Today with the recent advancement in the areas of computer technology, telecommunications

technology, software and information technology have resulted in changing the standard of
living of people in an unimaginable way. The communication is no more restricted due to the
constraints of geography and time. Information is transmitted and received widely and more
rapidly than ever before. And this is where the electronic commerce offers the flexibility to
business environment in terms of place, time, space, distance, and payments.

The advent of new technologies such as the internet and other networks have changed the
business world and provided the trading processes in e-business more efficiency. This
technological Improvement has brought faster means of conducting business transactions,
different from that of paper transactions as the steps that are necessary to conclude and form an
e-contract is different and may be considered more technical than usual traditional contracts. 

India is also witnessing a digital revolution with internet becoming an integral part of its
population and availability of internet in the mobile phones. With the decrease in the prices for
using internet, change in lifestyle in urban areas and the convenience that internet has brought
has supported this revolution1

Today the number of internet users in the world is close to 3 billion 2. Out of this, India has a total
of 259.14 Million internet and broadband subscribers3. This penetration of internet coupled with
the increasing confidence of the internet users to purchase online, has led to an enormous growth
in the e-commerce space, with an increasing number of customers registering on e-commerce
websites and purchasing products through the use of mobile phones4.

With the emergence and steady growth of e–commerce, there is a quick elevation in the use of e-
contracts. But the concept of e-contract is still not unclouded, it faces lot of challenges. The law
of contract in India gives a statutory recognition to the common contractual rule. The Indian
Contract Act, 1872 does not lay down the rights and duties which the law will enforce but it

1
http://www.mondaq.com/india/x/299686/IT+internet/Legal+Issues+In+ECommerce+Think+Before+You+Click
2
Cited from “Internet Usage Statistics - The Internet Big Picture - World Internet Users and Population Stats”
available at http://www.internetworldstats.com/stats.htm (last visited on March 10, 2021)
3
Cited from “The Indian Telecom Services Performance Indicators (April – June 2014)” available at
http://www.trai.gov.in/WriteReadData/PIRReport/ Documents/Indicator%20Reports%20-%20Jun-14.pdf (last
visited on March 10, 2021)
4
http://blogs.wsj.com/indiarealtime/2014/10/15/mobile-shopping-set-to-dominate-indias-e-commerce-market/
(last visited on March 10, 2021)
deals with the limiting principles, subject to which parties may create right and duties for
themselves.

In todays’ world, there is great complexity in the goods and services that consumer acquire in
electronic contracts. The complexity of this problem has been accelerated by the growing
popularity of standard form of contracts. In addition to the complexity of goods and services
today, enormous changes have also occurred in the way consumers acquire these goods and
services. Consumers today are able to purchase goods via e-commerce over the internet.

In such a transaction, consumer has got no opportunity to suspect the genuineness of the person
he/she is dealing with online and this places them at a greater risk of being swindled of their
money by fraudsters. Consumers are often faced with unfair terms in the form of exemption
clauses that attempt to exclude or limit the liability of trader, such as defective product, which
otherwise they would be subject to. In fact, the principle of caveat emptor (let the buyer be
aware) is no longer of reasonable application because most pre-packed products, cannot be
reasonably inspected before purchase.

It is therefore essential that the government has authority, through appropriate legislations to
protect its citizens through from unfair contract terms and other abusive market practices by
manufacturers or retailers that are only interested in reaping large profits even at the expense of
the unsuspecting consumers. Nevertheless, because of the ways in which it differs from
traditional commerce, electronic commerce raises some new and interesting technical and legal
challenges. For recognition of e-contracts following questions are needed to be considered5.

Defining E-Commerce

The term E-Commerce stands for ‘Electronic Commerce’. There is no standard definition for the
term ecommerce as such, it is said to be used in the sense of denoting a mode of conducting
business through electronic means unlike through conventional physical means. Such electronic
means include ‘click & buy’ methods using computers as well as ‘m-commerce’ which make use
of various mobile devices or smart phones6. The concept of E-commerce not only includes
selling and purchasing of goods online but also its delivery, payments, supply chain and service
managements.
5
http://www.legalserviceindia.com/laws/contracts.htm
6
E-Commerce in India, Legal, Tax and Regulatory Analysis, August 2013, Nishith Desai Associates
Electronic commerce covers all business conducted by means of computer networks. In recent
years, advances in telecommunications and computer technologies have made computer
networks a fundamental part of the economic infrastructure. Progressively companies are
facilitating transactions over web. There has been incredible competition to target each and every
computer owner, connected to the Web.

