CHAPTER 1

1.1. INTRODUCTION

Ever since the inception of human civilization the concept of contract has been known to
man. As the civilization progressed, thought process of man developed very drastically. Man
became conscious of his belongings and started to exercise his authority over his belongings.
With this, there was change in mindset and the element of profit and gain occupied its place
in everyday activities. The transactions, which were once appeared to be normal and
routine, took the shape of profit or gain oriented.

As years passed by, man became more and more conscious about his authority over his
belongings. Whenever he indulged in trade he exchanged his goods for considered
equivalent value of other goods of his choice from other person. This system is commonly
referred to as barter system. This system was followed for trade of commodities, goods
and even for services.

Further development in society brought in different classification amongst persons based on

their class. With this, there was change in perception of one's rights and such rights varied
from person to person based on their class or status. Most of the times, transactionsbetween
persons were mainly based on trust,faith and goodwill. The society was very simple and
people carried on their transaction orally with absolute belief in other person.

Performance of one's role was considered as highest moral conduct and society always
appreciated such high moral conduct. On the other hand, non-performance of one's role was
considered as out of low morality.

People believed in high moral conduct and any person not showing such high moral conduct
was looked down upon by other members.

As there was increase in trade and commerce, man became more adventurous and started
to look out for new avenues for carrying on his trade. The further development in society
slowly changed the pattern of transactions. Oral transactions were slowly replaced by written
documents.

Sir HenryMaine in his classic work Ancient Law developed a thesis on concept of contract.

1
According to Maine, in early societies, both static and progressive, the legal condition of the
individual is determined by status and the march of progressive societies witnesses the
disintegration of status and determination of the legal condition of the individual by free
negotiation on his part. This was expressed by him in the dictum.

The movement of progressive societies has hitherto been a movement from status to contract.

According to Maine, the unit of ancient society was family but individualis unitof the present
society. This led to disintegration of the family system, end of the dependency on the pater
familia and emergence of contractual relations among individuals. Now the individual
became the best judge of his own good. Law accordingly recognized the individual as the
sole subject matter of rights and duties in place of pater familia which was previously the sole
repository of power.

With the growth of commercial and industrial culture, law of contract acquired significance
during 18th and 19th centuries. Hence the theory of free contract came to extensive use in
trading and commercial world. The social contract theories founded on the notion of free
contract of agreement between people and the rulers. The concept of liberty, equality and
fraternity of the French revolution, doctrine of inalienable natural rights of man of the
American declaration of independence, philosophy of laissez faire in economic, political and
legal theories, relationship between master and servant, employer and workmen, wife and
husband, parents and children etc. are the examples to support the dictum movement from
status to contract. Gradually society recognized individual rights and the concept of right
attained some prominence.

During European renaissanceevery right arose from a title. The term title is derived from the
term Titulus of Roman law and Titre of French law. So also legal protection, of an interest
without its legal recognition cannot make it a legal right. It is commonly agreed that right
exists upon the base of obligations.

Obligation is synonymous with duty and it includes perfect and imperfect obligation. Where
person obligated to God alone then such obligations are called imperfect obligations and
such obligations are not accountable to any individuals. On the other hand, perfect
obligations which are also called as performance obligations—give right to demand of
performance of such obligations.

2
Effect of such perfect obligations are -

1.Contracts,

2.Quasi contracts(engagements in nature of contracts),

3.Injuries (delits) and

4.Acts in thenature of injuries (quasi-delits).

Now coming to contracts, it is treated as right in personam. Generally, a contract is a promise

or a set or promises for the breach of which the lawgives a remedy, or the performance of
which the law in some wayrecognizes as a duty. The correlation between contracts and title
has beendescribed by Salmond as acts in the law and whereas Paton describedsuch
relation as juristic act. According to Paton, by juristic acts, legalpersons create, modify,
or destroyrightsandduties and thereby affect legal persons.

There are two categories of contracts viz. unilateral and bilateral.Unilateral acts are those
where will orconsentof one of the parties is essential whereas in bilateral acts .will or
consent of both parties is essential. These bilateral acts are called as agreements. These
bilateral actsbetween persons play very significant role in day to day life.

Swift changes in information and communication technologies(ICT) influenced every walk

of life and contract law was not an exception.Thesedevelopments in information and
communication technologies were usedfor commercial activities. Thus, lawof contract is the
base for electronictransactions without there being any specific law to deal with e-contracts.

The basic principles of law of contract govern these electronic transactions.The pace of
development in information and communication technologiescan aptly be described by the
following stated by Cosmos the villain in the movie Sneaker.

The world is not run by weapons any more, or energy ormoney. It is run by ones and
zeroes-little bits of data. It is allelectrons. There is a war out a world war. It is not about who
has the most bullets. It is about who controls the information. What we see and hear, how
we work, what wethink. It is all about information.

Now-a-days, almost each and every home owns a personal computer orlaptop.
Technology is changing rapidly. In the developed world, thepresent generation cannot
imagine life without computers and internet.Computers get associated with a person

3
before his birth when CATscanners detect birth or determine sex and they remain
associated forsometimes even after the death till insurance issues are settled. Presently,large
chunk of population is fastened to social networking sites, a future isabout to come wherein a
baby of a year old will own an account on socialnetworking sites. Every departmental work is
carried out online, either itmay be procurement contracts or announcing of exam results.
Computers have invadedevery aspects of the human life and the impact has been soquick that
it caught the institutions of law and justice unawares. The newdevelopments in information
and communication technologies are posingchallenges to the fundamental principles of law,
which worked well beforethe advent of this technology. The problems have been
compounded bythe introduction of internet. Before going to problem of internet one has
tounderstand what this internet exactly and what is its genesis? How all thisstarted.

