Internet Based Contract
Content
INDIAN CONTRACT ACT AND ITS APPLICABILITY INTERNET TRANSACTIONS
14
Online contracts
It is a common practise that transactions of many goods and services depend and use standard
formof contract of terms and conditions, which are quite often hidden from the
user or not prominentlydisplayed. As the going is good there is no problem on
such practices but in a business where the volumes are high such fine print or hidden
terms may prove too costly when someone decides to act.Simply ‘I Agree’ button
displayed in front without reasonable and adequate display of terms
andconditions displayed to the buyer or user may lead to the costly litigations in
online transactionswhere there is no place of business. This necessities effective
and clear drafting of the terms
of c o n t r a c t w h e r e d r a f t i n g o f t h e t e r m s o f c o n t r a c t w h e r e t h e d r a
f t i n g l a n g u a g e h a s t o b e c l e a r transparent, to place across the business
proposition or offer without jeopardising the interest of the business where the language
could lead to multiple interpretations and running the risk in a court battle. Such
drafting requires the drafter to understand the fundamentals of
1.Relevant law in operation;
2.The practical implications of such law
3.The purpose and goal of the firm intends to achieve by such offer
4.How to use the relevant law and its implications to maximum advantage
5.How to minimize the liability risks in unforeseen circumstancesAccording to ‘Rodney’ -For
an Online contracts there are various terms and conditionsThey
areS h o u l d d i s p l a y t h e c o n t r a c t s t e r m s o n l i n e , t h e w o r l d w i d e w e b , E x p r e
s s i m p l i e d a n d t h e mandatory terms, contract formation terms, contract creation; what
constitutes an offer, as
passedt o a n i n v i t a t i o n t o t r e a t , w h e t h e r c o u n t e r o f f e r s w h e n a l l o w e d , i s t
h e r e p r o h i b i t i o n a g a i n s t customer change offer terms, where there is
automated computer acceptance if the merchant is m a k i n g a n o f f e r ,
h o w l o n g a n o f f e r i s v a l i d a n d w h a t c o n s t i t u t e s r e v o c a t i o n o f o f f e r.
W h a t constitutes acceptance and how and by what method and exactly when an acceptance
is effective(postal or receipt rule)
Electronic Contracts
Electronic contracts help the humans to avail the transactions and agreements electronically
withoutm e e t i n g e a c h o t h e r. T h i s m e a n s t h a t t h e t r a d i t i o n a l c o n t r a c t p r o c e
s s o f o f f e r, a c c e p t a n c e a n d agreement to transact through the electronic mode
than physical mod of paper. E-Commerce tosucceed such contracts need to be
validated legally as alternate mode of transaction through online using the latest
technological developments. This is aimed at:1. To create a secure atmosphere of transacting
online with alternate mode to paper and writing.2. To create an electronic documentation
system this will safeguard the contracting parties on par withthe traditional mode of
contracts.3. To create statutory status and monitoring/verifying authorities for such electronic
transaction.4. To check frauds intentional or unintentional transactions to promote
and build confidence and ingenuine online transactions.5. To create necessary
legal structures to oversee such instructions6. To establish standard rules and regulation for
smooth functioning online transactions.
7. To make digital signatures legally valid and incorporating the same with the existing legal
regimeof contracts, sale of goods, evidence and consumer acts.Such electronic
transactions will depend on the appropriate legal frame work, which
recognizes‘electronic records’ or ‘writings’ or ‘digital signatures’. It should facilitate for a
secure system of suchtransactions and should create evidentiary value of such
records.Contract formation in the electronic ContractsE-contracts are the contracts are
the contracts executed by Electronic Data Interchange EDI, EDI means the
electronic transfer from computer to computer of information using an agreed standard
tostructure the information(Article 2b of UNCTRAL model law)T h e
most online transactions that take place by the
p r o c e s s o f C l i c k W ra p c o n t r a c t w h e r e l a w provided freedom as to mode and
method of communicating offer and acceptance , clicking on the specified part of the
website to signify offer or the acceptance creates the contractual relation. Beforeclicking, the
party is expected to read terms and conditions posted on the website and on clicking thesend
option emerges. To establish the terms for download and use of software over internet set
forth awebsite’s terms of service (rules by which user may access the website or a
portion thereof andstipulate terms of online sale of goods and for rendering
service. Negotiation in most of click wrapcontracts is not available.