Thus, the business activity conducted through electronic means falls within e-commerce. Though
there is no specific definition provided in any statute, it encompasses all business conducted by
computer networks, be it B2B, B2C, C2C, C2B or B2B2C. The services that are offered does not
begin or end with providing an online platform but involves efficient delivery system, proper
payment facilitation and an effective supply chain and service management. So, the business is
not simple as it may seem and also involves a lot of legal issues7.

What is E-Contract:-

Online contract or an electronic contract is an agreement modelled, signed and executed

electronically, usually over internet. An Online contract is conceptually very similar and is
drafted in the same manner in which a traditional paper-based contract is drafted. In case of an
online contract, the seller who intends to sell their products, present their products, prices and
terms for buying such products to the prospective buyers. In turn, the buyers who are interested
in buying the products either consider or click on the ‘I Agree’ or ‘Click to Agree’ option for
indicating the acceptance of the terms presented by the seller or they can sign electronically.
Electronic signatures can be done in different ways like typing the name of the signer’s in the
specific signature space, copying and pasting the scanned version of the signature or clicking an
option meant for that purpose. Once the terms are accepted and the payment is made, the
transaction can be completed. The communication is basically made between two computers
through servers. The online contract is brought to the scenario to help people in the way of
formulating and implementing policies of commercial contracts within business directed over
internet. Online Contract is modelled for the sale, purchase and supply of products and services
to both consumers and business associates.

Legality of the E-Contract:-

7
http://www.mondaq.com/india/x/299686/IT+internet/Legal+Issues+In+ECommerce+Think+Before+You+Click
In India, till date there are no definite legislations or guidelines protecting the buyers and sellers
of goods and services over the electronic medium 8. However, several laws acting in unification
are trying to regulate the business transactions of E-contract. They are as follows:

 Indian Contract Act,1872

 Consumer Protection Act,1986
 Information Technology Act,2000
 Indian Copyright Act,1957
In India, e-contracts like all other contracts are governed by the basic principles governing
contracts in India, i.e. the Indian Contract Act, 1872 (“Indian Contract Act”) which inter alia
mandate certain pre-requisites for a valid contract such as free consent and lawful consideration.
All other statutes applicable to an electronic contract are to be read in conjunction, and not in
substitution, with the Indian Contract Act.

Some of the important requirements of a valid contract under the Indian Contract Act are as
follows:

i. The contract should be entered into with the free consent of the contracting parties;
ii. There should be lawful consideration for the contract;
iii. The parties should be competent to contract;
iv. The object of the contract should be lawful

What needs to be examined is how these requirements of the Indian Contract Act would be
fulfilled in relation to e-contracts. In this context it is important to note that the Information
Technology Act, 2000 (“IT Act”) provides fortification for the validity of e-contracts. The
Information Technology Act, 2000 provides various procedural, administrative guidelines and
regulates the provisions relating to all kinds of electronic transactions. Amongst other things it
specifically states that a contract shall not be deemed unenforceable, solely on the ground that
electronic form/means were used for communication of proposals, acceptance of proposals,
revocation of proposals or acceptances, as the case may. 

8
Akshat Razdan, The Future of E-Commerce in India, LAW WIRE, available at
http://www.lawinfowire.com/articleinfo/future-ecommerce-india.
The objectives of the Information Technology Act, as outlined in the preamble, are to provide
legal recognition for E-commerce transactions and facilitate Electronic Governance9. The
Information Technology Act 2000 is based on the Model Law on E-Commerce adopted by the
United Nations Commission on International Trade Law (UNCITRAL) 10.The Act aims to
provide legal recognition for the transactions carried out by the means of electronic data
interchange and other means of communications, commonly referred to as “Electronic
Commerce”.