It is specifically mentioned here that this introduction is going to be purelytechnical in

nature. Internet owes its origin to ARPANET which was setup in September, 1969 as a
joint venture of the Massachusetts‘s Institute of Technology and the American Department
of Defence Advance ResearchProject Administration as a source to establish continued
communicationbetween remote computer resources in the event of war. The
AdvanceResearch Projects Agency Network (ARPANET) connected 40 computersby a web
of links and lines. This network slowly grew and the Internet was born. By 1981, over 200
computers were connected around the world,today the figure runs into millions.

The real power of today‘s internet is that it is available to anyone with acomputer and a
telephone line or even on mobile phone. Immense andinvaluable power of information and
communication has been placed onan individual‘s hand by internet.

Internet usage has significantly increased over the past few years. Thenumber of data
packets, which flowed through the internet, has increaseddramatically. If left to its own
measure, it is highly unlikely that such atrend will reverse itself.

Internet Functioning

The administration of the internet is not in the hands of any individual, beit government,
corporation, university, NGO, firm or a person. In literalterms it is like a net in which
hundreds of thousands of separate operatorsof computers and computer networks use
common data transfer protocolto exchange information with other computers. It goes like a
chain inwhich one computer is connected with another. It is this series of linkednetworks

4
each linking computers and computer networks that iscommonly known today as internet.
It has quality of rapidly transmittingdata or communication with an automatic facility to
change the routewhere transmission is not possible due to damage or non-availability of links.
Internet uses a language (common communication protocol) calledInternet Protocol (IP).

The information available at any link means information available to allconnected with that
link as there is no control unit or central storagelocation and it is worthy to repeat here
that any individual cannot controlall the information available.

Internet and online services, sometimes called as new media services is inmany respects
similar to the traditional media as it also includesproduction oriented material such as
music, audio, video, graphics, textand games. It performs communication functions alsolike
messaging,conferencing, research and conduct of commerce. However, it differs fromthe
traditional media in two respects:

Firstly, internet and online services are communicated through digits(commonly called
digitized information). Digitization is the expression ofthe information in the computer
known language called binary language.Binary language has two characters, i.e. 0 and1. The
great advantage ofbinary language is its overwhelming simplicity. The characters of
binarylanguage known as bits where initially expressed in combination andalteration of
any two distinct conditions. The presence of light and absenceof light, a positive electrical
charge and negative electrical charge, the peakof a wave and trough of a wave, and many
other observable states ofmatter suffice to record and transmit information in binary
language. Thisbinary language being only two characters makes it highly
cumbersomemedium of expression.

Secondly, there services are not one way but both ways i.e., they areinteractive. The user has
a choice of the contents and time. He can alsoshare his own information with other users
depending upon the servicewhich may be one-on-one, chat or group conferencing or real
time basis.

 Direct Access: As the expression itself suggests, a user can be directly linked to
internet without any intermediary. Generally government offices, educational
institutions, research centres, libraries and even business establishments,
corporations and companies maintain a computer network linked directly. These
establishments then issue an account number with a secret key called password.

5
 The account number together with thepassword enables a user to have an access
directly to internet.
 Internet Service Provider: Service providers are generally commercial entities making
commercial use of internet by making available internet facility to general public in
lieu of the fee that an user has to pay. Service providers have direct access to internet
and any personal computer holder can have access to internet via direct link holder. It
works just like a home telephone without STDfacility.
 Commercial Online Service: Commercial online service provides direct access to
users without any fee. However, the commercial online service provides extensive
content of the information within their proprietary networks. These services are
commercial entitiesand provide their own content to the user of their service.

Mode of Communication

The exchange of communication and retrieving of information on internetis possible through

many modes. However, these modes are constantlychanging so an exhaustive list cannot be
expected. The popular methodsof communication are grouped as follows:

• One to one communication (such as e-mail)

• One to many communication (such as listserv)

• Sharing of information database (such as USENET newsgroups)

• Real time communication (such as internet relay chat)

• Real time remote computer utilization (such as telnet)

• Remote information retrieval (such as ftp, gopher and World WideWeb)

With the above background, moving further with discussion, it can be saidthat technology has
over passed living style of man. Now-a-days personsare doing business sitting in home
itself. Things have changeddrasticallyso much that people are shopping sitting at home,
buying andselling goods using e-shopping. The tool internet has changed lives ofpeople
by bringing in comfort factor. Due to this technological innovation,e-commerce is growing
at the speed of air. Electronic commerce refersgenerally to all forms of transactions
relating to commercial activitiesinvolving both organizational and individuals that are

6
based uponprocessing and transmission of digitized data, including text, sound andvisual
images. It also refers to the effects that the electronic exchange ofcommercial
information may have on the institutions and processes thatsupport and govern commercial
activities.

Electronic commerce is partof an evolvingapproach to businessand administration that could

eventually involve the application of information and communication technologies to an
enormous range ofproduction and distribution processes on a global scale.

Electronic contract is an integral part of electronic commerce. This is a newconcept. It is not

same as paperor traditional contract. The validity of e-contract is similar that to paper
contract.

1.2. STATEMENT OF THE PROBLEM

After advent of information and communication technologies, an avenuewas created for

commerce and trade. Thus, electronic commerce (e-commerce) was developed. This e-
commerce picked up momentum inAmerica and Europe by 1990s. At the international level,
an attempt wasmade to recognize and to bring this e-commerce within legal frameworkso that
it can be regulated. Accordingly, in 1996 a step was taken by the United Nations to draft a
Model Law.

