionary power of the court.

Section 90a: In case of an electronic record being five years old, if proved to be in proper
custody, the court may presume that the digital signature was affixed so as to authenticate the
validity of that agreement. The digital signature can also be affixed by any person authorized to
do so. For the purpose of this section, electronic records are said to be in proper custody if they
are in the custody of the person with whom they naturally be. An exception can be effected in
case circumstances of a particular case render its origin probable.
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CONCLUSION

Online agreements in India has definitely came a long way from the days of bazee.com which
underway as the first large online retail website. At present, with the increase in number of
internet user, e-contract is organised to grow further. The growing trend of internet banking and
credit or debit cards along with the rise in the number of educated and computer literate persons
will further support this growth. The need of the hour is law which covers all the aspects of e-
contract extending from payment mechanism and maintaining minimum standards in the
delivery of services. Such a legislation will help to restraint the growth of websites which rise
within a few days and then stop functioning in the absence of suitable funds for sustenance. As
all business through e-contract sites is ended through the internet without any direct physical
interfaces, the main basis connections is the trust of the customers which should be engaged at
any cost. A law in this field will detect the criminals who have used the internet as a source for
making quick money. This will also act a defence for the genuine e-contract websites and help in
further growing of business. There is also a need for the creation of an authority in the consumer
court to look into the grievances arising out of e-contract transactions. Such an authority should
have experts in area such as payment security. This will embolden speedy redressal of disputes
and promote e-contract transactions. E-contract which is a developing segment in the
commercial arenas scheduled to grow and it is the accountability of the prevailing players to
ensure that growth is not hindered by their acts and policies.