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Formation of E contracts

Attribution of electronic records, An electronic record shall be attributed to the originator 1. 2. if it was sent by the originator himself; by a person who had the authority to act on behalf of the originator in respect of that electronic record; or 3. By an information system programmed by or on behalf of the originator to operate automatically.

ere, Originator means A person who sends, generates, stores or transmits any electronic message or causes any electronic message to be sent, generated, stored or transmitted to any other person! "riginator doesn#t include Intermediary. Example:$i%e& uses his yahoo account to send an email to 'ohit. ere, $i%e& is the originator ( )ahoo is the intermediary. Example:$i%e& is on %acation. *uring %acation he has turned his %acation responder on with the following message+, -han& you for your email. . am on %acation, will reply your mail as soon . get bac&!. ere, though $i%e& has programmed an information system to operate automatically on his behalf. /till $i%e& is the originator! in this case.

Acknowledgement of receipt 1. 0here the originator has not agreed with the addressee that the ac&nowledgment of receipt of electronic record be gi%en in a particular form or by a particular method, an ac&nowledgment may be gi%en by 1. 2. any communication by the addressee, automated or otherwise; or Any conduct of the addressee, sufficient to indicate to the originator that the electronic record has been recei%ed. ere, Addressee means

A person who is intended by the originator to recei%e the electronic record but does not include any intermediary!. Example:$i%e& uses his yahoo account to send an email to 'ohit. ere, $i%e& is originator, )ahoo is intermediary ( 'ohit is addressee. Example+, 'ohit sends an email to 1oo2a as&ing her that he would li&e to purchase a car and would li&e to &now the prices of the cars a%ailable for sale. 1oo2a in return sends 'ohit a catalogue of prices of the cars a%ailable for sale. 3ow this action of 1oo2a is sufficient to indicate to 'ohit 4the originator5 that his email 4i.e. the electronic record5 has been recei%ed by the addressee 4i.e. 1oo2a5. 1. 0here the originator has stipulated that the electronic record shall be binding only on receipt of an ac&nowledgment of such electronic record by him, then unless ac&nowledgment has been so recei%ed, the electronic record shall be deemed to ha%e been ne%er sent by the originator. 2. 0here the originator has not stipulated that the electronic record shall be binding only on receipt of such ac&nowledgment, and the ac&nowledgment has not been recei%ed by the originator within the specified time or reasonable time, then the originator may gi%e notice to the addressee stating that no ac&nowledgment has been recei%ed by him and specifying a reasonable time by which the ac&nowledgment must be recei%ed by him. 3ow if no ac&nowledgment is recei%ed within the aforesaid time limit he may after gi%ing notice to the addressee, treat the electronic record as though it has ne%er been sent.

ime and place of dispatc! and receipt of electronic record 415 /a%e as otherwise agreed to between the originator and the addressee, the dispatch of an electronic record occurs when it enters a computer resource outside the control of the originator. Example:1oo2a composes a message for 'ohit. At e6actly 12.77 noon she presses the /end! button. 0hen she does that the message lea%es her computer and begins its 2ourney across the .nternet. .t is now no longer in 1oo2a#s control. -he time of dispatch of this message will be 12.77 noon.

425 /a%e as otherwise agreed between the originator and the addressee, the time of receipt of an electronic record shall be determined as follows, namely+ 1. if the addressee has designated a computer resource for the purpose of recei%ing electronic records, 4i5 receipt occurs at the time when the electronic record enters the designated computer resource; or 4ii5 if the electronic record is sent to a computer resource of the addressee that is not the designated computer resource, receipt occurs at the time when the electronic record is retrie%ed by the addressee; 4b5 if the addressee has not designated a computer resource along with the specified timings, if any, receipt occurs when the electronic record enters the computer resource of the addressee. 435 /a%e as otherwise agreed to between the originator and the addressee, an electronic record is deemed to be dispatched at the place where the originator has his place of business, and is deemed to be recei%ed at the place where the addressee has his place of business. 1. -he pro%isions of sub,section 425 shall apply notwithstanding that the place where the computer resource is located may be different from the place where the electronic record is deemed to ha%e been recei%ed under sub,section 435. Example+, 'ohit has entered into contract with a 8/ based company. 9ompany has its ser%er in Bra:il. ;%en if the company has its mail ser%er located physically in Bra:il, the place of receipt of the order would be the company#s office in 8/A. 2. <or the purposes of this section, 4a5 if the originator or the addressee has more than one place of business, the principal place of business, shall be the place of business; 4b5 if the originator or the addressee does not ha%e a place of business, his usual place of residence shall be deemed to be the place of business; 4c5 =usual place of residence=, in relation to a body corporate, means the place where it is registered.

