E-commerce as the term suggests is a
type of business that involves transfer of information across the internet. It
allows customers to electronically exchange goods and services with almost no
barriers.
E-commerce has expanded many folds in
the last few years and with the pace it is accelerating it is expected to
expand even more as it is more convenient and easily accessible. However, there
are various legal issues relating to formation and validity of electronic
transactions such as online contracts and enforcement issues which are dealt
hereinafter.
(A)Formation of an
E-Contract:
The most common forms of e-contracts
are click wrap, browse wrap and shrink- wrap contracts. The terms and
conditions in such contracts are made available to the contracting party in a
form that is considerably different from the standard paper contracts. In click
wrap contract, the party's affirmative acceptance is taken by means of checking
on an 'I accept' tab with the scroll box that allows accepting party to view
the terms and conditions.
In case of browse wrap agreement the
mere use (or browse) of the website makes the terms binding on the contracting
party.
In case of Shink wrap agreement the
contracting party can read the terms and conditions only after opening the box
within which the product (commonly a license) is packed. Such agreements are
relevant in the context of e-commerce mostly because of the kind of goods
associate with shrink-wrap agreements.
(B)Online Contracts
Validity:
The Indian Contract Act, 1872 governs
all the e-contracts in India which inter alia mandate certain pre-requisites
for a valid contract such as free consent and a lawful consideration. The
question which needs to be examined is how the requirements of Indian Contract
Act would be fulfilled in relation to e-contracts. Further, the Information
Technology Act, 2000 ('IT Act') provides fortification of the validity of
e-contracts.
As per Indian Contract Act, 1872 some
of the important requirements of a valid contract are as follows:
(i) The contract should be entered
with the free consent of the parties;
(ii) There should be lawful
consideration for the contract;
(iii) The parties should be competent
to contract;
(iv) The object of the contract should
be lawful.
The terms and conditions associated
with e-commerce platform are of utmost importance in ensuring and deciding that
e-commerce transaction meet with requirements of a valid contract. Unless
expressly prohibited click wrap agreements would be enforceable and valid if
the requirements of valid contract as per Indian Contract Act, 1872 are
fulfilled.
There is no requirement under the
Indian Contract Act to have written contracts physically signed. However,
specific statues do contain signature requirements. Further, the very nature of
e-commerce is that it is practically impossible to check the age of anyone who
is transacting online and which pose problems and liabilities for e-commerce
platforms because the position under Indian Law is that the minor is not
competent to enter into contract and such a contract entered is not enforceable
against the minor.
In India, every instrument under
which rights are created or transferred needs to be stamped and stamping of the
instrument further depends on specific stamp duty legislations enacted by
different states in India.
(C) Standard Form of
Online Contracts are Unconscionable
In India there is no well developed
jurisprudence on the question of whether standard forms of online agreements
are unconscionable. Though, the courts of India as per Indian Laws previously
dealt with instances where contract terms including standard form contracts
were negotiated between parties in unequal bargaining positions. Certain
provisions of Contract Act deal with unconscionable contracts such as when the
consideration in the contract or object of the contract is opposed to public
policy. In such cases the contract itself cannot be valid.
The courts can put the burden on the
person in the leading position to prove that the contract was not induced by
the undue influence.
In the case of "LIC
India Vs. Consumer Education & Research Center"2 the Hon'ble
Apex Court of India interpreted an insurance policy issued by Life insurance
corporation of India by bringing in certain elements of public purpose. The
court noted that" in dotted line contracts there would be no occasion
for weaker party to bargain as to assume to have equal bargaining power. He has
either to accept or leave the service or goods in terms of the dotted line
contract. His option would be either to accept the unreasonable or unfair terms
or forgo the service forever."
It is highly important to have a well
thought out terms which form online contracts in order to make sure that
sufficient opportunity is provided to the customers to familiarize themselves
with the terms thereof. Besides the above there are also various other legal,
tax and regulatory issues more specifically Security Issues, Consumer
Protection Issues, Intellectual Property Issues, Content Regulation,
Intermediary Liability, Jurisdictional Issues and issues relating to taxation
which need to be taken in mind while dealing with e-commerce transactions.
Conclusion:
The growth of the e-commerce industry
is not only indicative of the increasing openness of the public but has also
brought to the front the issues that the legal system of the country has been
faced within. The legal system has constantly tried to be updated especially
with the enactment of IT Act to deal with lots of issues emerging from the use
of internet. Therefore, a comprehensive understanding of the legal regime and
the possible issues that an e-commerce business would face together with
effective risk management plans has been the need of the hour for e-commerce
businesses to succeed in this industry