While discussing in Indian context, late 1990s and early 2000s witnessedexponential growth
of internet in India. The simultaneous development intechnology brought new dimension to
usage of internet and it becameaccessible even through mobile phones. Within span of
some 4-5 years, e-commerce gained pace in India and it would not be wrong to say that it
isstill in developing process. Realizing its potential growth, Indiangovernment enacted
Information Technology Act, 2000 for regulating e-commerce. Speaking purely from a
customer‘s perspective, as of now,some websites are offering sale of goods and offering
services. Apart fromthat, even major corporate houses have created their presence in
virtualworld for trading. Banking and insurance sectors have gone a sea changeafter
development of internet.

Slowly, e-commerce is dominating Indian scenario and it has beenbenefitting customers by

offering different range of products atcompetitive price. Thus, there is e-contract between
individual andindividual organization and individual and organization and organization.
Therefore, a legal relation is created between parties usingelectronic medium. As long as

7
their respective roles and parts of legalrelationship are performed there would be no dispute.
But once there issome variance, certainly, there will be dispute between parties and theyneed
judicial forum to adjudicate their dispute.

With this backdrop, these e-contracts some challenges have been posed to the existing
legal system in India. Therefore, following points are the statement of problems in this study:

• Whether the Information Technology Act, 2000 and Indian Contact Act, 1872
have cover and regulate e-contracts in Indian conditions?
• Whether Indian judicial system is fully equipped to adjudicate disputes arising
out of e-commerce as it being techno-legal in nature?
• What is the effect of judgment of Hon‘ble Supreme Court of India in?

8
 CHAPTER 2

E-CONTRACT - AN OVERVIEW:

It is known to everyone that computer is amongst the greatest inventionsofmankind. In

addition to computer, the invention of internet has broughtrevolution in field of information
technology. Internet is being used almosteverything such as, electronic commerce, social
networking, disputeresolution, sending mails, internet chat, blogs, etc. Out of these,
electroniccommerce is one of the significant features of internet.

The term E-Commerce includes all the activities of a firm or business oranindividual may
performsuch as buying and selling of products andservices alike, by using computers and
communication technologies. It caninclude a host of activities such as shopping, supply
chain management,automation, electronic payment etc. With the development e-
commerce,aseller can reach any part of the globe and the buyer has unlimited choiceto
access any seller. Efficiency has been greatly increased, paper work isreduced, time lag
shortened and expenses lessened.

It is worth to mention here that e-contract forms a part parcel of e-commerce. So before
dealing with e-contract, it is mandate on once part todiscuss about e-commerce.

A. E-COMMERCE

The phrase E-commerce can be defined as, commerce conducted in adigital form or on an
electronic platform or selling or buying goods and any form of business transaction in
which the partiesinteract electronically rather than by physical exchanges. Itcovers mainly
two types of activity, one is the electronicordering of tangible goods, delivered physically
usingtraditionalchannels such as postal services or commercialcouriers and the other is
direct electronic commerceincluding the online ordering, payment and delivery
ofintangible goods and services such as computer software,entertainment content or
information services on a globalscale.

9
The key words in the definition above are: commercial transactions,organizations, individuals
and electronic exchange. It reveals the scope ofelectronic commerce from a jurisdiction and
functional perspective.

Electronic commerce, in private sense, is international and domesticcommerce; trade and

business for both non-personal and personal usage.

The types of electronic commerce can be based either on the kinds ofpartiesinvolvedviz.
businesses,consumers, governments or administrations, on theother hand commercial
activities may be thecriterion for determining the kindsof business e.g. web
advertisement,electronic delivery of digital goods, deliveryof goods physically whichhave
been ordered electronically, informationservices.

The parties to a contract, which has been concluded electronically, shouldfirst be able to
establish the terms on which and the type of contract than

 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 itinvolves the interaction

between administration/governments(local, regional or national) with other administrations
or withbusinesses and consumers.
Business to Business (B2B)
A B2B cycle involves electronic transactions among and betweenbusinesses. This is a
technology which has been in practice for many yearsgenerally in the form of Electronic
Data Interchange (EDI) or electronictransfer of funds. B2B transactions have seen a
phenomenal growth due tosharp increase in the internet penetration and have become faster
growingsegment even within the e-commerce environment.

This kind of a business arrangement is seen in the case of various FMCG(Fast moving
consumer goods) companies who are connected with theirfranchisees through the internet
and a varied range of transactionsincluding reports of stock, sales, purchase orders and
other shippingdetails can be transacted through this form.

10
Business-to-Consumer (B2C)
In a typical B2C e-commerce, businesses sell directly to consumers.Websites such as
homeshop18.com, flipkart.com, ebay.com, are the mostcommon examples of such B2C e-
commerce cycle. In addition to these,even the traditional businesses have also established
virtual stores in orderto cater to ever growing demands.
The major advantages of such e-commerce sites and companies are theavailability of
physical space, availability of returns and availability ofcustomer service in physical
matters. The organization would directly bein touch with its customers. As middlemen are
eliminated, price of goodswill be less resulting in some benefit to customers.
Consumer-to-Business (C2B)
This generally involves individuals selling tobusiness concerned and maybe in the nature of
selling of a particular service or product that theconsumer intends to sell.
This may be in the form of catalogues, auctions, etc. very good examplesof such trade are
websites for travel arrangements.
Consumer-to-Consumer (C2C)
The C2C e-commerce category involves business transactions amongindividuals using the
Internet and web technologies. Here, the commercialactivities take place between two
individuals. One of the very classicexamples is the bids that are registered with websites
like bazee.com,olx.com for sale of products or possession of individual wanting to
sellthrough the net.