Electronic Contracts
Electronic contracts (contracts that are not paper based but rather in electronic form) are born out of the need for speed, convenience and efficiency. Imagine a contract that an Indian exporter and an American importer wish to enter into. One option would be that one party first draws up two copies of the contract, signs them and couriers them to the other, who in turn signs both copies and couriers one copy back. he other option is that the two parties meet somewhere and sign the contract. In the electronic age, the whole transaction can be completed in seconds, with both parties simply affixing their digital signatures to an electronic copy of the contract. here is no need for delayed couriers and additional travelling costs in such a scenario. here was initially an apprehension amongst the legislatures to recogni!e this modern technology, but now many countries have enacted laws to recogni!e electronic contracts. he conventional law relating to contracts is not sufficient to address all the issues that arise in electronic contracts. he Information echnology Act (I Act) solves some of the peculiar issues that arise in the formation and authentication of electronic contracts

Essentials of an electronic contract


As in every other contract, an electronic contract also re"uires the following necessary ingredients# 1. An offer needs to be made In many transactions (whether online or conventional) the offer is not made directly one$on$one. he consumer %browses& the available goods and services displayed on the merchant&s website and then chooses what he would like to purchase. he offer is not made by website displaying the items for sale at a particular price. his is actually an invitation to offer and hence is revocable at any time up to the time of acceptance. he offer is made by the customer on placing the products in the virtual %basket& or %shopping cart& for payment. 2. The offer needs to be accepted As stated earlier, the acceptance is usually undertaken by the business after the offer has been made by the consumer in relation with the invitation to offer. An offer is revocable at any time until the acceptance is made.

Procedures available for forming electronic contracts include: '. E-mail: Offers and acceptances can be exchanged entirely by e$mail, or can be combined with paper documents, faxes,telephonic discussions etc. (. Web ite !orms: he seller can offer goods or services (e.g. air tickets, software etc) through his website. he customer places an order by completing and transmitting the order form provided on the website. he goods may be physically delivered later (e.g. in case of clothes, music )*s etc) or be immediately delivered electronically (e.g. e$tickets, software, mp+ etc). +. "nline Agreements: ,sers may need to accept an online agreement in order to be able to avail of the services e.g. clicking on -I accept. while installing software or clicking on

-I agree. while signing up for an email account. #. There has to be la$ful consideration Any contract to be enforceable by law must have lawful consideration, i.e., when both parties give and receive something in return. herefore, if an auction site facilitates a contract between two parties where one person provides a narcotic drug as consideration for purchasing an mp+ player, then such a contract is void. %. There has to be an intention to create legal relations If there is no intention on the part of the parties to create legal relationships, then no contract is possible between them. ,sually, agreements of a domestic or social nature are not contracts and therefore are not enforceable, e.g., a website providing general health related information and tips. &. The parties must be competent to contract )ontracts by minors, lunatics etc are void. All the parties to the contract must be legally competent to enter into the contract. '. There must be free and genuine consent )onsent is said to be free when there is absence of coercion, misrepresentation, undue influence or fraud. In other words, there must not be any subversion of the will of any party to the contract to enter such contract. ,sually, in online contracts, especially when there is no active real$time interaction between the contracting parties, e.g., between a website and the customer who buys through such a site, the clic( through procedure ensures free and genuine consent. ). The ob*ect of the contract must be la$ful A valid contract presupposes a lawful ob/ect. hus a contract for selling narcotic drugs online is void. +. There must be certaint, and possibilit, of performance A contract, to be enforceable, must not be vague or uncertain and there must be possibility of performance. A contract, which is impossible to perform, cannot be enforced, e.g., where a website promises to sell land on the moon. "T-E. /specific0 1. Attribution must be bet$een originator and addressee 2 . .eceipt ac(no$ledgement of both parties #. ecure and reliable electronic record %. .eliable digital signature &. virus-free computer '. 1nteraction of electronic agents ). Assure fairness +. E record is an original record

