EMERGENCE OF E-CONTRACTS IN INDIA ATTRIBUTABLE TO THE COVID-19 PANDEMIC
Author: Yajush Tripathi, III year of B.sw.LL.B. from Gujarat National Law University
E-contracts are the contracts that are formed by an interaction between two or more people through electronic means like e-mail, skype, etc. Section 65b of the Indian evidence act recognises the validity of E-contracts as a valid form of contract. This article focuses on the issue of the emergence of e-contracts in India due to the covid-19 pandemic. By analysing the various legal frameworks which include sections related to e-contracts from the Indian contracts act, 1872, Indian evidence act and information and technology act, 2000, the validity of e-contracts is established in India i.e., legal validity. There has been a resurrection of e-contracts in India due to the covid-19 pandemic, as its disastrous effects due to the resultant lockdown were also bored by the people who used to enter into contracts to do businesses. As of now, a physical meet up to enter into contracts is not possible because of the resultant lockdown that was imposed by the government, so attributable to that e-contracts were resurrected in the commercial business to combat the problems caused by the pandemic. Then, it discusses the advantages and disadvantages of opting for E-contracts as a way to enter into commercial business or transactions. Lastly, the author offers to chart a way forward that is best suited to the needs of the current e-contracts landscape in India. Seemingly, electronic contracts or E-contracts are deemed to be the way forward in these testing times of covid-19 pandemic as far as commercial transactions are concerned.
Keywords: E-contracts, Covid-19, feasibility, accessibility, commercial transactions.
The pandemic of covid-19 has created ruckus all around the world. It has affected the global economy to a large extent. It has hampered the commercial businesses. There has been a global recession of sorts because of the affected economy. Commercial contracts have also faced the extreme brunt of the pandemic and the resultant lockdown. The pandemic has created a situation of force majeure for many contracts, as the parties involved in the contract cannot complete the formalities to bring into effect the clauses of the contracts because the parties cannot meet physically due to the restrictions imposed by the government. Therefore, it is imperative to resort to a way that would allow the parties to complete their contractual obligations without any hindrance even in these testing times. It is imperative because the state of force majeure cannot prevail for a long period as it has disastrous effects on the economy.
This problem can be solved by following an alternative to the usual way, i.e., signing of contract through physical presence. E-contracts can act as an alternative. This form of contract is not a novel concept. It is only not prevalent in common practice in India. But now this way of the contract is emerging as it is very feasible for the parties especially in the testing times of covid-19. This form of contract has become prevalent in many parts of India, but still, there are many parts where no redressal mechanism has been formed to combat the result of the lockdown which affected commercial contracts.
Meaning of e-contracts
An E-contract is a kind of contract which is formed through the interaction of two or more persons using electronic means like e-mail, skype, cam scanner, etc. In other words, it is a contract modelled, specified, executed, and deployed by a software system.[i]
This is a contract that is accepted worldwide as a legal form of contract. The process and formalities of e-contract take place over the internet. The physical presence of the parties is not required to effectuate this kind of contract. This contract also like traditional forms of contract entails offeror and offeree, this contract also requires consideration to result in a valid contract. So, there are similarities between e-contract and the usual way of contracts, but contemporaneously it entails a set number of differences as well.
In this type of contract as well, there are two parties one which offers and the other who accepts, here they are known as originator who is a person who sends, transmits or stores any electronic message to another person to send, store, or transmit the electronic message sent and addressee, who is a person who receives the electronic message.[ii]
Here, generally, the process or the requisites of a contract is digitalized. Physical presence to fulfil any requirement of a contract is not required, not even for handwritten signatures, as digital signatures suffice the purpose. Unlike traditional forms of contract, which can only be entered into through pen-paper based mode, e-contracts can be carried out through email, click-wrap contracts, shrink wrap contracts, etc.[iii]Therefore, Electronic contracts are the agreements that are entered into through a software system contrary to the traditional form of contract which is entered into through paper-pen mode.
Legal validity of E-contracts in India: Overview
E-contracts are also to an extent governed by the Indian Contracts Act, 1872. But as it involves electronic devices and technology, the information and technology act, 2000 also comes into play. It recognises e-contracts along with ICA. Section 65a of the Indian evidence act also envisages it and, in a way, enlarges its validity under the purview of the law.[iv] Therefore, the validity of e-contracts results from mainly two acts- the Indian Contracts Act, 1872 and Information and Technology act, 2000. Indian contracts act does not enshrine special clauses regarding e-contracts. The laws which apply to traditional contracts, most also apply to e-contracts, i.e., it is governed according to them. But there are certain nuances related to e-contracts that are not covered under ICA like the procedure of e-signature, wrap contracts, etc.
These nuances are covered in the information and technology act, 2000. According to section 10-A of the information and technology act specifically, the validity and enforceability of E-contracts is recognised, which states:
“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.[v]"
The prerequisites of a valid e-contract are the same as a traditional form of a contract. The pre-requisites which are enshrined in section 10 of the Indian contracts act, 1872 also applies to e-contracts, i.e., contracts ought to have an offer, acceptance, lawful consideration, and lawful object. Section 10A of the Indian contract act also gives validity to e-contracts by stating that a contract cannot be considered unenforceable only on the basis that it has been performed using electronic means or ways, i.e. contracts carried out through electronic means are valid and enforceable.[vi] This was substantiated in the landmark case “Trimex International FZE Limited, Dubai v. Vedanta Aluminium Limited” wherein it was held that even if an agreement does not execute itself into a formal contract then also it can be considered to be a valid and enforceable contract,[vii] if the electronic agreement or communications satisfy all the prerequisites of the contract under section 10 of the Indian contracts act.
Furthermore, section 65b of the Indian evidence act also discusses the validity of e-contracts in India.[viii]This section states that any electronic record is equivalent to any legal document which is adequate to be considered as a legal contract and is admissible in proceedings. Therefore, all these are the prominent laws according to which e-contracts are governed in this country.
Role of covid-19 in the emergence of e-contracts in India
E-contracts are not a novel concept in India. It has already been in practice in India. There has been a resurgence of e-contracts in India attributable to the pandemic of covid-19. Due to covid-19, a state of lockdown has been imposed in the country to keep in check the spread of the virus. The arena of commercial contracts has faced backlash. Now, people are facing difficulty in entering into contracts, as to enter into a traditional contract physical presence is needed. Many contracts have also got into a state of “force majeure”. So, because of all the encumbrances which have emerged because of this novel situation, a substitution is needed as far as the way of entering into a contract is concerned. In these circumstances, e-contracts seem to be the best option available. The method is safe, quick, and plausible as people need not meet physically to enter into e-contracts, which thwarts the chance of spread of coronavirus whilst people enter into an e-contract.
Therefore, the main reason why there has been a resurgence of e-contracts in India is because of the covid-19 and the subsequent lockdown, this practice is a plausible way of entering into contracts in this way but at the same time, it is also difficult to implement this pan India in these times.
Advantages of using e-contracts as a substitute for the traditional form of contracts
E-contracts are the most sought-after way of entering into the contract in this lockdown and it is because of the numerous advantages that it serves. The benefits of e-contracts are
First, it ensures the safety of the citizens of the country, in these times where people are reluctant to meet one another especially then, e-contracts would be very convenient and safe. It can be carried out by special software along with digital signatures, so because of this parties of the contract can execute the documents at their respective places thereby entering into a legally binding contract. All these methods need no commotion which ensures the safety of the parties to the contract.
Second, the state of force Majeure has surrounded many commercial contracts in these times, but in the case of e-contracts, it is highly unlikely that a situation of force-majeure would come up because any extraordinary circumstances cannot prevent anyone from using the internet in their respective houses. Only exceptional circumstances like a ban on the internet, banning of apps, etc can prevent someone from entering into an e-contract. So, following the method of e-contracts in these times can solve the problem of “force-majeure” of the existing contracts and also can prevent future contracts from getting in a state of” Force Majeure”.
Third, e-contracts ensure the accuracy of documents.[ix]In the traditional form of contracts, there is a need to check whether or not the parties of the contract have filled all crucial information required for the contract. If any of the parties fail to fill any relevant informant or fails to sign where their sign is needed, the formalities would have to be repeated and that becomes a tedious process. This issue would not come up as a hindrance while entering into a contract if the parties get into a contract by electronic means, because there if one of the parties fails to fill the required information or fails to sign where their sign is needed, in such cases, it will prompt an error and thereafter the person who made the error can correct it. Hence, this will save the parties from the hassles of the tedious work that they had to do in traditional contracts. They would be free from re-sending and re-verifying the documents.
There are various other advantages that e-contracts offer like it saves time and money, it is convenient to use, it ensures speedy transactions, etc. Therefore, there are umpteen advantages of e-contracts because of which there has been an emergence of it in these times, but along with that, there is also a certain number of disadvantages because of which it is not as popular as a traditional form of a contract even in these times. These disadvantages are also very prominent and need meddling from various governing agencies to overcome.
Disadvantages of using e-contracts as a substitute for the traditional form of contracts
The use of e-contracts in recent times has to an extent resolved the thump that covid-19 brought to the transactional businesses through hampering commercial contracts. But the emergence has not been beneficial unanimously. It has its share of disadvantages. These disadvantages are-
First, this form of contract is not accessible to everyone. This form of contract entails a pre-requisite that a person should have a smartphone with internet and also expect them to be well-equipped with technology. Commercial contracts are generally entered into by middle-aged men so as a result, they are not well-equipped with technology. Also, the people entering into contracts from remote areas do not have running internet, many do not have smartphones. Therefore, for them, this option is not feasible even in these testing times.
Second, there are many things which if people have to enter into an e-contract, ought to have. They need to have propriated software.[x]But many businesses do not have it as they believe that they do not want to get dependent on other vendors for contracting and also because in these times it is difficult for the parties to have propriated software as it has become outdated. Other than that, the above-mentioned things (like running the internet, smartphones, etc) are needed, which becomes a cumbersome task for many business houses.
There are many peculiarities attached to the functioning of e-contracts which seems unfathomable for the people who are accustomed to entering into traditional forms of contract. Like there is limited storage which restricts them to storing many documents on their servers, which forces them to rely on other sources to store documents, which puts the customer’s information in peril of getting leaked.[xi] There are also many electronic software products that are used for e-contracts, but these products are unable to ensure the safety of digital signatures of parties, i.e., there is a danger of digital signatures getting leaked.
In these times, e-contracts are not feasible for all, as there is also a danger of cybercrimes attached amidst resorting to this method. Cybercrime is rampant in these times too, so there is a danger attached to using e-contracts as a method of contract, as using it might in some extreme cases lead up to cyberbullying. This is one of the most prominent disadvantages as it could harm the parties beyond the realm of the contract.
Therefore, these are the disadvantages of using e-contract as a substitute for the traditional form of contract. It is necessary to combat these disadvantages especially in these times, so that continuity could be maintained as far as the business transaction is concerned. The government here needs to meddle to combat these issues by developing innovative ways.
Suggestive ways that can be employed to make e-contracts more accessible in these times
This is a fact that there has been an emergence of e-contracts during these times, but at the same time it is not accessible to everyone and there are some disadvantages attached to its functioning. To combat these disadvantages, the government needs to come up with certain measures. Here are some suggestive changes which the government can come up with-
First, it should start awareness campaigns on e-contracts, so that people get to know about this method of entering into a contract apart from the traditional form of contract, further which could revive the dormant business transactions. They should also provide free internet services so that the method of e-contracts can reach out to maximum people. Therefore, the government should educate people about e-contracts to get the commercial contracts moving in these times too.
Second, the problem of forging and leaking of digital signatures is also rampant as a result of the emergence of e-contracts. It can be combated by the government by mandating every vendor to allow access to digitally signed documents according to defence standards or the national institute of standards and technology.[xii] By this, the parties entering into a contract through electronic means would get assured that the digital signatures would only be used for the requisite purposes and would also ingrain a sense of security of them while using the method of e-contracts.
Third, the laws which are governing e-contracts are the information and technology act, 2000 and the Indian contracts act, 1872. The government can pass amendments by which it can make the process of e-contracts simpler and also redressal mechanisms should be enshrined through amendments in these acts or a new act should be promulgated that would include in it redressal mechanisms in cases where there is an issue regarding implementation of an e-contract.
Therefore, these are some suggestive methods by which the government can resolve the existing issues with e-contracts. Through effective implementation of policies by the Government along the lines of the aforementioned suggestive measures in these times where e-contracts are emerging as an alternative to the traditional way of contracts, can further make the way of entering into contracts via e-contracts reach maximum people in India.
E-contracts as a method to carry out commercial transactions have arisen in the testing times of covid-19, to make up for the impossibility of entering into traditional forms of contract. The validity of e-contracts in India is unquestioned as the Indian contracts act, 1982 and the information and technology act, 2000 govern it. But still, to make this form of contract accessible, some laws need to be added and amended. The change in laws related to digital signatures and vendors is crucial. Ergo, India is on the verge of becoming paperless as far as commercial transactions are concerned attributable to the pandemic of covid-19 and resultant lockdown. So, whether or not it is advantageous in the long run, people need to get accustomed to it as it seems perpetual due to covid-19.
[i]Vasudha Tamrakar& Pratibha Pal, ‘E contracts and its legality’, Legal Service India, Feb 08, 2017, available at: http://www.legalserviceindia.com/lawyers/lawyers_home.html, (Last visited on Feb 12, 2017).
[iii]Rajashreedevchaudhary, ‘COVID -19: A Catalyst For e-Contracts!’, king Stubb&Kasiva blog,May 01, 2020, available at:<COVID%20-19%20_%20A%20Catalyst%20For%20e-Contracts! %20-%20Coronavirus%20(COVID-19) %20-%20India.html> (Last visited on May 01, 2020).
[iv]Indian Evidence Act, 1872, § 65 cl (a).
[v]Information and Technology act, 2000, § 10 cl (a).
[vi] Indian Contracts Act, 1872, § 10 cl (a).
[vii]Trimex International FZE Limited, Dubai v. Vedanta Aluminium Limited, (2010) 3 S.C.C 1.
[viii]Indian Evidence Act, 1872, § 65 cl (b).
[ix]Shereen Abdin, ‘Electronic Contracts – Pros and Cons’, Lawyered, Oct 01, 2019, available at:<https://www.lawyered.in/legal-disrupt/articles/electronic-contracts-pros-and-cons/> (last visited on Oct 01, 2019) ((hereinafter Abdin).
[xi]Abdin, supra note 5.
[xii]Abdin, supra note 5.