E Contracts PDF
E Contracts PDF
E Contracts PDF
E-CONTRACT—AN OVERVIEW
2.1. INTRODUCTORY
A. E-COMMERCE
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services on the Internet‘. 1 In the European Initiative in Electronic
Commerce E-commerce is defined as below:2
1 Faye Fangfei Wang, Law of Electronic Commercial Transaction, 1st Ed., Routledge, London,
2010, p.5
2 European Initiative in Electronic Commerce, COM (97) 157 at I(7) available at
ftp://ftp.cordis.europa.eu/pub/esprit/docs/ecomcom.pdf
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they have entered into. Broadly speaking an electronic contract can be
characterized as below:3
Business-to-Business (B2B)
Business-to-Consumer (B2C)
Consumer-to-Business (C2B)
Consumer-to-Consumer (C2C)
A/G2A/G or B/C [popularly known as electronic governance it
involves the interaction between administration/governments
(local, regional or national) with other administrations or with
businesses and consumers.]
3S.V. Joga Rao, Computer Contracts & Information Technology Law, Vol.1, 2nd Ed., Wadhwa
and Company, Nagpur, 2005, p.1226
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Business-to-Consumer (B2C)
The major advantages of such e-commerce sites and companies are the
availability of physical space, availability of returns and availability of
customer service in physical matters. The organization would directly be
in touch with its customers. As middlemen are eliminated, price of goods
will be less resulting in some benefit to customers.
Consumer-to-Business (C2B)
This may be in the form of catalogues, auctions, etc. very good examples
of such trade are websites for travel arrangements.
Consumer-to-Consumer (C2C)
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Governmental and Non-Business
The e-commerce applications are also found in the Government and non-
business sectors. The Revenue departments, the police enforcement, the
Railways, the Defence departments, Universities and other non-profit,
non-government voluntary organizations are some of the set ups using
technology. And calling of tenders for assigning public work called e-
procurement.
4Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas & Co. AIR 1966 SC 543
5 (1955) 2 All ER 493
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drowned by an aircraft flying overhead. There is no contract
at that movement. If he wishes to make a contract, he must
wait till the aircraft is gone and then shout back his
acceptance so that I can hear what he says…. Now take a
case where two people make a contract by telephone.
Suppose for instance, that I make an offer to a man by
telephone and, in the middle of his reply, the line goes ‗dead‘
so that I do not hear his words of acceptance. There is no
contractat that movement.
The principle of the Entores Case has beenendorsed in Kedia Case. The rule
above stated is called ‗acceptance rule‘.
Plaintiffs brought an action against the defendants for a decree for Rs.
31,150/- on the plea that the defendants had failed to supply cotton seed
cake which they had agreed to supply under an oral contract dated July
22, 1959 negotiated between the parties by conversation on long distance
telephone. The plaintiffs submitted that the cause of action for the suit
arose at Ahmadabad, because the defendants had offered to sell cotton
seed cake which offer was accepted by the plaintiffs at Ahmadabad. Also
because the defendants were under the contract bound to supply the
goods at Ahmadabad and the defendants were to receive payment for the
goods through a Bank at Ahmadabad. The defendants contended that the
plaintiffs had by a message communicated by telephone offered to
purchase cotton seed cake and they (the defendants) had accepted the
offer at Khamgaon, that under the contract delivery of the goods
contracted for was to be made at Khamgaon, price was also to be paid at
Khamgaon and that no part of the cause of action for the suit had arisen
within the territorial jurisdiction of the City Civil Court Ahmadabad.
On the issue of jurisdiction, the Trial Court found that the plaintiffs had
made an offer from Ahmadabad by long distance telephone to the
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defendants to purchase the goods and that the defendants had accepted
the offer at Khamgaon, that the goods were under the contract to be
delivered at Khamgaon and that payment was also to be made at
Khamgaon. The contract was in the view of the Court to be performed at
Khamgaon, and because of the offer made from Ahmadabad to purchase
goods the Court at Ahmadabad could not be invested with jurisdiction to
entertain the suit. But the Court held that when a contract is made by
conversation on telephone, the place where acceptance of offer is
intimated to the offeror, is the place where the contract is made, and
therefore the Civil Court at Ahmadabad had jurisdiction to try the suit. A
revision application filed by the defendants (Kedia) against the order,
directing the suit to proceed on the merits, was rejected in limine by the
High Court. Aggrieved by the order of the High Court, defendants
preferred appeal to Supreme Court with special leave.