2.2. BHAGWADAS KEDIA: OPENED UP DOOR FOR E-CONTRACTS

Prior to judgment of BhagwandasKedia for the Contract Act of 1872 wasapplicable to

traditional mode of contracts, which means, contractsentered face to face between the
competent parties. In order to understandKedia Case, it is necessary to discuss Entores
Ltd. v. Miles Far East corporation. This is the case on which Kedia Case decision is
based. The facts of the Entorescase were that, an offer was made from London by telexto a
party in Holland and it was duly accepted through the telex, the onlyquestionbeing as to
whether the contract was made in Holland or in England. The Court of Appeal held that
telex is a method of instantaneouscommunications between the parties is different from the
rule about thepost. The contract is only complete when the acceptance is received by
theofferer; and the contract is made at the place where the acceptance isreceivedDenning
L.J observed as follows:

11
 Let me first consider a case where two people make acontract by word of mouth in
the presence of one another.Suppose, for instance, that I shout an offer to a man
across ariver or a courtyard but I do not hear his reply because it isdrowned by an
aircraft flying overhead. There is no contractat that movement. If he wishes to make a
contract, he mustwait till the aircraft is gone and then shout back hisacceptance
so that I can hear what he says. Now take acase where two people make a contract
by telephone.Suppose for instance, that I make an offer to a man bytelephone and,
in the middle of his reply, the line goes deadso that I do not hear his words of
acceptance. There is nocontractat that movement. The principle of the Entores Case
has beenendorsed in Kedia Case. The ruleabove stated is called acceptance rule.

Facts of the Kedia Case

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 seedcake which they had agreed to supply
under an oral contract dated July22,1959 negotiated between the parties by conversation on
long distancetelephone. The plaintiffs submitted that the cause of action for the suitarose at
Ahmadabad, because the defendants had offered to sell cottonseed cake which offer was
accepted by the plaintiffs at Ahmadabad. Alsobecause the defendants were under the
contract bound to supply thegoods at Ahmadabad and the defendants were to receive
payment for thegoods through a Bank at Ahmadabad. The defendants contended that
theplaintiffs had by a message communicated by telephone offered topurchase cotton seed
cake and they (the defendants) had accepted theoffer at Khamgaon, that under the
contract delivery of the goodscontracted for was to be made at Khamgaon, price was also to
be paid atKhamgaon and that no part of the cause of action for the suit had arisenwithin the
territorial jurisdiction of the City Civil Court Ahmadabad.
On the issue of jurisdiction, the Trial Court found that the plaintiffs hadmade an offer from
Ahmadabad by long distance telephone to thedefendants to purchase the goods and that
the defendants had acceptedthe offer at Khamgaon, that the goods were under the contract
to bedelivered at Khamgaon and that payment was also to be made atKhamgaon. The
contract was in the view of the Court to be performed atKhamgaon, and because of the offer
made from Ahmadabad to purchasegoods the Court at Ahmadabad could not be invested with
jurisdiction toentertain the suit. But the Court held that when a contract is made
byconversation on telephone, the place where acceptance of offer isintimated to the offeror,

12
is the place where the contract is made, andtherefore the Civil Court at Ahmadabad had
jurisdiction to try the suit. Arevision application filed by the defendants (Kedia) against the
order,directing the suit to proceed on the merits, was rejected in limine by theHigh Court.
Aggrieved by the order of the High Court, defendantspreferred appeal to Supreme Court
with special leave.

Defence of Defendants
The defendants (Kedia) contended that in the case of contract on telephone,the place where
the offer is accepted is the place where the contract ismade, and that Court alone has
jurisdiction within the territorial jurisdiction of which the offer is accepted and the
acceptance is spokeninto the telephone instrumentReasoning and Judgment 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 majorityview whereas Hidayatullah M, J (afterwards CJ) gave dissenting
opinion.Shah J, gave judgment on behalf of himself and Wanchoo J. The
Judgesconstituting majority opinion, preferred to follow the English rule laiddown in the
Entores Case and saw no reason for extending the post officerule to telephonic
communication. Shah, J. observed:

Making of an offer at a place which has been acceptedelsewhere does not form
part of the cause of action in a suitfor damages, for breach of contract. Ordinarily it
is theacceptance of offer and intimation of that acceptance whichresult in a contract.
The intimation must be by same externalmanifestation which the law regards as
sufficient.
On the general rule that a contract is concluded when anoffer is accepted and
acceptance is intimated to the offerer, isengrafted an exception based on grounds of
conveniencewhich has the merit not of logic or principle in support, butof long
acceptance by judicial decision. The exception may besummarized as follows: When
by agreement, course of contract or usage of trade, acceptance by post or telegram
isauthorised, the bargain is struck and the contract is completewhen the acceptance is
put into a course of transmission theofferee by posting a letter or dispatching a
telegram.

13
 The rule that applies to acceptance by post of telegram doesnot however apply to
contracts made by telephone. The rulewhich applies to contracts by telephone is the
ordinary rulewhich regards a contract as complete only when acceptanceis intimated
to the purchaser. In the case of a telephonicconversation in a sense the parties are in
the presence of eachother, each party is able to hear the voice of the other. Mereis an
instantaneous communication of speech intimatingoffer and acceptance,rejectionand
counter-offer.Intervention of an electrical impulse which results in theinstantaneous
communication of messages from a distance does not alter the nature of the
conversation so as to make itanalogous to that of an offer and acceptance through post
orby Telegram.

It is true that the Posts and Telegraphs Department hasgeneral control over
communication by telephone andespecially over long distance Telephones, but that
is not aground for assuming that the analogy of a contract made bypost will govern
this mode of making contracts. In the caseof correspondence by post or telegraphic
communication, athird agency intervenes and without the effectiveintervention of
that third agency, letters or messages cannotbe transmitted. In the case of a
conversation by telephone,once connection is established there is in the normal
courseno 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 inthe hearing of each other by the aid of a mechanicalcontrivance
which makes the voice of one heard by the otherinstantaneously and communication
does not depend onexternal agency. That the draftsman of the Indian Contract Act
could nothave envisaged use of telephone because it had not beeninvented and,
therefore, the words of the provision shouldbe confined to communication by post.

On the other hand in his dissenting opinion Hidayatullah J., observed:

the Entores Case Lord Denning no doubt held thatacceptance given by telephone was
governed by theprinciples applicable to oral acceptance where the partieswere in the
presence of each other and that the analogy ofletters sent by post could not be applied.
But the Court ofAppeal was not called upon to construe a written law whichbrings in the
inflexibility of its own language. It was notrequired to construe the words found in

14
Section 4 of theIndian Contract Act, namely―The communication of anacceptance is
complete as against the proposer when it is putin a course of transmission to him, so as to
be out of the power of the acceptor.

The law under consideration was framed at a time whentelephone, wireless, Telstar and
Early Bird were notcontemplated. If time has marched and inventions havemade it easy to
communicate instantaneously over longdistance and the language of our law does not fit
the newconditions it can be modified to reject the old principles. Butit is not possible to go
against the language by accepting aninterpretation given without considering the language of
ourAct.The language of Section 4 of the Indian Contract Act, coversa case of communication
over the telephone. Our Act does not provide separately for post, telegraph, telephone,
orwireless. Some of these were unknown in 1872 and noattempt has been made to modify
the law. It may bepresumed that the language has been considered adequateto, cover cases
of these new inventions. It is possible todaynot only to speak on the telephone but to record
the spokenwords on a tape and it is easy to prove that a particularconversation took
place. Telephones now have televisionadded to them. The rule about lost letters of
acceptance wasmade out of expediency because it was easier in commercialcircles to prove
the dispatch of letters but very difficult todisprove a statement that the letter was not
received. If therule suggested on behalf of the plaintiffs is accepted it wouldput a very
powerful defence in the hands of the proposer ifhis denial that he heard the speech could take
away theimplications of our law that acceptance is complete as soonas it is put in course of
transmission to the proposer.

Where the acceptance on telephone is not heard on accountof mechanical defects there may
be difficulty in determiningwhether at all a contract results. But where the speech is fully
heard and understood there is it binding contract, and insuch a case the only question is
to the place where thecontract can be said to have taken peace.

In the present case both sides admitted that the acceptancewas clearly heard it
Ahmadabad. The acceptor was in aposition to say that the communication of the acceptance
inso far as he was concerned was complete when he (theacceptor) put his acceptance in
transmission to him (theproposer) as to be out of his (the acceptor) power of recallin terms of
the Contract Act. It was obvious that the word of acceptance was spoken at Khamgaon and
themoment the acceptor spoke his acceptance he put it in courseof transmission to the

15
proposer beyond his recall. He couldnot revoke acceptance thereafter. It may be that the gap
oftime was so short that one can say that the speech was heardinstantaneously, but if we are
to put new inventions into theframe of our statutory law we are bound to say that
theacceptor by speaking into the telephone put his acceptance inthe resource of transmission
to the proposer.

It is worth to mention that at the timeof enactment of Contract Act of 1872there were no
telephones, telex or computers. Therefore, the draftsmennever imagined about scientific
inventions. So, the Contract Act of 1872did not envision about communication using
different technologies.Further, the Supreme Court of India, through Hidayatullah J., stated
thatlaw can be modified to suit present day‘s requirements. At this point it canbe stressed
that, circumstances have changed and new inventions arecoming up. Under thissituation,
it appears that, the majority opinion inKediais standstill and would virtually beovertaken
by the fast changingtechnological innovations and circumstances. Further, these changes
havemade the dissenting opinion, expressed by Justice Hidayatullah, morerelevant today
than the majority opinion. In addition to this, India issignatory party to the Model Law on
Electronic Commerce, 1996. On that basis India has enacted Information Technology Act,
2000. Signing of sucha convention and enacting law makes the bindingmajority opinion
inKedias case redundant.

Having discussed about e-commerce and an important case, while movingahead, now e-
contracts are discussed here.

2.3. WHAT IS E-CONTRACT

After looking at bird‘s view of e-commerce, now it is time forunderstanding what is the
meaning of e-contract? There is no hard andfast definition of e-contract. The traditional
definition of contract cannotbe applied to e-contract, because realm of e-contract is much
bigger thanthe realm of traditional mode of contract.To put it simply, e-contract is
anyagreement which is entered on internet by competent parties, with lawfulconsideration,
free consent, without any mala fide intention and to createlegal relationship.

16
E-contract can be defined in following words:
“E-contract is a kind of contract formed by negotiation of two or more individuals
through the use electronic means, such as e-mail, the interaction of an individual with
an electronic agent, such as a computer program, or the interaction of atleast two
electronic agents that are programmed to recognize the existence of a contract. ”
As it is already stated that there is no exhaustive definition as to e-contractand most of times
only generic definitions are available. E-contracts arealso referred as cyber-contract or
digital contract or online contracts.

Etymologically one can give as many as definitions for e-contract, butthere is no border
line for its meaning. In broader sense, it can be summedup ascontracts made using computers,
either via e-mail or the Internet, orthat involve computer related products, such as databases
and software.

The International Chamber of Commerce refers to electronic contractingas theautomated

process of entering into contracts via the partiescomputers, whether networked or through
electronic messaging. Thisdefinition is an amalgamation of two separate explanations, one
containedin the UN Convention on the use of Electronic Communications inInternational
Contracts and the other taken from the US UniformElectronic Transaction Act and
Uniform Computer InformationTransactions Act providing forautomated transactions.
ElectronicCommunication means any communication that parties make by meansof data
message, whereas automated transaction means any transaction.

KINDS OF E-CONTRACT

There are two ways through which commercial contracts can be enteredelectronically. A
common and popular method is through the exchange ofelectronic mail e-mail. The other
method of contracting is using theWorld Wide Web or website. Further the website
based is divided intofollowing kinds:

 Click Wrap
 Browse Wrap and
 Shrink Wrap

17
E-MAIL CONTRACT

A contract can be entered into and concluded following the exchange of anumber of e-mails
between the parties. Here the e-mails serve the samepurpose asnormal letters, do had a
contract been negotiated throughletters written by both parties. The fact that a contract has
been negotiatedelectronically will not raise any specific legal or contractual considerations
generis to the type although there may be evidential considerationsraised dependant on the
existing legislation and if there are any formalrequirements for a written signed contract.

CONTRACT THROUGH WEBSITES

Normally, a vendor would provide a display of products on his websiteandindicates cost of

such product. A customer can scroll through thewebsitepreviewing the items or products
on offer, click on the item forfurther information and if interested in the purchase, can place
an order byfilling in an order form and clicking Submit or I Agree or I Accept orsomething
similar button. Shrink wrap,click wrap and browse wrap arecommon types ofagreements used
in electronic commerce.

A. CLICK WRAP

A click wrap agreement is mostly found as part of the installation processofsoftware

packages. It is also called a click through agreement or clickwrap license. The name click
wrap comes from the use of shrink wrapcontracts in boxed software purchases. In a Click
Wrap Agreement, theparty after going through the terms and conditions provided in
thewebsite or programme has to typically indicate his assent by clicking ―IAgree/I
Accept icon or decline the same by clicking the icon ―I disagree. These types of contracts
are extensively used on internet for grantingpermission to access the site or downloading
the software or selling someproduct. Click-wrap agreements can be of the following types:

i. Type and Click where the user must type 'I accept' or otherspecified words in an
on-screen box and then click a Submit orsimilar button. This displays acceptance of
the terms of the contract.

18
A user cannot proceed to download or view the target informationwithout following these
steps.

ii. Icon Clicking where the user must click on an OK or I agreebutton on a dialog
box or pop-up window. A user indicatesrejection by clicking ―Cancel or Closing
the window.

Software Developers generally rely on the use of contracts in the form ofclick wrap license
agreements as a means to protect software fromunauthorized use, modification and
copying. By granting a license to thepurchaser to use the software rather than selling the
program outright, the Developer is able to retain and have control over his product.Most
of click wrap license agreements are non-exclusive licenses whichmean that the licensor
reserves the right to license the same software to other licensees.

Click wrap agreements usually include provisions such as a Notice ofAgreement Clause
stating that the using of the software/ productconstitutes agreement to the license's terms,
a Title Retention Clausewhich, in effect, states the user does not own the copy of the
program he/she has contracted for, but takes possession subject to a perpetuallicense, an
Exclusive Use Clause, a clause preventing the user fromcreating unauthorized copies of
the software/ product for use or otherwise, an Anti-refuse Clause prohibiting the user
from lending, renting, or transferring the software to others, in case of softwares, a
clauseprohibiting usage in more than one computer specified for that parties, anAnti-reverse
Engineering Clause, prohibiting the user from reassemblingthe product from the already
available version, a provision protecting thecopyright over the software/ product design, a
usual limitation ordisclaimer of warranties and liabilities, a clause limiting the liability of
thevendor, a purchaser's right to decline the terms of the agreement byreturning the
software program or the product, as the case may be, andmiscellaneous provisions such as
a governing law clause, jurisdictionclause, force majeure clause etc.

Thus, click wrap agreements are adhesion contracts which do not involvethe concept of
mutual assents and bargains as provided in the contracttheory. Actually they are ―take it
or leave it agreements in which the useris not made aware of the terms until late in the
transaction (just before theuse of the product) which is different from traditional written
contract.

19
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 kindof product, physical or otherwise.
Following are some of the issues thatmay arise out of click wrap contracting, which will
be dealt at laterjuncture:

• Identity of Parties

• Jurisdiction and

• Legal Recognition of Transaction

B. SHRINK WRAP

Shrink wrap contracts are license agreements or other terms andconditions which can
only be read and accepted by the consumer afteropening the product. The term describes
the shrink wrap plastic wrappingused to coat software boxes, though these contracts are not
limited to thesoftware industry.A shrink wrap contract is the prior license agreement enforced
upon thebuyer when he buys software. Before he or she tears the pack to use it, heor she is
made aware by tearing the cover or the wrap that they are boundby the license agreement of
the manufacture.

This is done to protect the interests of the manufacturer where theconsumer cannot
reproduce the package, copy it or sell it or donate it toothers affecting the sale of the
software. The license, which is shrunk andwrapped in the product,same becomes enforceable
and taken as consentbefore the buyer tears the package. The usual clauses that are part of
theshrink-wrap license are that of:

• prohibiting unauthorised creation of copies

• prohibiting rentals of the software

• prohibition of reverse engineering, de-compilation or modification

• prohibition of usage in more than one computer specified for thatpurpose

• disclaimer of warranties in respect of the product sold

• limitations of liability

20
The logic and business sense is that to protect the manufacturer of thepackage, as it is
easy to copy, manipulates and duplicate under otherbrand name.

The legal status of shrink wrap is somewhat unclear. In the 1980s, the UScourts tried to solve
the problem of status. The first legal ruling to addresstheenforceability 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. Incase of Vault Corp. v. Quaid Software Ltd.13, the district court stated
withoutexplication that the shrinkwrap license at issue in that case was ―a contractof
adhesion which could only be enforceable if the provisions of aLouisiana statute—which
explicitly made such license agreementsenforceable—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 wrapagreements. It was in
ProCD, Inc. v. Zeidenberg16 courts gave bit of relief tothe software companies by enforcing
shrink wrap agreement. Further itwas held that shrink wrap agreements were enforceable.

