Analyzing legal and security issues in cyber contracts (E - contracts)


January 31, 2023, 6:15 pm | Updated January 31, 2023, 6:48 pm IST
Analyzing legal and security issues in cyber contracts (E - contracts)
The world has moved on and adapted various approaches to tackle the problems associated with business trades. With e-contracts coming into the picture, an arrangement can be made between two parties residing in different corners of the world from their place of business. The e-contract mechanism has reduced the parties' physical presence while signing the agreements but has also increased the fear of falling into online fraud. Many people have gained through this new mechanism but still, a handful of people have been left behind, fearing they might get into trouble. Appropriate safeguards are required to protect the parties' interests by legal justification and clarity of jurisdiction if a party breaches the terms of the e-contract. Depending upon the trade, the traditional way of agreement might vanish in the coming days, and the new e-contract will replace it.
Listen to this article

Table of Contents

The world of the internet has provided convenience in almost all aspects of life. It has seemingly worked in connecting people all around the globe. As a result, people are more comfortable, and everything is just a click away. The very radiant impact of this reflects in the corporate world through the boost of e-commerce across the board. Businesses and legal or formal paperwork have robotized with the help of technological advancement and electronic mediums. Traditional contracts and agreements by pen and paper are getting replaced by online contracts or e-contracts. Hence, we can enunciate that e-contracts are nothing but the digitized version of traditional contracts. 

 

However, essential elements of a contract are not different as e-contracts are also governed under the Indian Contract Act, 1872, along with the provisions followed under Information Technology Act, 2000, Indian Evidence Act, 1872, Payment and Settlement Act, 2007 and Electronic Commerce Act, 1998. As cyber contracts are also governed by the Indian Contract Act, 1872, the essential elements of a valid e-contract are similar to a traditional contract. In addition, Clickwrap agreements, Browsewrap agreements and Shrinkwrap agreements are three general kinds of e-contracts. 


These are the essential ingredients of an e-contract

  • Involvement of two parties who are compatible under the law to enter an agreement/ contract. Note: In cyber contracts, parties to a contract are generally referred to as - Originator and Addressee
  • Use of electronic medium 
  • Free consent 
  • Valid consideration and lawful object 
  • E - acceptance and E - proposal 
  • Intention to create a legal relationship and certainty/possibility of legal performance 


The legal and regulatory framework in India for the validity of cyber contracts 

Indian Contract Act, 1872 

The provisions laid down under the Act do not limit electronic contracts or agreements unless they violate the general principles of a valid and legitimate contract enforceable under the law. Under Section 2 (b) of the Act, acceptanceof the valid offer and other essentials are considered valid criteria for forming the contract. Linking to the E-Contract is a form of acceptance when we agree by clicking on "I agree" to all the supplier's/ originator's terms and conditions.

Section 65-A of the Indian Evidence Act, 1872 

In congruence with this section defined by the Indian Evidence Act of 1872, the judicial systems in India acknowledge electronic documents with the effect of special provisions as evidence relating to the contents of electronic records. However, it is also pertinent to section 65-B of the Act and the conditions prescribed therein, fulfilling its admissibility in the court. 

Section 10A And Section 2 (p) of the Information Technology Act, 2000

By section 10A of the Act, if the contract formation meets all the requisites as per the provisions of the law, then it shall not be deemed unenforceable solely on the ground of its medium. Furthermore, In e-contracts, digital signatures will be required to authenticate communication between the parties, defined under Section 2 (p) of the Information Technology Act, 2000.

Electronic Commerce Act, 1998 

The Indian legislative system brought the Act to oversee the challenges related to cyber contracts. The Act comprises 15 divisions and lays down essential rules and requirements for genuine e-contracts.


Legal and security issues faced by E Contracts 


Judicial Issues


  • Choice of the applicable law

It gets slightly tricky to determine which law will govern the dispute in case of cyber contracts in the absence of the choice of the law by the parties to an agreement, i.e. originator and addressee. Consequently, several civil laws may be affected in deciding relevant substantive laws in cross-border commercial transactions.


  • Choice of the court of jurisdiction 

Since transactions like cyber contracts are paperless, it becomes relatively difficult to determine the court's jurisdiction in case of a breach or violation of the contract or any terms thereof. However, as per Section 13 (3) of the IT Act, the electronic record is deemed to be dispatched at the business place of the originator, whereas, for the addressee, it is considered to be at the business place where he has received the same. Subsequently, the issue may emerge where the location of the computer source is dissimilar from the principal place of the enterprise or a communicator. Also, when the parties are engaging in e-contract terms from different borders of the world.