Defence of Defendants
Matter was decided by a three Judges Bench consisting of Justice J.C. Shah,
Justice K.N. Wanchoo and Justice Mohd. Hidayatullah. There was a split
verdict with 2:1. Shah (afterwards CJ) and Wanchoo JJ., gave majority
view whereas Hidayatullah M, J (afterwards CJ) gave dissenting opinion.
Shah J., gave judgment on behalf of himself and Wanchoo J. The Judges
constituting majority opinion, preferred to follow the English rule laid
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down in the Entores Case and saw no reason for extending the post office
rule to telephonic communication. Shah, J. observed:
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intervention of that third agency, letters or messages cannot
be transmitted. In the case of a conversation by telephone,
once connection is established there is in the normal course
no further intervention of another agency. Parties holding
conversation on the telephone are unable to see each other;
they are also physically separated in space, but they are in
the hearing of each other by the aid of a mechanical
contrivance which makes the voice of one heard by the other
instantaneously and communication does not depend on
external agency.
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wireless. Some of these were unknown in 1872 and no
attempt has been made to modify the law. It may be
presumed that the language has been considered adequate
to, cover cases of these new inventions. It is possible today
not only to speak on the telephone but to record the spoken
words on a tape and it is easy to prove that a particular
conversation took place. Telephones now have television
added to them. The rule about lost letters of acceptance was
made out of expediency because it was easier in commercial
circles to prove the dispatch of letters but very difficult to
disprove a statement that the letter was not received. If the
rule suggested on behalf of the plaintiffs is accepted it would
put a very powerful defence in the hands of the proposer if
his denial that he heard the speech could take awry the
implications of our law that acceptance is complete as soon
as it is put in course of transmission to the proposer.
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never imagined about scientific inventions. So, the Contract Act of 1872
did not envision about communication using different technologies.
Further, the Supreme Court of India, through Hidayatullah J., stated that
law can be modified to suit present day‘s requirements. At this point it can
be stressed that, circumstances have changed and new inventions are
coming up. Under thissituation, it appears that, the majority opinion in
Kediais standstill and would virtually beovertaken by the fast changing
technological innovations and circumstances. Further, these changes have
made the dissenting opinion, expressed by Justice Hidayatullah, more
relevant today than the majority opinion. In addition to this, India is
signatory party to the Model Law on Electronic Commerce, 1996. On that
basis India has enacted Information Technology Act, 2000. Signing of such
a convention and enacting law makes the bindingmajority opinion in
Kedia‟s case redundant.
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E-contract can be defined in following words:6
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conducted or performed, in whole or in part, by electronic means or
electronic records‘.
2.3.1.KINDS OF E-CONTRACT
There are two ways through which commercial contracts can be entered
electronically. A common and popular method is through the exchange of
electronic mail ‗e-mail‘. The other method of contracting is using the
World Wide Web or ‗website‘. Further the website based is divided into
following kinds:
Click Wrap
Browse Wrap and
Shrink Wrap
2.3.1.1.E-MAIL CONTRACT
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filling in an order form and clicking ‗Submit‘ or ‗I Agree‘ or ‗I Accept‘ or
something similar button. Shrink wrap,9click wrap and browse wrap are
common types of agreements used in electronic commerce.
A. CLICK WRAP
i. Type and Click where the user must type ‗I accept‘ or other
specified words in an on-screen box and then click a ‗Submit‘ or
similar button. This displays acceptance of the terms of the contract.