Case Law 3
Hotmail v. Van Money Pie Inc c-98-20064, April 1998.
Hot mail terms of service prohibit use of hotmail accounts to facilitate the transmission of
unsolicitedcommercial e-mail known as spam. Users required agreeing to it by clicking on ‘I
agree’ definitionsent spam advertising a porn material. Falsely indicated that it was sent by
hotmail only. Injunctionwas issued in this case.A p a r t f r o m t h e g o o d s a n d s e r v i c e s
c o n t r a c t s t h e r e a r e v a r i e t i e s o f e - c o n t r a c t s n o w, w i t h o n l i n e interviews, and
online selections, the employment contracts assumed importance.
17
electronic information must be in the prescribed proper format so that there can be no
questions on itsauthenticity or veracity.
Recognition of the Cyber Documents
Where any law provides that information or any other matter shall be in writing or in the
typewrittenor printed form, then, notwithstanding anything contained in such law,
such requirements shall bedeemed to have satisfied if such information or matter is.- a)
rendered made available in the electronic form; and- b) Accessible so as to be usable for a
subsequent referenceThere are various excluded documents according Section 1(4)- a)
“Negotiable Instrument” other than cheque.- b) “Power-of-Attorney”- c) “Trust”- d) “will”e) “Contract for sale” or “Conveyance” of Immovable property or any interest in such
property;- f) Any such class of documents or transactions as may be notified by the central
Government in theOfficial Gazette.According to the Sec-5 of IT Act 2000Where any law
provides that information or any other matter shall be in writing/authenticated byaffixing the
signature, notwithstanding anything contained in such law such requirement shall bedeemed
to have been satisfied, if such information or matter is,-rendered available in electronic form.authenticated by means of digital signatureSection 3Authentication of the electronic records:-
1)Subject to the provisions of this section any subscriber my authenticate and
electronic record by affixing his digital signature.
2)
The authentication of the electronic record shall be effected by the use of asymmetric
cryptosystem and has function which envelops and transform the electronic record
into another electronic record.There are various kinds of Biometric Authentication Not
considered by ITA-2000They are-Finger print scanning- Iris Scanning- Face scanningSignature
AnalysisD u r i n g t h e e a r l y d a y s o f E l e c t r o n i c D a t a I n t e r c h a n g e
( E D I ) , t h e r e w a s n o w a y t o a p p l y cryptographically based
signatures to electronic documents, so the industries elide heavily upon“trading
partner agreements”. These paper agreements, signed by the parties involved, described
therules to which the EDI trading partners agreed with respect to honouring
purchase order request,dispute resolution, and so on. Trading partner Agreements
have been remarkably successful, withlegal disputes regarding EDI transactions
being exceptionally rare, trading partner Agreement stillremain an important part
of electronic commerce. The world-wide-reach and extremely
dynamic population of the internet makes establishing Trading partners
Agreements with all the possible participants in electronic transactions practically
impossible. The means to provide digital
signaturesf o r c o m p u t e r c o m m u n i c a t i o n s t h a t a r e r o u g h l y e q u i v a l e n t t o h a n
d w r i t t e n s i g n a t u r e s o n p a p e r documents available with the advent of the Public key
technology.The future of legal signatures in the online contractsThe challenge of enabling
large-scale e-commerce in all its guises requires that a means be found to shift virtually
all aspects of Ana log commerce into virtual guiseThe means of digitizing most features of
everyday commerce is relatively straightforward. Commercegenerally relies quite
heavily on paper trails of one variety or another and the nature of the
digitalm e d i u m i s s u c h t h a t d i g i t a l e q u i v a l e n t o f g i v e n p r o c e s s w i l
l b e m u c h r i c h e r i n t e r m s u s e f u l information content and accessibility.
One evident exception to this principle is the common place signature.
