Author: Muhammad Zamin, Iswar Saran Degree College

The emergence of e-commerce has significantly influenced our traditional commercial practices, requiring interpretation of traditional legal frameworks governing contractual relationships in e-transactions. In India, the contract law is codified under the Indian Contract Act, 1872, which lays the foundation principles and elements of a valid contract. The Information Technology Act, 2000, further provides a legal framework for electronic contracts done through electronic records, digital signature, and other electronic means.

Electronic contracts such as the click-warp, shrink-wrap, and browse-wrap agreements facilitate digital transactions which are commonly used in online retailing, software licensing, and other digital services. Courts in India, through various landmark judgements, have upheld the validity of such electronic contracts, enforcing that such agreements become legally enforceable when they satisfy the essential elements provided under the Indian Contract Act.

Despite their legal recognition, they pose various challenges, which includes complexities in cross border transactions, issues of authentication and admissibility, and prevalence of standard form contracts. These challenges undermine the robust legal mechanisms, such as the Consumer Protection Act, 2019, and the Consumer Protection Rules, 2020, which aims to protect the rights of the consumer and impose obligations on e-commerce entities.

Globally, the UNCITRAL Model Laws have been helpful in harmonizing legal principles for electronic signatures and commerce. India's legal ecosystem continues to evolve, adapting various doctrines to validate digital transactions. This ensures a responsive, secure, and legally certain environment for digital commercial engagements in India and beyond.

KEYWORDS

Indian Contract Act, 1872, Information Technology Act, 2000, Electronic Contracts (e-contracts), Digital Signatures, Click-Warp, Shrink-Wrap, Browse-Wrap Agreements, Jurisdiction in E-Commerce, Free Consent and Lawful Consideration, Consumer Protection Act, 2019, UNCITRAL Model Law on E-Commerce, Admissibility of Electronic Evidence.

In the Indian context, the law of contracts has been codified as the Indian Contract Act, 1872. This legislation serves as the foundational legal framework governing law of contracts in India. Section 2(h) of this Act defines contracts as "an agreement enforceable by law is a contract". This contract consists of promises from both the parties, and includes consideration and offer and acceptance. Agreements, which consist of a lawful consideration and a lawful object and are not declared void, can be called a "Contract". In essence, the Indian Contract Act provides a legal structure that governs the creation of contracts, their execution and enforcement.

E-commerce, or electronic commerce, is the facilitation of commercial transactions which involves buying and selling of goods and services on the internet. This includes a very broad spectrum of activities, which can include online retailing, electronic marketplaces, digital services, transferring of funds, online transactions, etc.

There are six (6) basic types of e-commerce. They are Business-to-Consumer (B2C), Business-to-Business (B2B), Consumer-to-Consumer (C2C), Consumer-to-Business (C2B), Business-to-Administration (B2A), and Consumer-to-Administration (C2A).

In the digital world, the Law of Contracts plays a vital role in the e-commerce industry. While the Indian Contract Act, 1872, provides a foundational base for contracts, the Information Technology Act, 2000, addresses the validity of electronic contracts and digital signatures. Electronic contracts, such as click-warp and browser-warp agreements, find a platform on the internet, requiring users to accept terms and conditions digitally. This helps the users to make contracts, while being at faraway destinations. Furthermore, these types of contracts and digital signatures are recognised in Courts and become admissible evidence in legal proceedings.

Talking about the essential elements of an e-contract, it is somewhat similar to the normal contracts. The legal validity of e-contracts is governed by the Indian Contract Act, 1872, and the Information Technology Act, 2000. While the Indian Contract Act provides the basic fundamental principles of a valid contract, the Information Technology Act addresses electronic communications and digital signatures. For an e-contract to be considered valid under Indian law, it must cover several essential elements, some of those of normal contracts.

1. Offer and Acceptance: For a contract to be valid, there should be offer and acceptance. Section 2(a) and 2(b) of the Indian Contract Act defines an offer and acceptance respectively. Similarly, for an e-contract too, there has to be an offer and an acceptance. In the digital world, offer and acceptance can be done via emails, messages, etc. Section 10A of the IT Act recognizes contracts where offer and acceptance are done electronically.