.elevant 1T Act provisions


Attribution of Electronic .ecords
According to section '' of the I Act ''. An electronic record shall be attributed to the originator0 (a) if it was sent by the originator himself1 (b) by a person who had the authority to act on behalf of the originator in respect of that electronic record1 or (c) by an information system programmed by or on behalf of the originator to operate automatically. According to section ((') (!a) of the I Act, originator is a person who# '. sends, generates, stores or transmits any electronic message or (. causes any electronic message to be sent, generated, stored or transmitted to any other person. he term originator does not include an intermediar,. 1llustration 2oo/a uses her gmail.com email account to send an email to 3ameer. 2oo/a is the originator of the email. 4mail.com is the intermediary. his section can best be understood with the help of suitable illustrations. 1llustration 1 2oo/a logs in to her web$based gmail.com email account. 3he composes an email and presses the -3end. button, thereby sending the email to 3ameer. he electronic record (email in this case) will be attributed to 2oo/a (the originator in this case) as 2oo/a herself has sent it. 1llustration 2 2oo/a instructs her assistant 3iddharth to send the above$mentioned email. In this case also, the email will be attributed to 2oo/a (and not her assistant 3iddharth). he email has been sent by a person (3iddharth) who had the authority to act on behalf of the originator (2oo/a) of the electronic record (email). 1llustration # 2oo/a goes on vacation for a week. In the meanwhile, she does not want people to think that she is ignoring their emails. 3he configures her gmail.com account to

automatically reply to all incoming email messages with the following message# - hanks for your email. I am on vacation for a week and will reply to your email as soon as I get back.. 5ow every time that gmail.com replies to an incoming email on behalf of 2oo/a, the automatically generated email will be attributed to 2oo/a as it has been sent by an information system programmed on behalf of the originator (i.e. 2oo/a) to operate automatically.

Ac(no$ledgment of .eceipt
According to section '((') of the I Act 6here the originator has not agreed with the addressee that the acknowledgment of receipt of electronic record be given in a particular form or by a particular method, an acknowledgment may be given by0 (a) any communication by the addressee, automated or otherwise1 or (b) any conduct of the addressee, sufficient to indicate to the originator that the electronic record has been received. According to section ((') (b) of the I Act, Addressee means a person who is intended by the originator to receive the electronic record but does not include any intermediary. 1llustration 2oo/a uses her gmail.com email account to send an email to 3ameer. 2oo/a is the originator of the email. 4mail.com is the intermediary. 3ameer is the addressee. his sub$section provides for methods in which the acknowledgment of receipt of an electronic record may be given, provided no particular method has been agreed upon between the originator and the recipient. One method for giving such acknowledgement is any communication (automated or otherwise) made by the addressee in this regard. 1llustration 7et us go back to the earlier example of 2oo/a going on vacation for a week. 3he has configured her email account to automatically reply to all incoming email messages with the following message Thanks for your email. I am on vacation for a week and will reply to your email as soon as I get back. he incoming message is also affixed at the bottom of the above$mentioned message. 5ow when 3iddharth sends an electronic record to 2oo/a by email, he will receive 2oo/a&s pre$set message as well as a copy of his own message. his automated communication will serve as an acknowledgement that 2oo/a has received 3iddharth&s message. Another method is any conduct of the addressee, sufficient to indicate to the originator that the electronic record has been received. 7et us take another illustration. 1llustration 8ohit sends an email to 2oo/a informing her that he would like to purchase a car from her and would like to know the prices of the cars available for sale. 2oo/a