Digital signatures share some interesting features with legal signatures in the
sensethat they can be fairly readily and intimately related to an individual and
they serve to authenticatedigital content with a high degree of assurance.It is therefore
very tempting to seize digital signature technology and the public key
infrastructure that supports them and presses them into service to support both
legalsignatures and broader contractual framework that e-commerce naturally thirsts for. In
addition to thedesire to enlist digital signatures have features that surpass
the analog signature in many
importanta s p e c t s . F o r e x a m p l e , t h e y a u t h e n t i c a t e t h e c o n t e n t w i t h
w h i c h t h e y a r e a s s o c i a t e d f a r m o r e intrinsically and integrally and, combined
with encrypted content, they actually serve to secure the content against disclosure to
unintended readers.These features of digital signatures have led to a fairly extensive and
broadly based movement in legal circles both in North America and Europe to
design a paradigm withinwhich digital signatures and contracting into the digital
medium, but actually go beyond what iscurrently done with pen and ink by proposing
to venture into the realm of non-repudiable contractualinstruments supported in part by
a scheme of virtual notarization.At the early stage of development of digital networks we are
close to a virtual big bang. Thus
digitals i g n a t u r e s , c o n t r a c t u a l p a r a d i g m s , b i o m e t r i c s , a u t h e n t i c a t i o
n , r u l e s o f e v i d e n c e , n e t w o r k communication protocols, signatures,
packet standards, directories, and other nascent features andtools are all tightly
and closely packed together, The professionals in search of the digital
tools,i n c l u d i n g t e l e c o m n e t w o r k e n g i n e e r s . , L a w y e r s , s o f t w a r e d e s i g n e r s
, e - c o m m e r c e m a n a g e r s , cryptographers, law enforcement professionals, social
scientists and many others, are all beingcrossed.A digital signatures ‘fixes’ the identity
of a party entering into the contract, these digital signatures areimportant where the precontractual dialogues have been conducted by computer agents or over distance,
and it is valid when there should be a confirmation of the identified individuals acceptanceo f
terms on offer, The ability to imprint ‘time’ into the signature or
‘ s t a m p ’ u n l i k e a p h y s i c a l signature where the time can be added later.Secure digital
signatureIf, by application of a security procedure agreed to by the parties concerned, it can
be verified that adigital signature, at the time it was affixed, was-a ) U n i q u e t o t h e
subscriber affixing it:
14
Online contracts
It is a common practise that transactions of many goods and services depend and use standard
formof contract of terms and conditions, which are quite often hidden from the
user or not prominentlydisplayed. As the going is good there is no problem on
such practices but in a business where the volumes are high such fine print or hidden
terms may prove too costly when someone decides to act.Simply ‘I Agree’ button
displayed in front without reasonable and adequate display of terms
andconditions displayed to the buyer or user may lead to the costly litigations in
online transactionswhere there is no place of business. This necessities effective
and clear drafting of the terms
of c o n t r a c t w h e r e d r a f t i n g o f t h e t e r m s o f c o n t r a c t w h e r e t h e d r a
f t i n g l a n g u a g e h a s t o b e c l e a r transparent, to place across the business
proposition or offer without jeopardising the interest of the business where the language
could lead to multiple interpretations and running the risk in a court battle. Such
drafting requires the drafter to understand the fundamentals of
1.Relevant law in operation;
2.The practical implications of such law
3.The purpose and goal of the firm intends to achieve by such offer
4.How to use the relevant law and its implications to maximum advantage
5.How to minimize the liability risks in unforeseen circumstancesAccording to ‘Rodney’ -For
an Online contracts there are various terms and conditionsThey
areS h o u l d d i s p l a y t h e c o n t r a c t s t e r m s o n l i n e , t h e w o r l d w i d e w e b , E x p r e
s s i m p l i e d a n d t h e mandatory terms, contract formation terms, contract creation; what
constitutes an offer, as
passedt o a n i n v i t a t i o n t o t r e a t , w h e t h e r c o u n t e r o f f e r s w h e n a l l o w e d , i s t
h e r e p r o h i b i t i o n a g a i n s t customer change offer terms, where there is
automated computer acceptance if the merchant is m a k i n g a n o f f e r ,
h o w l o n g a n o f f e r i s v a l i d a n d w h a t c o n s t i t u t e s r e v o c a t i o n o f o f f e r.