A user cannot proceed to download or view the target information
without following these steps.
ii. Icon Clicking where the user must click on an ‗OK‘ or ‗I agree‘
button on a dialog box or pop-up window. A user indicates
rejection by clicking ―Cancel‖ or closing the window.
9 The clinging transparent plastic film that is used to shrink-wrap the Compact Disks.
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purchaser to use the software rather than selling the program outright, the
Software Developer is able to retain and have control over his product.
Most of click wrap license agreements are non-exclusive licenses which
mean that the licensor reserves the right to license the same software to
other licensees.10
Thus, click wrap agreements are adhesion contracts which do not involve
the concept of mutual assents and bargains as provided in the contract
10 Kunal Singh, Click Wrap Agreements in Indian Contract Law, available at http://lex-
warrier.in/2012/03/click-wrap-agreements-in-indian-contract-law/ last visited on 05-11-
2012
11Ibid
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theory. Actually they are ―take it or leave it‖ agreements in which the user
is not made aware of the terms until late in the transaction (just before the
use of the product) which is different from traditional written contract.12
In click wrap agreements, the meeting amongst the parties is virtual i.e.
they do not meet physically. The contract could be for the sale of any kind
of product, physical or otherwise. Following are some of the issues that
may arise out of click wrap contracting, which will be dealt at later
juncture:
Identity of Parties
Jurisdiction and
Legal Recognition of Transaction
B. SHRINK WRAP
A shrink wrap contract is the prior license agreement enforced upon the
buyer when he buys software. Before he or she tears the pack to use it, he
or she is made aware by tearing the cover or the wrap that they are bound
by the license agreement of the manufacture.
12Mark A. Lemley et al., Software and Internet Law, Aspean Law and Business, California,
3rd Ed., 2006, p.363 available at http://www.law.berkeley.edu/5368.htm last visited on
24-11-2012
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This is done to protect the interests of the manufacturer where the
consumer cannot reproduce the package, copy it or sell it or donate it to
others affecting the sale of the software. The license, which is shrunk and
wrapped in the product, same becomes enforceable and taken as consent
before the buyer tears the package. The usual clauses that are part of the
shrink-wrap license are that of:
The logic and business sense is that to protect the manufacturer of the
package, as it is easy to copy, manipulates and duplicate under other
brand name.
The legal status of shrink wrap is somewhat unclear. In the 1980s, the US
courts tried to solve the problem of status. The first legal ruling to address
the enforceability of a shrink wrap license grew out of a pair of decisions
(a trial court decision and an appeal to the Fifth Circuit) from Louisiana. In
case of Vault Corp. v. Quaid Software Ltd.13, the district court stated without
explication that the shrinkwrap license at issue in that case was ―a contract
of adhesion which could only be enforceable‖ if the provisions of a
Louisiana statute—which explicitly made such license agreements
13655 F. Supp. 750, 761 (E.D. La. 1987), aff‘d, 847 F.2d 255 (5th Cir. 1988) available at
http:// itlaw.wikia.com/wiki/Vault_v._Quaid last visited on 29-11-2012
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enforceable—were a valid statute that was not preempted by federal law.
It was held that the shrink wrap is unenforceable.
Further in Arizona Retail Sys. v. Software Link14 and Step-Saver Data Sys. v.
Wyse Technology15the courts did not discuss much about the shrink wrap
agreements. It was in ProCD, Inc. v. Zeidenberg16 courts gave bit of relief to
the software companies by enforcing shrink wrap agreement. Further it
was held that shrink wrap agreements were enforceable.17
ProCD was followed by Klocek v. Gateway, Inc.18, which found the contracts
at hand unenforceable, but did not comment on shrink wrap contracts as a
whole.
C. BROWSE WRAP
14 831 F. Supp. 759 (D. Ariz. 1993) available at http:// itlaw.wikia.com/ wiki/
Arizona_Retail_Systems_v._Software_Link last visited on 29-11-2012
15 939 F.2d 91 (1991) available at http://itlaw.wikia.com/wiki/Step-
Saver_Data_Systems_v._Wyse last visited on 29-11-2012
16 908 F. Supp. 640 (W.D. Wis. 1996) available at http://itlaw.wikia.com /wiki/
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‗shrink wrap‘ used in the licensing of tangible forms of software sold in
packages.