The Act comprises of the three significant aspect of e-commerce:

 Legal recognition of electronic records and communications contractual framework,

evidentiary aspects, digital signatures as the method of authentication, rules for
determining time and place of dispatch and receipt of electronic records.
 Cyber contraventions- civil and criminal violations, penalties, establishment of the
Adjudicating Authority and
 The Cyber Regulatory Appellate Tribunals.

The provisions of The Information Technology Act, 2000 (IT Act) gives statutory recognition to
E-contracts under the Sec. 10-A. This section 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.

"Section 10-A: Validity of contracts formed through electronic means. -

Where in a contract formation, the communication of proposals, the acceptance of

proposals, the revocation of proposals and acceptances, as the case may be, are
expressed in electronic form or by means of an electronic record, such contract shall not
be deemed to be unenforceable solely on the ground that such electronic form or means
was used for that purpose."

9
Preamble of the IT Act.
10
UNCITRAL Model Law, 1996 states that in the context of contract formation, unless otherwise agreed by the
parties, an offer and the acceptance of an offer may be expressed by the means of “data message”. Valid contracts
can therefore, be formed where offer and acceptances is conveyed via the Internet.
The IT Act also recognizes "digital signatures" or "electronic signatures" and validation of the
authentication of electronic records by using such digital/electronic signatures. A digital
signature is a mathematical technique to validate the authenticity of message, 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 signature11’recognized under IT (Amendment) Act, 2008.

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. 12 the Supreme Court of India
held that “the contract between the parties was unconditionally accepted through e-mails and 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 like the traditional contracts.

Jurisdiction of Court in case of E-Contract:-

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. The courts of law primarily have to deal with territorial and pecuniary
jurisdictions. Related to e-commerce dispute, deciding territorial jurisdiction gets more
complicated, mainly because when it comes to the Internet, there are no borders between the
countries.

The Supreme Court of India in case of Bhagwandas Goverdhandas Kedia vs. Girdhari Lal
Parshottamdas & Co13 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, Civil suits have expressly been given power to try the civil suits unless barred as per
the Section 9 of the Civil Procedure Code, 1908. Section 13 of the same act also recognises the
judgments given by the foreign courts having competent jurisdiction and provides for their
enforcement except under few circumstances. 

11
Refer Sec.2 (ta) and 3- A inserted by the Information Technology (Amendment) Act, 2008
12
Trimex International FZE Ltd., Dubai vs. Vedanta Aluminium Ltd, 2010 (1) SCALE 574
13
Bhagwandas Goverdhandas Kedia vs. Girdhari Lal Parshottamdas & Co., AIR 1966 SC 543
As per the Section 20 of the same act, two principles fundamental have been prescribed to
determine the jurisdiction: 

 The place where defendant(s) at a time of commencement of suit resides or

voluntarily carries out its business.
 Where cause of action arises.

In some of the crucial cases, the courts have developed some test to determine the aspects of the
jurisdiction governing the e-contracts.

Operation of Website Test:-

In Casio India Co. Ltd. vs. Ashita Tele Services Pvt. Ltd14., the Delhi High Court ruled that if
the website is accessed from Delhi, it is enough to invoke the territorial jurisdiction of Delhi.

Substantial Connection Test:-

Delhi High Court had made observations on internet jurisdictional issues in the case of
Independent News Service Pvt. Ltd. Vs India Broadcast Live LLC and Ors 15, the courts
considered the substantial connection and the effects test, It was found that the website of the
defendant was not merely passive but was interactive permitting the browsers to not only access
the contents thereof but also to subscribe to the services provided by the owners. Thus the court
stressed on the importance of level of interactivity. Where the target audience and the customers
of the website is located, the court can exercise its jurisdiction irrespective of the location of the
defendant. 