ProCD was followed by Klocek v. Gateway, Inc.18, which found the contractsat hand
unenforceable, but did not comment on shrink wrap contracts as awhole.

C. BROWSE WRAP

In a browse-wrap agreement, the terms and conditions of use for a websiteor other
downloadable product are posted on the website, typically as ahyperlink at the bottom of
the screen. Unlike a clickwrap agreement,where the user must manifest assent to the terms
and conditions byclicking on an ―I agree box, a browse-wrap agreement does not
requirethis type of express manifestation of assent. Rather, a web-site userpurportedly gives
his or her assent by simply using the product — such asby entering the website or
downloading software. Browse-wrapagreements, like click wrap agreements, derive their
name by analogy toAs in case shrink wrap agreements there is uncertainty of enforceability,

same way the uncertainty continues with browse wrap agreements. But browse-wrap
agreements present different issues because it is less clearthat the person using the
website has accepted the terms of the agreement.The courts have held that the validity of a

21
browse wrap agreement depended on whether a website user has had actual or
constructive notice of the terms and conditions prior to using the websiteor other product.

As in case shrink wrap agreements there is uncertainty of enforceability,same way the

uncertainty continues with browse wrap agreements. Butbrowse-wrap agreements present
different issues because it is less clearthat the person using the website has accepted the
terms of the agreement.The courts have held that the validity of a browse wrap
agreementprimarily depended on whether a website user has had actual orconstructive
notice of the terms and conditions prior to using the websiteor other product.

In Hubbert v. Dell Corp., 19 on appeal, an Illinois state appellate courtreversed the trial
court's refusal to compel arbitration. The appeals courttook note of how prominently Dell had
warned the user that Dell‘s termsand conditions would apply:

The blue hyperlink entitled ―Terms and Conditions ofSale appeared on numerous Web
pages the plaintiffscompleted in the ordering process and should be treatedthe same as a
multipage written paper contract. The bluehyperlink simply takes a person to another page
of thecontract, similar to turning the page of a written papercontract. Although there is no
conspicuousness requirement,the hyperlink‘s contrasting blue type makes it
conspicuous.Common sense dictates that because the plaintiffs werepurchasing computers
online, they were not novices whenusing computers. A person using a computer quickly
learnsthat more information is available by clicking on a blue hyperlink.

Additionally, on three of the defendant‘s Web pages that theplaintiffs completed to make
their purchases, the followingstatement appeared: ―All sales are subject to Dell‘s Terms
and Conditions of Sale. This statement would place areasonable person on notice that there
were terms andconditions attached to the purchase and that it would bewise to find out
what the terms and conditions were beforemaking a purchase.

The statement that the sales were subject to the defendant‘s―Terms and Conditions of
Sale,combined with making the―Terms and Conditions of Sale accessible online by
bluehyperlinks, was sufficient notice to the plaintiffs thatpurchasing the computers online
would make the ―Termsand Conditions of Sale binding on them.

Because the Terms and Conditions of Sale were a part ofthe online contract and because the
plaintiffs did not arguethat their claims were not within the scope of the arbitrationagreement,
they were bound by the ―Terms and Conditionsof Sale,including the arbitration clause.

22
Whereas inSpecht v. Netscape,20 the influential Second Circuit court ofappeals affirmed
denial of a motion (or application) to compel arbitration the court agreed that:

A reasonably prudent Internet user in circumstances suchas these would not have
known or learned of the existence ofthe license terms before responding to defendants
invitationto download the free software,defendants therefore didnot provide
reasonable notice of the license terms.
In Hoffman v. Supplements Togo Mgmt. LLC, 21 and In re Zappos.com Inc.,
Customer Data Security Breach Litigation, 22 the court held that ―without
direct evidence that Plaintiffs click on the Terms of Use, we cannot
conclude that Plaintiffs ever viewed, let alone manifested assent to, the
Terms of Use.

D. ONLINE SHOPPING AGREEMENT

This is another kind of e-contract, in this people can purchase goods, homeappliances and
many more things online. Very recently in India somewebsites are selling some products
are services online. This type of sale isgaining more popularity. Therefore, this kind of
agreement assumesimportance.

Generally a typical B2C e-commerce cycle involves the following five major activities:
 Information Sharing: The general practice in information sharing is that the Company
uses the following application/methodology to share information with its
prospective customer. This information could be in the form of the Company‘s
website, online catalogs, email alerts, online advertising, bulletin boards, message
Board systems, news groups and discussion groups.
 Order: Once a customer is familiarized with his needs the customer may use the
electronic forms which are available on the Company‘s website and order for the
necessary goods.
 Payment Channels: The website gives the customer various options for payment for
the goods or services selected, all of which are listed with the website. The most
popular modes of payment are credit and debit cards cheques and cash on delivery
or charge cards.The web company to ensure security and confidentialitywith
respect to each of these electronic transactionsincorporates various security
measures. These measures inthe form of digital signature, authentication, public key

23
 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 Deskand Guarantee of
secure transaction.

E-GOVERNANCE:
The e-governance predominantly deals with delivery of governmentservices to its citizens,
exchange of information and integration of varioussystems and servicesusing informationand
communicationtechnologies. This e-governance has different parameters. It could be
government to government (G2G) or government to citizens (G2C) orgovernment to
business (G2B) or government to employees (G2E).

The basic purpose of e-governance is to enhance efficiency inadministration and transparency

in operations. This e-governance has twoway communications. In Indian context, a recent
conference on e-governance, Indian government has conceptualized ―open government for
its citizens. This theme of open government consisted of threecomponents viz. accessibility,
participation and transparency.Asmentioned earlier chapters, e-governance gives level
playing field to allinterested 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 bygiving an easy opportunity to
people to participate in administrativeproceedings. The Second Administrative Reforms
Committee set up byGovernment of India has submitted a report that by 2017 there should
bepaperless offices in this country.
Government of India started e-governance under National e-GovernancePlan (NeGP)
initiated by Department of Administrative Reforms & PublicGrievances and Department of

24
Electronics and Information Technology in2006 with objective of making services accessible
to citizens andpromoting efficiency and transparency.