subse"uently sends 8ohit a catalogue of prices of the cars available for sale. It can now be concluded that 2oo/a has received 8ohit&s electronic record. his is because such a conduct on the part of 2oo/a (i.e. sending the catalogue) is sufficient to indicate to 8ohit (the originator) that his email (i.e. the electronic record) has been received by the addressee (i.e. 2oo/a). According to section '((() of the I Act Where the originator has stipulated that the electronic record shall be binding only on receipt of an acknowledgment of such electronic record by him, then unless acknowledgment has been so received, the electronic record shall be deemed to have been never sent by the originator. 1llustration 3uppose 2oo/a wants to sell a car to 3ameer. 3he sends him an offer to buy the car. In her email, 2oo/a asked 3ameer to send her an acknowledgement that he has received her email. 3ameer does not send her an acknowledgement. In such a situation it shall be assumed that the email sent by 2oo/a was never sent. According to section '((+) of the I Act Where the originator has not stipulated that the electronic record shall be binding only on receipt of such acknowledgment, and the acknowledgment has not been received by the originator within the time specified or agreed or, if no time has been specified or agreed to within a reasonable time, then the originator may give notice to the addressee stating that no acknowledgment has been received by him and specifying a reasonable time by which the acknowledgment must be received by him and if no acknowledgment is received within the aforesaid time limit he may after giving notice to the addressee, treat the electronic record as though it has never been sent. 1llustration 8ohit sends the following email to 3ameer# Further to our discussion, I am ready to pay s !" lakh for the source code for the #$I software developed by you. %et me know as soon as you receive this email. 3ameer does not acknowledge receipt of this email. 8ohit sends him another email as follows# I am resending you my earlier email in which I had offered to pay s !" lakh for the source code for the #$I software developed by you. #lease acknowledge receipt of my email latest by ne&t week. 3ameer does not acknowledge the email even after a week. he initial email sent by 8ohit will be treated to have never been sent.

Time and place of despatch and receipt


According to section '+(') of the I Act 'ave as otherwise agreed to between the originator and the addressee, the despatch of an electronic record occurs when it enters a computer resource outside the control of the originator.

1llustration 2oo/a composes a message for 8ohit at ''.9: a.m. At exactly '(.;; noon she presses the -3ubmit. or -3end. button. 6hen she does that the message leaves her computer and begins its /ourney across the Internet. It is now no longer in 2oo/a&s control. he time of despatch of this message will be '(.;; noon. According to section '+(() of the I Act 'ave as otherwise agreed between the originator and the addressee, the time of receipt of an electronic record shall be determined as follows, namely() *a+ if the addressee has designated a computer resource for the purpose of receiving electronic records,) *i+ receipt occurs at the time when the electronic record enters the designated computer resource, or *ii+ if the electronic record is sent to a compute resource of the addressee that is not the designated computer resource, receipt occurs at the time when the electronic record is retrieved by the addressee, *b+ if the addressee has not designated a computer resource along with specified timings, if any, receipt occurs when the electronic record enters the computer resource of the addressee. 1llustration: he marketing department of a company claims that it would make the delivery of any order within <= hours of receipt of the order. >or this purpose they have created an order form on their website. he customer only has to fill in the form and press submit and the message reaches the designated email address of the marketing department. 5ow 3uresh, a customer, fills in this order form and presses submit. he moment the message reaches the company&s server, the order is deemed to have been received. ?aran, on the other hand, emails his order to the information division of the company. One @r. 3harma, who is out on vacation, checks this account once a week. @r. 3harma comes back two weeks later and logs in to the account at ''.+; a.m. his is the time of receipt of the message although it was sent two weeks earlier. 5ow suppose the company had not specified any address to which orders can be sent by email. Aad ?aran then sent the order to the information division, the time of receipt of the message would have been the time when it reached the server of the company. According to section '+(+) of the I Act 'ave as otherwise agreed to between the originator and the addressee, an electronic record is deemed to be despatched at the place where the originator has his place of business, and is deemed to be received at the place where the addressee has his place of business. 1llustration 3ameer is a businessman operating from his home in 2une, India. 3ameer sent an order by email to a company having its head office in 5ew Bork, ,3A. he place of

despatch of the order would be 3ameer&s home and the place of receipt of the order would be the company&s office. According to section '+(<) of the I Act The provisions of sub-section *!+ shall apply notwithstanding that the place where the computer resource is located may be different from the place where the electronic record is deemed to have been received under sub-section *.+ 7et us consider the illustration mentioned above of 3ameer and the 5ew Bork based company. Cven if the company has its mail server located physically at )anada, the place of receipt of the order would be the company&s office in 5ew Bork ,3A. According to section '+(9) of the I Act For the purposes of this section,) *a+ if the originator or the addressee has more than one place of business, the principal place of business, shall be the place of business, *b+ if the originator or the addressee does not have a place of business, his usual place of residence shall be deemed to be the place of business, *c+ /usual place of residence/, in relation to a body corporate, means the place where it is registered . 1llustration 3ameer sent an order by email to a company having its head office in 5ew Bork, ,3A. he company has offices in '( countries. he place of business will be the principal place of business (5ew Bork in this case). 3ameer is a businessman operating from his home in 2une, India. Ae does not have a separate place of business. 3ameer&s residence will be deemed to be the place of business. A landmark /udgement was given by the Allahabad Aigh )ourt with respect to the formation of electronic contracts.

P... Transport Agenc, vs. 2nion of 1ndia 3 others AI8(;;:All(+, (;;:(') A6)9;<
14 T-E -15- C"2.T "! A66A-A7A8 )ivil @isc. 6rit 2etition 5o. 9=<:= of (;;9 *ecided On# (<.;D.(;;9 Appellants: 2.8. ransport Agency through its partner 3ri 2rabhakar 3ingh Es. .espondent: ,nion of India (,OI) through 3ecretary, @inistry of )oal, Fharat )oking )oal 7td. through its )hairman, )hief 3ales @anager 8oad 3ales, Fharat )oking )oal 7td. and @etal and 3crap rading )orporation 7td. (@3 ) 7td.) through its )hairman cum @anaging *irector 7ac(ground of the case Fharat )oking )oal 7td (F))) held an e$auction for coal in different lots. 2.8. ransport Agency&s (28 A) bid was accepted for <;;; metric tons of coal from *obari )olliery. he acceptance letter was issued on 'Dth Guly (;;9 by e$mail to 28 A&s e$mail address. Acting upon this acceptance, 28 A deposited the full amount of 8s. ='.'( lakh through a che"ue in favour of F)). his che"ue was accepted and encashed by F)). F)) did not deliver the coal to 28 A. Instead it e$mailed 28 A saying that the sale as well as the e$auction in favour of 28 A stood cancelled Hdue to some technical and unavoidable reasonsH. he only reason for this cancellation was that there was some other person whose bid for the same coal was slightly higher than that of 28 A. *ue to some flaw in the computer or its programme or feeding of data the higher bid had not been considered earlier. his communication was challenged by 28 A in the Aigh )ourt of Allahabad. I5ote# Allahabad is in the state of ,ttar 2radesh (,2)J F)) ob/ected to the -territorial /urisdiction. of the )ourt on the grounds that no part of the cause of action had arisen within ,.2. 1ssue raised b, 7CC he Aigh )ourt at Allahabad (in ,.2.) had no /urisdiction as no part of the cause of action had arisen within ,.2. 1ssues raised b, P.TA '. he communication of the acceptance of the tender was received by the petitioner by e$mail at )handauli (,.2.). Aence, the contract (from which the dispute arose) was completed at )handauli (,.2). he completion of the contract is a part of the -cause of action.. (. he place where the contract was completed by receipt of communication of acceptance is a place where Kpart of cause of actionK arises.

Points considered b, the court '. 6ith reference to contracts made by telephone, telex or fax, the contract is complete when and where the acceptance is received. Aowever, this principle can apply only where the transmitting terminal and the receiving terminal are at fixed points. (. In case of e$mail, the data (in this case acceptance) can be transmitted from anywhere by the e$mail account holder. It goes to the memory of a KserverK which may be located anywhere and can be retrieved by the addressee account holder from anywhere in the world. herefore, there is no fixed point either of transmission or of receipt. +. 3ection '+(+) of the Information echnology Act has covered this difficulty of -no fixed point either of transmission or of receipt.. According to this section -...an electronic record is deemed to be received at the place where the addressee has his place of business.H <. he acceptance of the tender will be deemed to be received by 28 A at the places where it has place of business. In this case it is Earanasi and )handauli (both in ,.2.) 8ecision of the court '. he acceptance was received by 28 A at )handauli L Earanasi. he contract became complete by receipt of such acceptance. (. Foth these places were within the territorial /urisdiction of the Aigh )ourt of Allahabad. herefore, a part of the cause of action had arisen in ,.2. and the court had territorial /urisdiction..

Validity of e contracts
he validity of the eMcontracts and limitation of the present law are determined by section III,IE N E of the present act. hese sections define the purpose, applicability and scope of the present law. hese sections are as under# ECT1"4 #: his Act shall be construed consistently with what is commercially reasonable under the circumstances and to effectuate the following purposes# (a) o facilitate electronic communications by means of reliable electronic records1 (b) o facilitate and promote electronic commerce, to eliminate barriers to electronic commerce resulting from uncertainties over writing and signature re"uirements, and to promote the development of the legal and business infrastructure necessary to implement secure electronic commerce1 (c) o facilitate the electronic filing of documents with government agencies and statutory corporations, and to promote efficient delivery of government services by means of electronic records1 (d) o minimi!e the incidence of forged electronic records, intentional and unintentional alterations of records, and fraud in electronic commerce and other electronic transactions1 (e) o promote public confidence in the integrity and reliability of electronic records, electronic signatures and electronic commerce1 (f) o establish uniform rules and standards regarding the authentication and integrity of electronic records1 and (g) o create a legal infrastructure for the use of digital signatures. )omments# his Act aims to remove actual and perceived barriers to electronic commerce and to set forth a legal framework to promote and facilitate the development of electronic commerce. It seeks to remove barriers by clarifying existing uncertainty over whether electronic records are HwritingsH or HsignaturesH or HrecordsH for legal purposes. o promote electronic commerce, this Act provides for recognition of a class of electronic records known as HsecureH electronic records and signatures. 3ecure electronic records and signatures are afforded higher evidentiary presumptions to provide parties engaged in electronic commerce assurance that their transactions are enforceable. In addition, this Act addresses evidentiary concerns as to the admissibility of electronic records. he Act presents a logical and coherent approach to resolving issues raised by electronic commerce and, where possible, seeks to preserve uniformity among the approaches to electronic commerce legislation taken by various countries.

ECT1"4 %: (a) 2arts II or IE of this Act shall not apply to any law re"uiring writing or signatures in any of the following circumstances# (') the creation or execution of a will1 (() the execution of negotiable instruments1 (+) the creation, performance or enforcement of an indenture, declaration of trust or power of attorney with the exception of constructive and resulting trusts1 (<) any for the sale or other disposition of immovable property, or any interest in such property1 (9) the conveyance of immovable property or the transfer of any interest in immovable property1 (:) documents of title for movable or immovable property1 or (O) where such application would involve a construction of a rule of law that is clearly inconsistent with the manifest intent of the lawmaking body or repugnant to the context of the same rule of law, provided that the mere re"uirement that information be Hin writing,H HwrittenH or HprintedH shall not by itself be sufficient to establish such intent. (b) he )entral 4overnment may modify in the public interest, by notification published in the Official 4a!ette, the provisions of section (a) by adding, deleting or amending any class of transactions or matters specified in that section. (c) In relation to this Act, electronic records shall not be liable to stamp duty under the 3tamp Act, '=DD. (d) 5otwithstanding anything contained in the elegraph Act, '==9, or rules made under this Act, it shall be lawful to transmit and receive records electronically. )omments# It is not feasible to give broad legal recognition to all documents that are signed with an electronic signature because, under Indian 7aw, hand written signatures are more appropriate for certain categories of agreements. herefore, the purpose of limiting application of this Act is to acknowledge the intent of relevant laws that mandate the use of pen and ink for some documents. >or example, in the case of negotiable instruments, the current state of technology does not ade"uately provide a reliable mechanism for the transfer or negotiation of electronic records to holders in due course beyond an originator and an initial recipient of the electronic record. Additionally, this section provides authority to the )entral 4overnment to amend, as appropriate, the limitations set forth in this section. >urther, the application of the 3tamp Act has been limited to recogni!e the intangible nature of electronic records, based upon precedent set in the *epositories Act, 'DD:. he applicability of the elegraph Act also has been limited in recognition of the necessity to encrypt data in relation to the transmission of certain types of secure electronic records. ECT1"4 &: As between parties involved in generating, sending, receiving, storing or otherwise processing electronic records, any provision of 2art II or IE of this Act may be varied by agreement of the parties.

)omments# his section states the general principle that parties may vary the provisions of 2arts II or IE by agreement. hus, where the signer and the recipient of an electronic record, agree to the terms of a contract, the rules set forth in this Act may be varied by a contract between the parties.

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