Purposeful Availment Test Applied:-

In Banyan Tree Holding (P) Limited v. A. Murali Krishna Reddy and

Anr.16 Delhi High Court held that merely accessing the website in Delhi won’t
confer the jurisdiction to the court and that it is not merely enough to prove the
interactivity of the website. Instead, it has to be proved the intent of the
website creator was to conclude a commercial transaction with the user and

14
Casio India Co. Ltd. vs. Ashita Tele Services Pvt. Ltd 106 (2003) DLT 554,
15
India TV Independent News Service Pvt. Ltd. v. India Broadcast Live LLC, 2007 35 PTC 177 Delhi.
16
Banyan Tree Holding (P) Limited v. A. Murali Krishna Reddy, 2008 38 PTC 288 Delhi.
such use resulted in injury and harm to the user. Firstly, the plaintiff must show
prima facie that the specific targeting of the forum state by a defendant
resulted in an injury or harm to the plaintiff within forum state to invoke Section
20 (c) of the Code of Civil Procedure. Secondly, it must be proved that the
injurious effects have been felt by the plaintiff in the forum state.

E-commerce websites operating in India are required to follow many laws of India including the
Information Technology Act, 2000. As per the IT Act, 2000 these e-commerce websites
operating in India are Internet intermediaries and they are required to comply with cyber law due
diligence requirements as well17.

Section 1(2) of the IT Act read along with Section 75 of the IT Act provides that “the Act shall
extend to the whole of India and, save as otherwise provided under the Act, it shall apply also to
any or contravention thereunder committed outside India by any person” and

Section 75 of the IT Act provides the provision for the application of the IT Act for any offence
or contravention committed outside India. Sub-Section 1 of Section 75 provides that, “Subject to
the provisions of sub-section (2), the provisions of this Act shall apply also to any offence or
contravention committed outside India by any person irrespective of his nationality“. And

Sub-section 2 of Section 75 provides that, “For the purposes of sub-section (1), this Act shall
apply to an offence or contravention committed outside India by any person if the act or conduct
constituting the offence or contravention involves a computer, computer system or computer
network located in India.”

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

17
The Information Technology (Intermediaries guidelines) Rules 2011, Rule 3
Section 13 of the IT Act deals with the time and place of dispatch and receipt of an electronic
record and electronic contracts.

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

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

The dispatch 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 dispatched 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 dispatched and received of an
electronic record of both the parties i.e. the originator and the addressee. An electronic record is
dispatched 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 dispatched 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 dispatch and
receipt of electronic record.
In the case of PR Transport Agency vs. Union of India 18, wherein the Allahabad High Court had
to decide the question of jurisdiction where the respondent had sent the letter of acceptance by an
e-mail to the petitioner's e-mail address. Subsequently, the respondent sent another e-mail
cancelling the e-auction in favour of the petitioner "due to some technical and unavoidable
reasons". When the petitioner challenged this communication in the Allahabad High Court, the
respondent raised an objection as to the "territorial jurisdiction" of the Court on the ground that
no part of the cause of action had arisen within Uttar Pradesh (UP), and therefore, the Allahabad
High Court (UP) had no jurisdiction to try the dispute. In the case, the principal place of business
of the petitioner was in district Chandauli (UP), and the other place where the petitioner carried
on business was Varansi, which is also in the State of UP. The Court, therefore, on the basis of
section 13(3) of the IT Act, held that the acceptance of the tender by e-mail would be deemed to
have been received by the petitioner at Varanasi/Chandauli, which are the only two places where
the petitioner has his places of business. As both these places fell within the territorial
jurisdiction of the Allahabad High Court, the Court assumed jurisdiction to try the dispute.

Challenges posed by E-Commerce/E-Contracts

The advent of electronic commerce in modern commercial transactions has posed a great challenge on
the Indian laws. E- Commerce allows consumers to purchase goods through transactions that are
agreed, settled and transferred in an open network environment. Electronic commerce brings both
comforts and discomforts to its users. The comforts include on the spot sales and purchase, competitive
costs, convenience, saving of time, etc. The discomforts include frauds and cyber-crimes committed
against e-commerce users. At times there are disagreements and dissatisfactions as well among buyers
and purchasers that cannot be resolved using traditional litigation methods 19. Thus, it can be said that
disputes are inevitable in the course of the life of a business, whether online or offline. As a result, there
are several problems that are of concern to the consumers which needs to be addressed are:

18
PR Transport Agency vs. Union of India AIR 2006 All 23
19
http://odrindia.in/tlceodri/?p=21
Contractual disputes20

Disputes that arise out of some non-fulfillment of any contractual obligation are said to be known as
Contractual Disputes. There are numerous kinds of contractual disputes existing in the corporate arena,
some of which are:

Business-to-business (B2B) disputes

These kinds of disputes usually take place between the enterprise and its suppliers such as non-
performance of contractual obligations, misrepresentations, and complaints from customers regarding
services provided by suppliers.

Business-to-consumer (B2C) disputes

These disputes are common between the enterprise and its customers such as non-payment for goods
or services, non-performance of contractual obligations, poor performance of contract,
misrepresentations, breach of the privacy policy, and breach of security of confidential information. It is
between the enterprise and its customers that lies the greatest possible scope for disputes.

Product returns and refunds

Issue which may arises in electronic contract is the right of the consumers to cancel the product after it
is ordered by a party. Since the customer does not feel and touch the product, and consequently when
the product arrives, the customer might not be satisfied with the product, the appearance of the
product may not be as attractive as it seemed on the screen. This may defraud the consumers and as in
an electronic contract the consumer is not provided with the right to inspect the goods.

In the case of LIC India vs. Consumer Education and Research Centre21, the
Supreme Court had held that “In dotted line contracts there would be no
occasion for a weaker party to bargain as to assume to have equal bargaining
power. He has either to accept or leave the service or goods in terms of the
dotted line contract. His option would be either to accept the unreasonable or
unfair terms or for-go the service forever.”

20
http://cyber.law.harvard.edu/ecommerce/disputes.html
21
 LIC India vs. Consumer Education and Research Centre 1995 AIR 1811
Delivery of faulty goods

The other issue in electronic contract related to the consumer when he receives faulty goods or totally
wrong goods. www.Shopclues.com was served a legal notice for selling fake JBL speakers Premium audio
devices manufacturer Harman International (India) Pvt 22.

Fixation of liability

Another challenge with Electronic Contract is that it is very ambiguous to know as to who will owe the
liability in case of some dispute arises in the manner as for delivery of faulty good, late delivery etc. As
and when the goods services are purchased from websites like Flipkart, Snapdeal, etc and then a dispute
arises, can there be any case filed against them as they are concerned in owning and managing a web
portal that enables those sellers who stock storage devices to sell products through its web portal for a
commission and is not engaged in the purchase or sale of goods and services 23.

As a landmark case of ESSO Petroleum Co. Ltd. v. Mardon 24 brings out, in a business contract; both the
alternatives are of value to the innocent party. In electronic contract, however, the consumer discovers
the misrepresentation only when he receives the goods or services. To set aside the contract, the
consumer will have to establish that it was the misrepresentation which caused him to get in the
contract.

Legal framework addressing the Remedies for E-Commerce/E-Contract:-

The terms and conditions that are framed in the electronic contract are generally arbitrary and the
consumer being a layman is not vigilant enough to pay heed to it and enters into the deal without
seeing its legal perspective which gives the proprietor an undisputed chance to govern the
customer by its own whims and fancies 25. Several laws acting in unification are trying to
regulate the business transactions of E-contract. They are as follows:
 Indian Contract Act,1872
 Consumer Protection Act,2019
 Information Technology Act, 2000
Indian Contract Act, 1872

22
Harman send legal notice to Shopclues.com for selling fake JBL speakers, THE INDIAN EXPRESS available at
http://indianexpress.com/article/technology/technology-others/ harman-sends-legal-notice-to shopclues-com-for-
selling-fake-jbl-speakers/.
23
1 Ashish Ahuja v. Snapdeal, Case No. 17 0f 2014, (Competition Commission of India, May 19,2014).
24
ESSO Petroleum Co. Ltd. v. Mardon, (1976) QB 801, (1976, Court of Appeal).
25
DevadattKamat, Information Technology Act, 2000-A contractual Perspective, THE PRACTICAL LAWYER available
at http://www.ebc-india.com/lawyer/articles/2004v1a2.htm.
Like any other types of business, E-contract business also works on the basis of contracts. It is
therefore, structured by the Indian Contract Act, 1872. Any valid and legal E-contracts can be
designed, completed, and enforced as parties replace paper documents with electronic
parallels. The contracts are move in between the service providers or sellers and buyers.

