THE WEST BENGAL NATIONAL UNIVERSITY OF JURIDICAL SCIENCES

CONTRACT REGULATION IN INTERNET

Project for
Information Technology Law

AKSHAT GUPTA
ID: 210022
5th Year, 10th Semester
2014-15

A. INTRODUCTION

The Internet, like the steam engine, is a technological breakthrough that changed the world.1

The Internet revolution has changed the face of commerce today; there is a significant change
in the way modern businesses operate. With the capabilities of the Internet, it is possible for
corporations to cater to a global customer base as opposed to being restricted otherwise. With
the expansion of commerce through the medium of the Internet, there is also a significant rise
in the number of contracts entered into over this medium.
The author, through the medium of this paper proposes to examine the relevant regulations
governing electronic contracts (hereinafter e-contracts) in India. Starting with a working
definition of e-contracts, the author aims to outline the provisions of the Information
Technology Act, 2000 (hereinafter IT Act) and to critically analyze the existing framework.

B. ELECTRONIC CONTRACTS OR E-CONTRACTS

In essence, a contract is an agreement between two or more parties for the performance of
reciprocal promises.2 Such an agreement must be valid and enforceable in the eyes of the
law.3 A traditional understanding of contracts would suggest that agreements may be oral in
nature or in writing. The question then arises: what is the status of an agreement arrived at
between two or more parties over the Internet?
As per the decision of the Supreme Court in Trimex International FZE Ltd. Dubai v. Vedanta
Aluminum Ltd.,4 a contract would be constituted even in case of an exchange of e-mails
1 Peter Singer.
2 See generally, Section 2(e), Indian Contract Act, 1872.
3 See generally, Section 2(h), Indian Contract Act, 1872.
4 Trimex International FZE Ltd. Dubai v. Vedanta Aluminum Ltd. (2010 (1) SCALE 574).
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between the concerned parties regarding mutual obligations. Therefore, the basic principles
espoused in the Indian Contract Act, 1872 (hereinafter Contract Act) regarding free consent,
lawful consideration etc. remain applicable to e-contracts.5 E-contracts are also provided for
under the IT Act which will be discussed in the next section. In order to understand the
regulation of e-contracts, provisions under both Acts must be read in conjunction with one
another.6 For the purpose of this research paper, the author will not be delving into the
provisions of the Contract Act and will focus primarily on the provisions under the IT Act.

C. E-CONTRACTS UNDER THE IT ACT

The evolution of the United Nations Commission on International Trade Law (UNCITRAL)
Model Law on E-Commerce (hereinafter Model Law) led to the enactment of the IT Act in
2000.7 Generally, the IT Act follows the provisions of the Model Law. However, it is
interesting to note that provisions related to online contracting are different as compared to
the Model Law.8 On the one hand, Article 11 of the Model Law espouses the formation and
validity of e-contracts. The IT Act, on the other hand, does not contain any express provision
on this subject.9

5 See generally, Sections 3-30, Indian Contract Act, 1872.

6 Sachin Mishra, Determining Jurisdiction over E-Commerce disputes in India, available at
<http://www.manupatra.co.in/newsline/articles/Upload/FE4BA350-DBEF-49DA-97D409E54ED8B813.pdf> (last visited on March 20, 2015).
7 CM Abhilash, E-Commerce Law in Developing Countries: An Indian Perspective, 11(3)
INFORMATION & COMMUNICATION TECHNOLOGY LAW 269 (2002).
8 Devadutt Kamat, Information Technology Act, 2000 A Contractual Perspective, 1 SCC
(JOUR) 11 (2004).
9 Section 10A of the Information Technology Act, 2000, reads, 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.
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Sections 11-13 under the IT Act deal with the attribution, acknowledgment and dispatch of
electronic records.10 These provisions do not modify or alter the existing principles under the
Contract Act. In order to ascertain whether an e-contract has been formed requires a conjoint
reading of the aforementioned sections and Section 411 of the Contract Act.
Despite the passive reference to e-contracts under the IT Act, there are several problems in
terms of how e-contracts are to be regulated in India. Since the reference is passive,
foreseeable troubles may arise. This is discussed in the following section.

D. ISSUES SURROUNDING E-CONTRACTS UNDER THE IT ACT

Courtesy of the Contract Act, there is an existing framework for what constitutes a contract.
The IT Act does not recognize e-contract explicitly. Instead, it provides for rules regarding
electronic records and receipts. However, there remain certain issues which are unanswered
even after a conjoint reading of both the statutes. There is no provision regarding the
obligations and liabilities of online businesses with respect to consumer protection.12
Consumers remain unshielded as a result of this.
A problem arises further since the Supreme Court held that Section 4 of the Contract Act is
applicable only in cases of non-instantaneous forms of communication. 13 This creates a
distinction between the applicable provisions for e-contracts. For instantaneous contracts
such as web contracts, Sections 11-13 under the IT Act would apply. However, if an
agreement is arrived after significant negotiations through online communication, Section 4
would apply. This creates a dichotomy between e-contracts.
Moreover, it may be difficult to determine whether consent is free or not. 14 Specifically, in
cases of click wrap and shrink wrap contracts, the terms and conditions of the agreement are
10 See generally, Sections 11-13, Information Technology Act, 2000.
11 Section 4 of the Indian Contract Act, 1872 deals with the communication of proposals,
acceptance and revocation.
12 Supra note-8.
13 Bhagwandas v. Girdharilal, AIR 1966 SC 543.
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simply presented to the consumer. There may be no opportunity for the consumer to negotiate
these terms. This may be considered to be an unconscionable transaction.15
Lastly, there is no check on the possibility of minors entering into agreements. 16 Given the
increasing presence of online vendors including websites such as Flipkart, Amazon etc., it is
likely that minors may purchase or sell goods online.

E. CONCLUSION

The Internet has enabled businesses across the world to operate in a more efficient manner.
With the rise of e-commerce, there has been a consequent rise in e-contracts. The regulation
of such contracts requires a consideration of the Contract Act as well as the IT Act. On
consideration of the provisions of the IT Act in particular, it seems evident that there are two
major issues surrounding e-contracts. First, there is no substantive method of determining
whether the consent given by a party is free. Second, there is no method of verification of age
of the parties entering into contracts. It is possible for minors to enter into contracts over the
internet. Since the jurisprudence on the subject is still in its nascent stage, the need of the
hour is to account for the abovementioned issues either by way of judicial precedent or by
way of legislative amendment.

14 Supra note-6.
15 See generally, Section 16(3), Indian Contract Act, 1872 which reads, 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; see also, Central Inland Water Transport
Corporation v. Brojonath Ganguly, 1986 SCR (2) 278.
16 Supra note-6.
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