W h a t constitutes acceptance and how and by what method and exactly when an acceptance
is effective(postal or receipt rule)
Electronic Contracts
Electronic contracts help the humans to avail the transactions and agreements electronically
withoutm e e t i n g e a c h o t h e r. T h i s m e a n s t h a t t h e t r a d i t i o n a l c o n t r a c t p r o c e
s s o f o f f e r, a c c e p t a n c e a n d agreement to transact through the electronic mode
than physical mod of paper. E-Commerce tosucceed such contracts need to be
validated legally as alternate mode of transaction through online using the latest
technological developments. This is aimed at:1. To create a secure atmosphere of transacting
online with alternate mode to paper and writing.2. To create an electronic documentation
system this will safeguard the contracting parties on par withthe traditional mode of
contracts.3. To create statutory status and monitoring/verifying authorities for such electronic
transaction.4. To check frauds intentional or unintentional transactions to promote
and build confidence and ingenuine online transactions.5. To create necessary
legal structures to oversee such instructions6. To establish standard rules and regulation for
smooth functioning online transactions.
7. To make digital signatures legally valid and incorporating the same with the existing legal
regimeof contracts, sale of goods, evidence and consumer acts.Such electronic
transactions will depend on the appropriate legal frame work, which
recognizes‘electronic records’ or ‘writings’ or ‘digital signatures’. It should facilitate for a
secure system of suchtransactions and should create evidentiary value of such
records.Contract formation in the electronic ContractsE-contracts are the contracts are
the contracts executed by Electronic Data Interchange EDI, EDI means the
electronic transfer from computer to computer of information using an agreed standard
tostructure the information(Article 2b of UNCTRAL model law)T h e
most online transactions that take place by the
p r o c e s s o f C l i c k W ra p c o n t r a c t w h e r e l a w provided freedom as to mode and
method of communicating offer and acceptance , clicking on the specified part of the
website to signify offer or the acceptance creates the contractual relation. Beforeclicking, the
party is expected to read terms and conditions posted on the website and on clicking thesend
option emerges. To establish the terms for download and use of software over internet set
forth awebsite’s terms of service (rules by which user may access the website or a
portion thereof andstipulate terms of online sale of goods and for rendering
service. Negotiation in most of click wrapcontracts is not available.
Case Law 3
Hotmail v. Van Money Pie Inc c-98-20064, April 1998.
Hot mail terms of service prohibit use of hotmail accounts to facilitate the transmission of
unsolicitedcommercial e-mail known as spam. Users required agreeing to it by clicking on ‘I
agree’ definitionsent spam advertising a porn material. Falsely indicated that it was sent by
hotmail only. Injunctionwas issued in this case.A p a r t f r o m t h e g o o d s a n d s e r v i c e s
c o n t r a c t s t h e r e a r e v a r i e t i e s o f e - c o n t r a c t s n o w, w i t h o n l i n e interviews, and
online selections, the employment contracts assumed importance.
17
electronic information must be in the prescribed proper format so that there can be no
questions on itsauthenticity or veracity.
Recognition of the Cyber Documents
Where any law provides that information or any other matter shall be in writing or in the
typewrittenor printed form, then, notwithstanding anything contained in such law,
such requirements shall bedeemed to have satisfied if such information or matter is.- a)
rendered made available in the electronic form; and- b) Accessible so as to be usable for a
subsequent referenceThere are various excluded documents according Section 1(4)- a)
“Negotiable Instrument” other than cheque.- b) “Power-of-Attorney”- c) “Trust”- d) “will”e) “Contract for sale” or “Conveyance” of Immovable property or any interest in such
property;- f) Any such class of documents or transactions as may be notified by the central
Government in theOfficial Gazette.According to the Sec-5 of IT Act 2000Where any law
provides that information or any other matter shall be in writing/authenticated byaffixing the
signature, notwithstanding anything contained in such law such requirement shall bedeemed
to have been satisfied, if such information or matter is,-rendered available in electronic form.authenticated by means of digital signatureSection 3Authentication of the electronic records:-
1)Subject to the provisions of this section any subscriber my authenticate and
electronic record by affixing his digital signature.