Like an ordinary paper contract, an electronic contract is also primarily governed by the codified
provisions of Indian Contract Act, 1872 (ICA), as applicable to contracts in general.  Therefore,
an electronic contract also cannot be validly executed unless it satisfies all the essentials of a
valid contract. All other statutes applicable to an electronic contract are to be read in
conjunction, and not in substitution, with the Indian Contract Act.

There is no specific rule in case of breach of online contract but the rules regarding remedies for breach
of contract can be followed as provided in The Indian Contract Act. A valid contract gives rise to co-
relative rights and obligations and they are enforceable in the court of law when infringed on breach of
contract. The Contract Act mainly talks about two remedies for the breach of contract such as Damages
and Quantum Merit. But few other remedies are also available as provided in the Specific Relief Act such
as specific performance of contract and injunction restraining the other party from making a breach of
contract. Sec 73 and Sec 74 of the Indian Contract Act, 1872 deals with the rules regarding the remedy
of damages on breach of contract.

The person whose rights are infringed by the breach of contract may bring an action for damages or
compensation in terms of monetary value for the loss suffered by the party. Sec 73 to 75 provides rules
regarding the assessment of damages based on the famous case Hadley vs. Baxendale. According to
the rules laid down in this case, there can be damages which naturally arose on the usual course of
things from such breach of contract and can be called ordinary damages and secondly, damages for loss
arose from special circumstances i.e. special damages.

The parties to a contract must either perform or offer to perform, their respective promises, unless such
performance is dispensed with or excused under the provisions of the Act, or any other law. Promises
bind the representatives of the promisor in the case of death of such promisor before performance,
unless a contrary intention appears from a contract. In a contract the agreement being enforceable by
law, each party to the contract is legally bound to perform his part of the obligation. Non-performance
of the duty undertaken by a party in a contract amounts to breach of contract, for which he can be
made liable.
The legal remedies for breach of contract are: (a) damages; (b) specific performance of the contract; and
(c) injunction.

Damages:

In practice damages constitute the main remedy. When a contract has been breached, the party who
suffers by such breach is entitled to receive, from the party who has breached the contract,
compensation for any loss or damage caused to him thereby, being loss or damages which naturally
arose in the usual course of things from such breach or which the parties knew, when they made the
contract, to be likely to result from the breach of it. Such compensation is not to be given for any remote
and indirect loss of damage sustained by reason of the breach. A person who rightfully rescinds a
contract is entitled to compensation for any damage, which he has sustained through non-fulfillment of
the contract.

Liquidated damages and penal stipulations

If a sum is named in the contract as the amount to be paid in case of breach of contract, or if the
contract contains any other stipulation by way of penalty, the party complaining of the breach is
entitled, whether or not actual damage of loss is proved to have been caused thereby, to receive, from
the party who has broken the contract, reasonable compensation, not exceeding the amount so named
or the penalty stipulated for. A stipulation for increased interest from the date of default may be
regarded as a stipulation by “way of penalty”. The court is empowered to reduce it to an amount which
is reasonable in the circumstances.

Specific performance

In certain special cases (dealt with in the Specific Relief Act, 1963), the court may direct against the party
in default “specific performance” of the contract, that is to say, the party may be directed to perform
the very obligation which he has undertaken, by the contract. This remedy is discretionary and granted
in exceptional cases. Specific performance means actual execution of the contract as agreed between
the parties. Specific Performance of any contract may, in the discretion of the court be enforced in the
following situations

 When there exists no standard for ascertaining the actual damage caused by the
nonperformance of the act agreed to be done; or
  When the act agreed to be done is such that monetary compensation for its nonperformance
would not afford adequate relief.

Instances where compensation would be deemed adequate relief are:

 Agreement as a consequence of a breach by a landlord for repair of the rented premises;

 Contract for the sale of any goods, for instance machinery or goods.

Information Technology Act, 2000

The Act aims to provide legal recognition for the transactions carried out by the means of electronic
data interchange and other means of communications, commonly referred to as “Electronic
Commerce”, which involve the use of alternatives to paper based methods of the communication and
storage of information, to facilitate electronic filing of document with the government agencies 26. It is
based on the Model Law on E-Commerce adopted by the United Nations Commission on International
Trade Law (UNCITRAL)27.

The Information Technology Act deals with contractual aspects of use of electronic records, such as
attribution, acknowledgement, time and place of dispatch and receipt. As the IT Act is only an enabling
Act, it has to be read in conjunction with the Indian Contracts Act.

The Information Technology Act, 2000 (IT Act, 2000) and Information
Technology (Intermediaries Guidelines) Rules, 2011 (Rules) govern all
Information Technology intermediaries.

The IT Act defines intermediary as “any person who on behalf of another person
receives, stores or transmits that message or provides any service with respect
to that message”. Section 79 makes it very clear that an intermediary and a
“network service provider” are one and the same. Thus, the Statute makes it
clear that Section 79 defenses are applicable to all intermediaries including
those in E-Commerce and this represents the clarity in drafting and explains
legislative intent. Section 79 of the IT Act provides that an intermediary is not

26
Taxman’s IT Act (2000), Information Technology Act 2000, New Delhi: Taxman’s Allied services Ltd.
27
UNCITRAL Model Law, 1996 states that in the context of contract formation, unless otherwise agreed by the
parties, an offer and the acceptance of an offer may be expressed by the means of “data message”. Valid contracts
can therefore, be formed where offer and acceptances is conveyed via the Internet.
liable for any third-party content hosted/made available through such
intermediary when:

i. The intermediary merely provides access to a communication system over which

information made available by third parties is transmitted or temporarily stored or hosted;
or
ii. The intermediary does not at its instance
 Initiate the transmission;
 Determine the receiver of the transmission,
 Choose or alter the information contained in the transmission; and
iii. The intermediary observes due diligence or any guidelines issued by the Central
Government in this regard28.

The IT Act also provides that exemption from liability shall not apply if “upon receiving actual
knowledge, or on being notified by the appropriate Government or its agency that any information, data
or communication link residing in or connected to a computer resource controlled by the intermediary is
being used to commit the unlawful act, the intermediary fails to expeditiously remove or disable access
to that material on that resource without vitiating the evidence in any manner” 29.

The 2011 Intermediary Rules provide for a diligence framework to be followed

by intermediaries in order to avail of the exemption under Section 79. The
intermediary will have to shall strictly follow the provisions of “the Act” or any
other laws for the time being in force.

Consumer Protection ACT, 2019

The Information Technology Act, 2000 is silent on Cyber Consumerism and leaves this entire
area to the Consumer Protection Act. The Consumer Protection Act is a legislation that governs
the relationship between a consumer and a provider of goods and services. The concept of
consumer protection typically implies the liability of the service provider in case there is a
deficiency in the service provided or there is some defect in the goods sold by the seller. The
statute also includes unfair trade practices in its purview.

28
Section 79 (2) of the IT Act.
29
Section 79(3)(b) of the IT Act
The Consumer Protection Act, 2019 received the assent of the President of India and was
published in the official gazette on 9th August 2019. This New Act will replace the old
Consumer Protection Act, 1986. The New Act will come into force on such date as the Central
Government may so notify.
Now, recently, in exercise of the powers conferred by sub-section (3) of section 1 of the New
Act, MINISTRY OF CONSUMER AFFAIRS, FOOD AND PUBLIC DISTRIBUTION
(Department of Consumer Affairs) has issued a Notification No. S.O. 2351(E) dated 15th
July 2020 whereby the Central Government has appointed the 20th day of July, 2020 as the
date on which the certain provisions of the said Act shall come into force.
Bringing e-commerce companies under the ambit of a structured consumer redressal mechanism,
the government on July 20 notified the Consumer Protection Act, 2019, which will be
empowered to conduct investigations into violations of consumer rights. It will also give teeth to
the authorities to punish unfair trade practices and misleading advertisements.

E-commerce platforms will now have to acknowledge the receipt of any consumer complaint
within 48 hours and redress the complaint within a month from the date of receipt.

A significant change that under the earlier Act, complaints could be initiated only in the place
where the transaction took place. But now, a consumer can institute a complaint from where he
resides.