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and Conditions of Sale.‖ This statement would place a
reasonable person on notice that there were terms and
conditions attached to the purchase and that it would be
wise to find out what the terms and conditions were before
making a purchase.
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D. ONLINE SHOPPING AGREEMENT
This is another kind of e-contract, in this people can purchase goods, home
appliances and many more things online. Very recently in India some
websites are selling some products are services online. This type of sale is
gaining more popularity. Therefore, this kind of agreement assumes
importance.
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cryptography, certificate authorities, SSI, secure HTTP
digital signatures and public and private key transactions.
Performance of Order: The function of performance of the order,
depending on the nature of the transaction and the directions of the
customer might be either simple or complex. The mode of
fulfillment will also depend on how the e-business handles its own
fulfillment operations or outsources this function to third parties.
Support and Services: In any e-business service plays a very vital
role by virtue of the fact there is a lack of physical presence and
other innovative methods are required to maintain current
customers. The general ways of applications of technology for
providing such service and support are having; periodic follow up
by e-mails, email confirmation/alerts, Online surveys, Help Desk
and Guarantee of secure transaction.
2.4. E-GOVERNANCE
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for its citizens 26 . This theme of ―open government‖ consisted of three
components viz. accessibility, participation and transparency. As
mentioned earlier chapters, e-governance gives level playing field to all
interested participants in allotment of government contracts. Thus, e-
governance removes arbitrariness from the administrative set-up. Further,
it strengthens the core concept of our Constitution that is welfare state by
giving an easy opportunity to people to participate in administrative
proceedings27. The Second Administrative Reforms Committee set up by
Government of India has submitted a report that by 2017 there should be
paperless offices in this country28.
Advantages of e-governance30
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2. Public Services: it provides citizens with access to information and
knowledge. Further, it enhances speed of communication.
31Ibid
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minimizing corrupt practices, e-governance is used as a handy tool for
achieving these objectives. One of the greatest advantages of using e-
governance is e-procurements.
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exercise of power, wherever it is found. It is unthinkable
that in a democracy governed by the rule of law the
executive Government or any of its officers should possess
arbitrary power over the interests of the individual. Every
action of the executive Government must be informed with
reason and should be free from arbitrariness. That is the very
essence of the rule of law and its bare minimal requirement.
And to the application of this principle it makes no
difference whether the exercise of the power involves
affectation of some right or denial of some privilege.‖
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contracts or issuing quotas or licences or granting other
forms of largess. The Government cannot act arbitrarily at its
sweet will and, like a private individual, deal with any
person it pleases, but its action must be in conformity with
standard or norm which is not arbitrary, irrational or
irrelevant. The power or discretion of the Government in the
matter of grant of largess including award of jobs, contracts
etc., must be confined and structured by rational, relevant
and non-discriminatory standard or norm and if the
Government departs from such standard or norm in any
particular case or cases, the action of the Government
would be liable to be struck down. Unless it can be shown by
the Government that the departure was not arbitrary, but
was based on some valid principle which in itself was non-
irrational, unreasonable or discriminatory.‖
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―It is well established that Art. 14 requires that action must
not be arbitrary and must be based on some rational and
relevant principle which is non-discriminatory. It must not
be guided by extraneous or irrelevant considerations. The
State cannot act arbitrarily in enter into relationship,
contractualor otherwise, with a third party. Its action must
conform to some standard or norm which is rational and
non-discriminatory.‖
The above stated observation makes it amply clear that the State has to
exercise its discretion in such manner so as to promote transparency and
to eliminate discrimination. This sort of governance can safely be achieved
by the e-procurement.
Thus, so far we discussed about e-contracts and other allied topics. As this
work is related to e-contracts, it is essential to understand evolution of
contracts. Therefore, in coming chapter we are discussing about evolution
of contracts from jurisprudential perspective.
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