  • Competency and free consent 

Section 10 of the Indian Contract Act primarily governs contracts that include e-contracts in India. Consequently, Section 10, 11, and 12 of the Act mandates free consent and competence of the parties to enter a contract which are essential ingredients for a valid contract formation under the law. Since this also applies to cyber contracts, a situation may arise where an incompetent person be it minor or any other, may accidentally or fraudulently get access or either by clicking on ' I agree' to the terms of the contract.


Security Issues

  • Security and privacy threat

More often than not, security and privacy issues majorly affect online transactions, irrespective of whether they are commercial or on the applications or a shopping website with buyer and seller agreements. Internet malpractices such as hacking, phishing, and email satirizing are some prominent drawbacks in web-based transactions and contracts.


  • Signature authentication

The binding parties don't have to sign a contract, as the Indian Contract Act, 1872 recognizes both, i.e. oral and written agreements. However, a digital signature represents the party's intention or consent to enter a contract, which may be subject to suspicion due to cyber fraud in the virtual world.


  • Loss due to technical error

Loss due to technical error is one of the most prevalent issues affecting transactions and contracts in the virtual environment. 


  • Data forgery and Identity theft

Section 66, read with Section 43 of the Information Technology Act, 2000 explicitly deals with online fraud. Nonetheless, it also incorporates identity theft, which includes imitating the buyer, a person, or an enterprise and dealing in unlawful activities that may involve criminal intent.


Court precedent in India on the online contracts 

Trimex International Fze Limited v. Vedanta Aluminium Limited 

The offer and acceptance were transmitted by email without signature documents in the given case. The issue pertained to the question of whether the contract is held to be valid in the absence of the formal subsisting agreement. The hon'ble Supreme Court in the given case pronounced its judgment as once a contract is reached within the electronic system of the parties, it fulfills all the essentials of the said contract under the provisions of the laws to which it is subjected, the mere notion that a formal agreement must be needed has no bearing on its validation.


Above are some of the legal and technical issues which e-contracts face in India and globally. However, these legal and technical limitations can be curbed with the implication of the substantial yet specific laws for the contracts and transactions happening digitally. Nevertheless, with innovations and inventions in technological trends, the growth of the digital wave is quite evident in the world of business, and independent e-contract governance can transform it into a success with better control over the issues.


Conclusion

The world has moved on and adapted various approaches to tackle the problems associated with business trades. With e-contracts coming into the picture, an arrangement can be made between two parties residing in different corners of the world from their place of business. The e-contract mechanism has reduced the parties' physical presence while signing the agreements but has also increased the fear of falling into online fraud. Many people have gained through this new mechanism but still, a handful of people have been left behind, fearing they might get into trouble. Appropriate safeguards are required to protect the parties' interests by legal justification and clarity of jurisdiction if a party breaches the terms of the e-contract. Depending upon the trade, the traditional way of agreement might vanish in the coming days, and the new e-contract will replace it.

Written By:
Kishan Dutt Kalaskar

Recommended Free Legal Advices
question markHouse owner issues 1 Response(s)
Dear Sir, Thinking on behalf of landlord he was prevented from getting another tenant as such he may charge penalty of 5% to 10% on the advance amount paid by you and return back your advance amount. You may approach the Police.
question markRental issues please respond 1 Response(s)
Dear Sir, He has every right to deduct 5-10% out of the advance amount paid by you since he lost the chance to get another tenant since you have accepted to become his tenant.
question markSecurity Deposit not Returned 5 Response(s)
Send him a legal notice for recovery of security deposit. Even after that if he is not willing to pay then file a Summary suit in the local civil court against him to recover the amount. Summary suits are relatively faster and if all well then you can recover your money within 60-90 days.
question markLandlord not returning Security deposit 3 Response(s)
It is general habit of landlords to falsely claim damages in order to grab the security amount. You must have to be tactful and should return the keys and claim your security. If security is not paid then you can claim the same through court.
question markFemale security guards working till late night 2 Response(s)
Dear Client, It's PSARA Act which they referred about the working of female security guards. Read PSARA Act, so that you can get your clearance. Hope, it is helpful