E-Contracts and Digital Signatures: Legal Challenges in India

E-Contracts and Digital Signatures: Legal Challenges in India

Author: Sonam Chahar, Army Institute of Law

INTRODUCTION

As we all know contracts are agreements that are enforceable by law. This is the meaning of a contract given by laws. The contracts are between the parties who agree with each other on certain terms and conditions. As the technological revolution took place, the electronic contracts overruled the traditional contracts. E-contracts save the time, money, and complications of parties to the contract. The traditional contracts need some essential elements to be fulfilled, similarly, the e-contracts require pre-requisite conditions to be fulfilled. The old contract system dealt with paperwork, parties had to sign contracts physically, and they were time-consuming. However, e-contracts can be made digitally on various apps, websites, and gadgets. Individuals living in any corner can make contracts digitally. For completion of any contract, one needs the consent of the parties to the contract. In traditional contracts, they had to sign the documents related to the object of the contract. But in the technological era along with e-contracts, digital signatures have also evolved. The parties to the contract have the privilege to sign or submit their documents digitally without any hassle of going out. This article deals with the essentials, the advantages, and disadvantages of e-contracts and digital signatures, and their challenges in India.

1. Meaning, Definition & Explanation

The contract is defined in Section 2(h) of the Indian Contract Act,1872 as “an agreement enforceable by law is a contract”.[1] To constitute a contract as valid certain pre-requisite conditions, need to be fulfilled such as lawful consideration and lawful objects of the contract. E-contracts are defined in Section 10(A) of Information Technology(IT)Act, 2000 as “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 records, such contract shall not be deemed to be unenforceable solely on the ground that such electronic form or means was used for that purpose.”[2]

2. Essentials of contracts

There are some essential elements of the contract under The Indian Contract,1872 which are as follows:

  1. The one party must make an offer and the acceptance by the other party.
  2. The parties should be competent to enter the contract.
  3. The object of the contract must be lawful.
  4. The consideration of the contract must be lawful.
  5. The parties must enter to the contract with free consent.

Essentials of Electronic Contracts

  1. The offer must be made by one party electronically and accepted by another by the mode prescribed.
  2. The object and consideration of the contract must be lawful.
  3. The parties must be competent to make the contract.

 3. Types of E-Contracts

  1. Shrink wrap agreements

These types of agreements are related to the buying of software goods. The customer who is purchasing the software product, along with the product the customer has access to the terms and conditions of the product also.

  •  Web wrap agreements

These types of agreements are related to merely accepting the terms and conditions of the software for product purchasing. By clicking the button “OK” agreeing to the conditions of the software will give access the customer to purchase the products from that specific software. The customer has the choice of registration also entering the software. Examples are online shopping, and social media apps.

  • Browse wrap agreements

These types of agreements are between several parties and are binding each other with the usage of the website. Parties must comply with the terms and conditions of the website.  

4.  Benefits of E- Contracts

  1. Cost and time effective: It reduces the time of making a traditional contract and it is time effective as it saves the time of parties entering into a contract.
  2. Security purposes: The e-contracts are protected from any damage to the original contracts. They are also protected from any unauthorized use from other sources which are illegal in nature.
  3. Easy accessibility: The e-contracts are easily accessible from various platforms or online tools.
  4. Environment-friendly: The e-contracts reduce the paperwork which saves paper.

5. Legal Challenges of e-contract

There are some emerging key challenges of e-contracts.

  1. Authentication: The authenticity and legality of documents are essential elements to constitute a contract digitally, without the authenticity, there is the risk of fraudulent activities and tampering of documents.
  2. Free consent: Free consent is essential for contracts. The parties should refrain from coercion, misrepresentation, or any type of fraud and give free consent in compliance with the terms and conditions of the contract.
  3. Easy accessibility: The e-contracts are digitally made, and every individual does not have access to the internet which refrains them from making contracts digitally without going anywhere.
  4. Privacy: The data privacy of individuals comes in danger as they submit all their personal and professional information on online platforms to make contracts online. There is a threat to privacy on online platforms.
  5. Transaction: In India, consumers are not very aware of online transaction fraud. They purchase products from various online platforms and make transactions with a single click without going through the terms and conditions of that platform that made their loss.
  • DIGITAL SIGNATURE

Digital signatures evolved with time as technological evolution took place. Digital signatures are different from e-signatures. The digital signature is a form of consent given by one person to another person digitally attached to documents. The IT Act, of 2000 section 2(p) defines digital signatures as “digital signature” means authentication of any electronic record by a subscriber using an electronic method or procedure in accordance with the provisions of section 3.”[3]

Digital signatures are important because they carry the real identity of the individual related to the digital documents. They are equivalent to the handwritten signatures. There are three features of digital signatures which are authentication, integrity, and non-repudiation. The authentication of electronic records is given in section 3 of the IT Act, 2000 as 3. Authentication of electronic records. – (1) Subject to the provisions of this section any subscriber may authenticate an electronic record by affixing his digital signature.
(2) The authentication of the electronic record shall be effected by the use of asymmetric crypto
system and hash function which envelop and transform the initial electronic record into another electronic record.[4]

Benefits of Digital signatures

  1. Save time:  The digital signatures save time for the individual who is residing in a different city away from his/her business place. The individual can sign the documents instantly whenever needed from any place; it eventually saves time. 
  2. Cost-effective:  The digital signatures eliminate all the paper formalities. It saves the cost of companies as they no longer invest in paperwork, scanning, printing, delivery of papers, etc.
  3. Valid in nature: They are valid in nature as the laws approve it. They are authentic and original in nature. The specific rules and regulations laid down in the IT Act to ensure the legal validity.
  4.  Efficiency in Workflow:  The workflow of companies and businesses has become fast and efficient. Digital signatures save their time and are cost-effective which leads to a smooth flow of work.  

Legal Challenges of Digital Signatures

The digital signatures are managed online, and there is a risk of the tempering of documents. There are some legislative rules and regulations that determine who is competent for digital signatures. Some jurisdictions do not consider digital signatures valid. There are fraudulent activities that question the legal validity of digital signatures.

  •  CONCLUSION & COMMENTS

The technological revolution introduced e-contracts, digital signatures, electronic signatures, and many more things. The world is slowly moving toward the digital world wholly. Now, electronic contracts become one step ahead of traditional contracts in many aspects, including benefits, etc. To implement these changes effectively in a country, certain rules and regulations and legislative laws like the Information Technology Act, of 2000.

[1] Indian Contract Act,1872 available at ndiacode.nic.in/show-data?abv=CEN&statehandle=123456789/1362&actid=AC_CEN_3_20_00035_187209_1523268996428&sectionId=38605&sectionno=2&orderno=2&orgactid=AC_CEN_3_20_00035_187209_1523268996428

[2]  Information Technology Act,2000 available at https://www.indiacode.nic.in/show-data?abv=CEN&statehandle=123456789/1362&actid=AC_CEN_45_76_00001_200021_1517807324077&orderno=14&orgactid=AC_CEN_45_76_00001_200021_1517807324077

[3] Information Technology Act,2000 available at https://www.indiacode.nic.in/show-data?abv=CEN&statehandle=123456789/1362&actid=AC_CEN_45_76_00001_200021_1517807324077&orderno=2&orgactid=AC_CEN_45_76_00001_200021_1517807324077

[4] Information Technology Act, 2000 available at /mhnlakgilnojmhinhkckjpncpbhabphi/pages/pdf/web/viewer.html?file=https%3A%2F%2Fwww.indiacode.nic.in%2Fbitstream%2F123456789%2F13116%2F1%2Fit_act_2000_updated.pdf