2)
The authentication of the electronic record shall be effected by the use of asymmetric
cryptosystem and has function which envelops and transform the electronic record
into another electronic record.There are various kinds of Biometric Authentication Not
considered by ITA-2000They are-Finger print scanning- Iris Scanning- Face scanningSignature
AnalysisD u r i n g t h e e a r l y d a y s o f E l e c t r o n i c D a t a I n t e r c h a n g e
( E D I ) , t h e r e w a s n o w a y t o a p p l y cryptographically based
signatures to electronic documents, so the industries elide heavily upon“trading
partner agreements”. These paper agreements, signed by the parties involved, described
therules to which the EDI trading partners agreed with respect to honouring
purchase order request,dispute resolution, and so on. Trading partner Agreements
have been remarkably successful, withlegal disputes regarding EDI transactions
being exceptionally rare, trading partner Agreement stillremain an important part
of electronic commerce. The world-wide-reach and extremely
dynamic population of the internet makes establishing Trading partners
Agreements with all the possible participants in electronic transactions practically
impossible. The means to provide digital
signaturesf o r c o m p u t e r c o m m u n i c a t i o n s t h a t a r e r o u g h l y e q u i v a l e n t t o h a n
d w r i t t e n s i g n a t u r e s o n p a p e r documents available with the advent of the Public key
technology.The future of legal signatures in the online contractsThe challenge of enabling
large-scale e-commerce in all its guises requires that a means be found to shift virtually
all aspects of Ana log commerce into virtual guiseThe means of digitizing most features of
everyday commerce is relatively straightforward. Commercegenerally relies quite
heavily on paper trails of one variety or another and the nature of the
digitalm e d i u m i s s u c h t h a t d i g i t a l e q u i v a l e n t o f g i v e n p r o c e s s w i l
l b e m u c h r i c h e r i n t e r m s u s e f u l information content and accessibility.
One evident exception to this principle is the common place signature.
Digital signatures share some interesting features with legal signatures in the
sensethat they can be fairly readily and intimately related to an individual and
they serve to authenticatedigital content with a high degree of assurance.It is therefore
very tempting to seize digital signature technology and the public key
infrastructure that supports them and presses them into service to support both
legalsignatures and broader contractual framework that e-commerce naturally thirsts for. In
addition to thedesire to enlist digital signatures have features that surpass
the analog signature in many
importanta s p e c t s . F o r e x a m p l e , t h e y a u t h e n t i c a t e t h e c o n t e n t w i t h
w h i c h t h e y a r e a s s o c i a t e d f a r m o r e intrinsically and integrally and, combined
with encrypted content, they actually serve to secure the content against disclosure to
unintended readers.These features of digital signatures have led to a fairly extensive and
broadly based movement in legal circles both in North America and Europe to
design a paradigm withinwhich digital signatures and contracting into the digital
medium, but actually go beyond what iscurrently done with pen and ink by proposing
to venture into the realm of non-repudiable contractualinstruments supported in part by
a scheme of virtual notarization.At the early stage of development of digital networks we are
close to a virtual big bang. Thus
digitals i g n a t u r e s , c o n t r a c t u a l p a r a d i g m s , b i o m e t r i c s , a u t h e n t i c a t i o
n , r u l e s o f e v i d e n c e , n e t w o r k communication protocols, signatures,
packet standards, directories, and other nascent features andtools are all tightly
and closely packed together, The professionals in search of the digital
tools,i n c l u d i n g t e l e c o m n e t w o r k e n g i n e e r s . , L a w y e r s , s o f t w a r e d e s i g n e r s
, e - c o m m e r c e m a n a g e r s , cryptographers, law enforcement professionals, social
scientists and many others, are all beingcrossed.A digital signatures ‘fixes’ the identity
of a party entering into the contract, these digital signatures areimportant where the precontractual dialogues have been conducted by computer agents or over distance,
and it is valid when there should be a confirmation of the identified individuals acceptanceo f
terms on offer, The ability to imprint ‘time’ into the signature or
‘ s t a m p ’ u n l i k e a p h y s i c a l signature where the time can be added later.Secure digital
signatureIf, by application of a security procedure agreed to by the parties concerned, it can
be verified that adigital signature, at the time it was affixed, was-a ) U n i q u e t o t h e
subscriber affixing it:
