E-Contracts- Requirements, Recognition and Validity

Blog   wpadmin   December 31, 2020

Executive Summary:

      • Contracts that are not paper based and electronic in natures; and generally made by two parties from two different geographical locations for formalizing am agreement.
      • E-contracts are formed online, recognized under the Information Technology Act, 2000 and enforced by courts in India.

Introduction:

A contract is a legally binding document between at least two parties that defines and governs the rights and duties of the parties to an agreement and capable of being enforced if it meets the requirements and approval of the law and attracts penalties, civil liability, fines, damages for its breach. Contracts are an integral part of our day-to-day life that most of the time we do not even recognize that we have entered into one.

Contracts usually are paper contracts but with technology minimizing almost every aspect of human interference and the need for innovation in conducting business to make it more competitive, profitable and time saving, has evolved new concepts of contracting such as electronic-contracts(e-contracts), executing contracts electronically, in short, the shift to online mode from the traditional physical mode of drawing contracts. E-contract is a contract modeled, specified, executed and deployed through software system.

E-contracts-Requirements, Recognition and Validity:

As we know e-contracts are contracts that are initiated and concluded through the digital mode or internet. With growing business, there has been a radical shift to technology for completing almost every aspect of business even daily life chores are not spared by technology. In the Indian context, any agreement or contract is considered valid and enforceable to secure rights of parties if it is based on the contracting principles provided under the Indian Contract Act, 1872i.e. offer, acceptance of the offer, free consent, valid consideration, lawful object and parties must be able to contract. Any contract concluded on these principles is valid irrespective of the mode used in the formation of the contract and is supported by Section 10A of the Information Technology Act, 2000 (IT Act) which provides that the validity of a contract will not be affected solely for the reason that any electronic form or mode was used in the formation, communication and revocation of proposal/acceptance of such contracts.

Additionally, Section 4 of IT Act accords legal recognition to electronic records and provides that where any law requires information or matter to be in a written or printed form, then such requirement will be deemed to be satisfied if the information or matter is available and accessible in an electronic form. The IT Act also recognizes authentication of electronic records by using such digital/electronic signatures and the contents of electronic records can be proved in evidence by the parties under the Indian Evidence Act, 1872.

However, the IT Act excludes the following documents from its purview:

  • a) Negotiable instruments (other than cheques)
  • b) Power of Attorney, Trust deeds, Will/Testamentary Dispositions
  • c) Any contract for sale/conveyance of immovable property or any interest insuch property.

Any contract is considered as valid or concluded once the parties sign the contract. In the e-contracts, the parties can execute the contracts through digital signatures, e-signatures, Sharing scanned copies of wet ink signed contracts,Email conveying acceptance of a contract and e-Aadhaar verification and wherever required to be stamped can be stamped through the electronic stamping portal of the Government.

In Trimex International FZE Limited, Dubai vs. Vendata Aluminum Ltd.,3 SCC 1(2010), the Hon’ble Supreme Court of India recognized as valid a contract which was unconditionally accepted through e-mails.

In this modern age of technology almost all business is conducted online and on a daily basis we enter into so many contracts such as shrink wrap, Browse Wrap Agreements, Click Wrap Agreements when we access websites or visit online shopping portals. Even employment agreements, vendor agreements, software agreements are mostly concluded electronically. The shift in contracting mode has immensely made life easy by eliminating errors and enhancing security of transactions. Availability of contract templates on the internet also saves time and resources and is also cost effective and ensures fast business, better and effective service. Although the concept of e-contracts has gained momentum, the security updation/upgradation for contracts will always remain a concern with server crashes, cyber-crimes and hacking.

Conclusion:

E-contracts like paper contracts are recognized for all purposes and have really helped business houses to maintain business continuity, especially in times of the pandemic, without the need to be physically present for executing contracts. These contracts are secure to execute and can save one the time and energy involved in physically drafting and vetting a contract, managing them, tracking contractual terms/compliances, moreover there are less chances of errors, hence enhance business growth.

Regards,
Legal Team

Proind Business Solutions Private Limited
306, Tower B, I-thum, Plot No A-40, Sector 62, Noida, UP, India- 201301
No.: +91 120 4224203
Email: info@proind.in, website: www.proind.in

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