FAQ's

Electronic Contracts

Q.5. How does one ensure validity and enforcement of electronic contracts?

Ans. An agreement between parties is legally valid if it satisfies the requirements of the law regarding its formation, i.e. that the parties intended to create a contract primarily. This intention is evidenced by their compliance with 3 classical cornerstones i.e. offer, acceptance and consideration.

While freedom of contract among parties to transact is a general rule, the law considers certain types of contracts as void or voidable because of conflict with the public interest. E-commerce participants should be aware of the potential invalidity or unenforceability of contracts against the public interest. Various types of illegal subject matter may cause particularly great harm within the e-commerce environment, such as an agreement to traffic in pornographic or obscene material on the internet.

Performance in many e- contract transactions involves electronic media, especially in the payments process or where the contract is for the provision of on-line services such as access to information or download of software. Download of software and access of billed information resources are examples of performances those can be completed without human mediations (beyond the initial programming).

Offer:

The preliminary e-mail informing consumers of the goods and services available for sale, is an invitation to treat. When consumers respond through an e-mail or by filling in an online form, built into the web page, they make an Offer. The seller can accept this offer either by express confirmation or by conduct. Parties are also free to enter into traditional e-contract, wherein the first e-mail or web page constitutes the offer. Then however the one who offers will have to contract with everyone who responds, denying him the freedom of contract, without reservation of right not to sell to certain persons, or in certain jurisdictions.

Acceptance:

The critical issue is when acceptance takes effect, to determine where and when the contract comes into existence. The general receipt rule is that acceptance is effective when received. Communication through internet is virtually instantaneous despite insignificant delays. The applicable rule of communication depends upon reasonable certainty of the message being received. If the server is trusted, the postal rule may apply, if however, the server is not trusted or there is uncertainty concerning the e-mail's route, it is best not to apply the postal rule. When arrival at the server is presumed insufficient, the 'receipt at the mail box' rule is preferred.

Examples:

If the offer says so, acceptance can be given by clicking on a "Yes" or "Buy" icon. For example, in Time Inc. New Media's subscription agreement for its Pathfinder service, a screen with the following message appears, "By answering 'accept' you agree to the terms (listed below) for use of Pathfinder." One of the terms is: "TINM shall have the right at any time to change or modify the terms and conditions" of use, effective immediately upon notice. The notice may simply be by posting on Pathfinder. A court may find that the buyer agreed to be bound by the terms of the subscription agreement at the time the buyer clicked on the "accept" icon.

Downloading software could sufficiently constitute acceptance depending on the terms of the offer.

Q.6. Which are the legal forums in case of breach of contract?

Ans. Jurisdiction:

Jurisdiction of a contract determines the law applicable to it and the codes in which theory can be enforced. Jurisdiction depends on the place where the contract is concluded. Determining this fore-contract is difficult due to ambiguity caused by technicalities of network.

The physical location of the server determines the applicable jurisdiction in case there is no express cause specifying it. In R. Vs Waddon, however, the court dismissed the argument that simply because the server is in another country, its laws should apply. The courts suggested that since the web site was interacted with, in UK, English law should be applicable, demonstrating the willingness of the courts to extend a 'long arm jurisdiction'.

However, generally it is seen that a jurisdiction clause is inserted in the agreement itself, and when the agreement is arrived at with free consent of parties, then it would be appropriate to affirm such agreement as regards jurisdiction as well.

Courts:

Though s.46 of the IT Act provides for a mechanism of the adjudicating office, s.48 for constitution of the Cyber Regulations Appellate Tribunal, and s.62 provides for further appeal to High Court, this mechanism awaits final notification by the government and constitution of the said authorities. Resultantly, the present remedy is to move before the Civil Courts.

Tests:

These are the following tests which a court of law would use to decide whether it would have jurisdiction to entertain a claim or not:

  • If the defendant has purposefully availed himself of the privilege of acting in the forum state or causing a consequence in the forum state.

  • The cause of action must arise from the defendant's activities there.

  • The acts of the defendant or consequences caused by the defendant must have a substantial enough connection with the forum to make the exercise of jurisdiction over the defendant reasonable.

If the above tests are satisfied then the court would entertain a claim.