By the New Act the definition of the Consumer has been enlarged and as per new definition, a
Consumer is a person who “buys any goods” and “hires or avails any services” which includes
offline or online transactions through electronic means or by teleshopping or direct selling or
multi-level marketing. [Explanation (b) of Section 2(7) of the New Act].

Along with the above the New Act also provides for the definition of “e-commerce”. As
per Section 2(16) of the New Act, “e-commerce” means buying or selling of goods or services
including digital products over digital or electronic network; Further as per Section 2(17) of the
New Act, “electronic service provider” means a person who provides technologies or processes
to enable a product seller to engage in advertising or selling goods or services to a consumer and
includes any online market place or online auction sites;

All e-commerce entities are required to be incorporated in the form of a company under the
Companies Act, 2013 or a foreign company or an office, branch or agency outside India owned
or controlled by a person resident in India. It may be worthwhile to note that the E-Commerce
Rules also apply to an e-commerce entity which is not established in India, but systematically
offers goods or services to consumers in India, thereby expanding the scope of applicability of
these rules to foreign owned e-commerce platforms.

E-Commerce entities are required to refrain from any unfair trade practice 30 , whether in the
course of business on its platform or otherwise. In this context, unfair trade practice refers to
such trade practice which adopts any unfair method or unfair or deceptive practice for the
purpose of promoting the sale, use or supply of any goods or for the provision of any service.
Such practices may include:

 Manipulating the price of goods or services offered on the e-commerce platform in such a
manner so as to gain unreasonable profit;
 Making arbitrary classification of consumers to offer discounts;
 Publishing misleading representations concerning the characteristics of products;
 Refusing to take back or withdraw defective goods or deficient services and refusing to
refund the consideration; or
 Disclosing to third parties any personal information given in confidence by the consumer
unless such disclosure is made in accordance with the provisions of applicable law

Considering that the definition of ‘unfair trade practices’ includes a host of practices/ actions
pertaining to a buy and sale transaction, e-commerce entities need to be careful about any
statement, information or representation about a product being sold through their platforms.

One of the crucial additions in CPA 2019 is the introduction of the concept of product liability.
‘Product liability’ refers to the responsibility of a ‘product manufacturer’, ‘product service
provider’ or ‘product seller’, of any product or service, to compensate for any harm caused to a
consumer by such defective product manufactured or sold or by deficiency in services relating
thereto.

The CPA 2019 entitles a complainant to initiate a product liability action against a product
manufacturer or a product service provider or a product seller, as the case may be, for any harm
that may have been caused to him on account of a defective product having been provided to
such complainant31. In this regard, a ‘product liability action’ refers to a complaint which can be

30
Please refer Section 2(47) of CPA 2019.
31
Please refer Section 83 of CPA 2019
filed by a person before the concerned adjudicating authority for claiming compensation for the
harm caused to him. The CPA 2019 lays down certain criteria for determining the liability of
product manufacturers, product service providers and product sellers32. Additionally, the CPA
2019 also provides for certain exceptions to the rule of product liability, such as the product
being misused, altered, or modified (in the case of product seller)33.

The CPA 2019 has introduced the concept of ‘unfair contracts’ which includes all such contracts,
between a manufacturer or trader or service provider on one hand, and a consumer on the other,
which are heavily weighed against the interest of the consumers 34. The CPA 2019 allows room to
the consumers to file complaints against such unfair contracts 35. Contracts which may have
unfairly worded clauses such as those that are in the nature of imposing on the consumer any
unreasonable charge, obligation or condition which puts such consumer to disadvantage may fall
within the ambit of ‘unfair contracts’ and consumers can initiate action in terms of the CPA 2019
in relation to such contracts.

Section 94 of the New Act provides that for the purposes of preventing unfair trade practices in
e-commerce, direct selling and also to protect the interest and rights of consumers, the Central
Government may take such measures in the manner as may be prescribed.

Further, Section 101 of the New Act gives the power to the Central Government to make rules,
by notification, for the measures to be taken by the Central Government to prevent unfair trade
practices in e-commerce, direct selling under Section 94.

32
Please refer Sections 84, 85 and 86 of CPA 2019.
33
Please refer Section 87 of CPA 2019.
34
Please refer Section 2(46) of CPA 2019
35
Please refer Section 2(6)(i) of the CPA 2019.