2. Lawful Consideration: A valid contract consists of consideration from both the parties. The concept of consideration has been defined under section 2(d) of the Indian Contract Act. Consideration refers to the value exchanged between the parties. In e-contracts, this can be as payment or online services, etc.

3. Lawful Object: The aim or objective of the contract must be legal. It should not be against the law and should not be for illegal activities. Section 23 of the Indian Contract Act defines what types of consideration and objects are lawful and unlawful. This also applies to the online agreements and e-contracts as well.

4. Free Consent: The consent should be free. It should not have been obtained through coercion, undue influence, fraud, misrepresentation, or mistake, as has been outlined from Sections 13 to 22 of the Indian Contract Act. 

5. Competency of Parties: The parties to such contracts must be competent to enter into a legal agreement, as provided under Section 11 of the Indian Contract Act. This means that the person entering into the contract must be of the age of majority, should be of sound mind, and should not be disqualified from entering into contracts by any law. 

6. Not Void: The agreements to be considered a valid contract, it should not be expressly declared to be void by any law. The purpose, object, and consideration of such agreements must be lawful and not disqualified.

As we can see, the essential elements of e-contracts are nearly similar to that of normal contracts. The only difference between them is that normal contracts are not done electronically. They are valid and enforceable under Indian law, similar to normal contracts.

To understand the formation of e-contracts, we first need to understand the types of e-contracts. There are basically three types of e-contracts. They are Click-Warp, Shrink-Wrap and Browse-Wrap Agreements.

1. Click-Wrap Agreements: This agreement is also known as "click-through". It is a non-negotiable contract commonly found in online services. These agreements require the users to accept the terms and conditions by clicking "I Accept", "OK", etc. before accessing a service. This type of agreement is often presented in online registration, product purchases or software installations. This type of agreement is advantageous for online users as they enable standardized contracts with numerous users without any individual negotiation and facilitate digital record keeping.

2. Shrink-Wrap Agreements: This type of agreement is enclosed with physical products or software where the user's acceptance is determined from actions such as opening the package or using the product. Software vendors mostly employ shrink-wrap licenses to regulate mass software distribution without individualized negotiation or physical signature. By licensing instead of selling, these vendors retain greater control over the product's use and its distribution. 

3. Browse-Wrap Agreements: This type of agreement covers the use or access of materials available on a certain website or product. Only if the person agrees to the terms and conditions on that web page, then he is able to access the contents of that page. However, the enforceability depends on whether the user had actual or constructive knowledge of the terms.

The Information Technology Act, 2000 serves as the base for the legal recognition of digital signatures and electronic records in India. Section 3A of the IT Act defines digital signature as the authentication of any electronic record by a subscriber, if it is considered reliable. Section 5 of the Act further grants legal recognition to digital signatures. Section 2(1)(t) of the act defines electronic record as "data, record or data generated, image or sound stored, received or sent in an electronic form or microfilm or computer generated microfiche". Section 4 of the Act gives legal recognition to electronic records.

The legal recognition of electronic contracts in India is primarily governed by the Indian Contract Act, 1872, and the Information Technology Act, 2000. In the Indian Contract Act, section 10 provides for conditions, when fulfilled, makes those contracts enforceable and legally recognised. Similarly, section 10A of the IT Act secures the validity and enforceability of contracts which are formed through electronic means.

1. Trimex International FZE Ltd. Dubai v. Vedanta Aluminium Ltd., India: The parties in this case entered into a negotiation via email relating to the sale of bauxite. Although there was no formal written contract executed, the Supreme Court observed that the essential elements of a contract, i.e., offer, acceptance, and consideration, were present in the emails. The Court held that even if there was no signed document, it does not negate the existence of a binding contract if the parties have agreed upon the terms and conditions through electronic communication. A contract concluded through electronic communications even in the absence of a formally signed agreement, is valid and enforceable.

2. Tamil Nadu Organic Private Ltd. v. State Bank of India: This case involved the enforcement of a contract which was entered through an electronic auction process. The Madras High Court held that contracts entered into via electronic means are valid and enforceable, provided that they fulfill the criteria mentioned in the Indian Contract Act, 1872. The Court said that such contracts are legally enforceable as contractual obligations can arise through electronic means.

In the present era, electronic communications and electronic contracts play an important role in e-transactions. However, they also pose challenges relating to their enforcement, jurisdictional challenges, authentication, and validity.

1. Jurisdictional Issues and Cross-Border Disputes: E-contracts are often done beyond the geographical boundaries of a nation. The global nature of this complicates the determination of the applicable laws in case of any dispute. In India, section 20 of the Code of Civil Procedure, 1908, provides that the jurisdiction is typically based on the residence of the defendant or on the location where the cause of action arose. Cross-border disputes complicate the enforcement due to varying legal frameworks. While international conventions such as the New York Convention facilitate the enforcement of arbitral awards, disparities in national laws can hinder the resolution of disputes arising from e-contracts.

2. Authentication and Evidentiary Issues: Ensuring the authentication of e-contracts is paramount. The IT act provides legal recognition to electronic records and digital signatures, equating them with their physical counterparts. Section 63 of the Bharatiya Sakshya Adhiniyam, 2023 (section 65B of Indian Evidence Act, 1872), provides for the admissibility of electronic records, subject to specific conditions. Despite these provisions, digital documents and records are often susceptible to unauthorized alterations which raise serious concerns about their reliability. Some courts have exhibited hesitation in accepting electronic evidence. The absence of specific laws governing these e-contracts leads to various ambiguities in their enforcement.

3. Standard Form Contracts and Unequal Bargaining Power: Standard form contracts which are commonly used in digital transactions often present terms or a take it or leave it basis which leaves very little room for negotiation. This results in unequal bargaining power where one party imposes unfavorable terms on the other. Sometimes, such contracts contain clauses that are excessively one-sided, which raises concerns about being unfair and unenforceable. Sometimes, even users may not fully understand or read the terms before agreeing which can lead to disputes over consent.

The Consumer Protection Act, 2019 and the Consumer Protection (E-commerce) Rules, 2020, establishes a comprehensive legal framework to safeguard consumer interests in India's digital marketplace. These legislations set forth the rights and duties of consumers, impose specific obligations on e-commercial entities and provide structured redressal mechanisms. Section 2(9) of the Consumer Protection Act, 2019, provides 6 fundamental rights for consumers. They are:

1. Right to Safety: Consumers have the right to be protected from goods and services that are hazardous to life and property.

2. Right to be Informed: The consumers have the right to receive accurate and complete information regarding the quantity, quality and standard of goods or services received, which enables them to prevent unfair trade practices.

3. Right to Choose: The consumers have the right and freedom to choose from a variety of services and products at competitive prices, free from coercion and unfair practices.

4. Right to be Heard: The consumer has the right that their complaints and grievances regarding the products or services are addressed and acknowledged by appropriate authorities.

5. Right to Seek Redressal: The consumers have the right to seek remedies for grievances, compensation or replacement for defective goods or services.

6. Right to Consumer Education: They have the right to consumer awareness, ensuring that they are well informed of the rights and responsibilities.

The Consumer Protection Rules, 2020, provides for the duties and obligations of sellers on e-commerce platforms. Some of those duties are:

1. Fair Practices: The seller must not engage in any type of unfair trade practices when selling their goods and services.

2. Returns and Refunds: The seller must accept returns and refunds for defective goods or services, including late deliveries.

3. Accurate Advertising: The seller must ensure that their advertisements match the actual characteristics and conditions of the products or services provided by them.

4. Honesty in Reviews: The seller must not post any fake reviews or photos of their products or services or misrepresent the quality or features of it.

5. Display Information: The seller must provide accurate information to be displayed on the platform for the product of services, such as the total price, expiry dates, country of origin, contact details for the grievance officer, etc.

The Consumer Protection Act also provides a three-tier grievance redressal mechanism:

1. District Consumer Disputes Redressal Commission: These commissions handle complaints that involve consideration up to ₹1 crore.

2. State Consumer Disputes Redressal Commission: These address cases where consideration exceeds ₹1 crore but is less than ₹10 crore.

3. National Consumer Disputes Redressal Commission: These deal with complaints which involve consideration exceeding ₹10 crore.

The UNCITRAL Model Law on Electronic Commerce (MLEC), adopted in 1996, serves as a foundation framework for the recognition of electronic transactions. It emphasizes the principles of functional equivalence and technology neutrality, and facilitates the equal treatment of electronic and paper based information. The UNCITRAL Model Law on Electronic Signatures, 2001, further reinforces the legitimacy of electronic authentication methods. It introduced the Model Law on the Use and Cross Border Recognition of Identity Management and Trust Services in 2022 which further enhances the legal infrastructure supporting digital identities and trust services in cross border contexts.

The enforcement of such cross border electronic contracts introduces many challenges, primarily due to different legal systems, jurisdictional ambiguities, and electronic evidence admissibility.

In India, the legal framework for governing electronic contracts is covered by the Indian Contract Act, 1872, and the Information Technology Act, 2000. These statutes govern the validity of electronic contracts if they fulfill essential elements such as offer, acceptance, consideration, free consent, etc. Recently, various judicial interpretations have acknowledged the enforceability of electronic contracts. Courts are progressively addressing issues related to e-contracts and block chain based agreements, focusing on electronic based consent and the applicability of traditional contractual principles to electronic transactions. This evolving jurisprudence ensures that the legal systems adapt the technological advancements, and ensure that the law remains responsive to the dynamic change in electronic commerce.

In summary, the law of contract as codified in the Indian Contract Act, 1872, still serves as the basic legal framework for agreements and contracts, even in the digital world. The Information Technology Act, 2000, serves as a backbone to the Indian Contract Act in cases where it is unable to find legal grounds. The Indian Contract Act lays down basic elements such as offer, acceptance, consideration, consent, etc., whereas the IT Act gives legal recognition to electronic records and signatures, making e-contracts valid and enforceable.

The Judiciary, through landmark cases such as the Trimex International case and Tamil Nadu Organic v. SBI case, has affirmed the legal recognition of electronic contracts in the absence of traditional written contract. However, enforceability of such contracts is not without its challenges. Issues relating to jurisdictional ambiguity, evidentiary standards, and authentication mechanisms require continued legal scrutiny and reform.

Globally, model laws like UNCITRAL's MLEC and other frameworks for digital identity management advocate for harmonized legal standards.

To summarize, e-contracts are legally valid and play an important role in today's digital world. India must remain agile while ensuring enforcement, consumer protection, and cross border harmonization to foster trust, efficiency, and certainty in digital transactions.

1. The Indian Contract Act, 1872, No. 9, Acts of Parliament, 1872 (India)

2. The Information Technology Act, 2000, No. 21, Acts of Parliament, 2000 (India)

3. Trimex International FZE Ltd. Dubai v. Vedanta Aluminium Ltd., India, (2010) 3 SCC 1 (India)

4. Tamil Nadu Organic Private Ltd. v. State Bank of India, AIR 2014 Mad 103 (India)

5. India – E-Contracts – Legal Validity And Jurisdiction, Conventus Law (Nov. 12, 2016), https://conventuslaw.com/report/india-e-contracts-legal-validity-and-jurisdiction/?utm_source=chatgpt.com

6. Rahul Sundaram, Consumer Rights Under the Consumer Protection Act, 2019: Empowering Consumers for a Fair Marketplace, India Law (Jan. 7, 2025), https://www.indialaw.in/blog/commercialcorporate/consumer-rights-under-the-consumer-protection-act-2019/

7. Rahul Sundaram, A summary of the Consumer Protection (E-Commerce) Rules, 2020, India Law (Oct. 22, 2024), https://www.indialaw.in/blog/civil/consumer-protection-e-commerce-rules/?utm_source=chatgpt.com#duties-and-liabilities-of-inventory-e-commerce-entities

8. UNCITRAL Model Law on Electronic Commerce (1996) with additional article 5 bis as adopted in 1998, https://uncitral.un.org/en/texts/ecommerce/modellaw/electronic_commerce?utm_source=chatgpt.com

9. YAGAY andSUN, Digital Contracts/Agreements: Evolution and Enforceability of E-Contracts in Indian Contract Law Context, Tax Management India. Com (Mar. 29, 2025), https://www.taxmanagementindia.com/visitor/detail_article.asp?ArticleID=13957&utm_source=chatgpt.com