Advantages of e-governance
The advantages of e-governance is discussed with reference to threeimportant parameters as
under –

1.Governance: it empowers citizens by creating awareness of their rights and encourages

participation. It further strives for promotionof democraticsociety. The other common
ground is it encouragestransparency, efficiency, reduction in corruption and improvementin
accountability.

2.Public Services: it provides citizens with access to information andknowledge. Further, it

enhances speed of communication.

3.Management: It encourages balanced regional development withspecial emphasis on

rural areas. It smoothens operation andmanagement of voluminous data. It provides
decision supportsystem to administrative staff. It reduces cost.

Challenges to e-governance especially in Indian context Though e-governance has so many

advantages, it has few challengeswhich overshadow its efficiency. The first and foremost
challenge is that e-governance has not reached the desirable number of citizens in
anInformation Technology advanced nation like India. Further, citizens, insome cases, have
been given only limited access to information. In India – where most of the population still in
rural areas and still uneducated – theconcept of e-governance suffers due to lack of awareness
amongst citizens.
Different authorities usedifferent standards,terminology andmethodology. This acts as
one the biggest impediments in effectiveimplementation of e-governance. Further,
administrative staff posesresistance to change. This acts as one more impediment in
effectiveoperation of e-governance. On different note, cost of information,reliability of
information and privacy are other sets of issues which alwayshinder effective implantation of
e-governance.
Strictly speaking, provision for e-governance may not amount to acontractbetween State
and individuals or organizations. Omission toprovide e-governance cannot be questioned

25
in courts of law. Asgovernment is striving forenhancing transparency in administration
andminimizing corrupt practices, e-governance is used as a handy tool forachieving these
objectives. One of the greatest advantages of using e-governance is e-procurements.

2.5. E-CONTRACT IN PUBLIC PROCUREMENT

E-procurement, as a part of e-contracts, has changed entire approachtowardspublic
procurement. Thus, the concept of equality as enshrinedunder the Article 14 of the
Constitution of India, 1950 has been fulfilled toa great extent. Prior introduction of e-
procurement platform, there werecertain anomalies in the system. These shortcomings
always paved wayfor interference of courts mainly on ground of lack of transparency
andarbitrariness.
In matter of RamanaDayaramShetty v. International Airport Authority ofIndia while
dealing with duties of the Government and manner ofperformance in light of the Article
14 of the Constitution of India, 1950, theSupreme Court was pleased to observe as under –
Today with tremendous expansion of welfare and socialservice functions,
increasing control of material andeconomic resources and large scale assumption of
industrialand commercial activities by the State, the power of theexecutive
Government to affect the lives of the people issteadily growing. The attainment of
socio-economic justicebeing a conscious end of State policy, there is a vast and
inevitable increase in the frequency with which ordinarycitizens come into
relationship of direct encounter with Statepower-holders. This renders it necessary
to structure andrestrict the power of the executive Government so as toprevent its
arbitrary application or exercise. Whatever be theconcept of the rule of law, there is
substantial agreement injuristic thought that the great purpose of the rule of
lawnotion is the protection of the individual against arbitrary exercise of power,
wherever it is found. It is unthinkablethat in a democracy governed by the rule of
law theexecutive Government or any of its officers should possessarbitrary power
over the interests of the individual. Everyaction of the executive Government must
be informed withreason and should be free from arbitrariness. That is the veryessence
of the rule of law and its bare minimal requirement.And to the application of this
principle it makes nodifference whether the exercise of the power
involvesaffectation of some right or denial of some privilege.

26
Further it was observed that Today the Government, ina welfare State? is the
regulator and dispenser of specialservices and provider of a large number of
benefits. Thevaluables dispensed by Government take many forms, butthey all
share one characteristic. They are steadily taking theplace of traditional forms of
wealth. These valuables whichderive from relationships to Government are of many
kinds:leases, licences, contracts and so forth. With the increasingmagnitude and
range of governmental functions as we movecloser to a welfare State, more and
more of our wealthconsists of these new forms. Some of these forms of wealthmay
be in the nature of legal rights but the large majority ofthem are in the nature of
privileges. But on that account, itcannot be said that they do not enjoy any legal
protection norcan they be regarded as gratuity furnished by the State sothat the State
may withhold, grant or revoke it at its pleasure.

The law has not been slow to recognize the importance ofthis new kind of wealth
and the need to protect individualinterest in it and with that end in view, it has
developed newforms of protection. Some interests in Government largessformerly
regarded as privileges have been recognized asrights while others have been given
legal protection not only by forcing procedural safeguards but also
byconfining/structuring and checking Government discretionin the matter of grant
of such largess. The discretion of the Government has been held to be not
unlimited in that theGovernment cannot give or withhold largess in its
arbitrarydiscretion or at its sweet will.

Therefore, where the Government is dealing with thepublic, whether by way of

giving jobs or entering intocontracts or issuing quotas or licences or granting
otherforms of largess. The Government cannot act arbitrarily at itssweet will and,
like a private individual, deal with anyperson it pleases, but its action must be in
conformity withstandard or norm which is not arbitrary, irrational or irrelevant.
The power or discretion of the Government in thematter of grant of largess including
award of jobs, contractsetc., must be confined and structured by rational,
relevantand non-discriminatory standard or norm and if theGovernment departs
from such standard or norm in anyparticularcase or cases, the action of the
Governmentwould be liable to be struck down. Unless it can be shown by the

27
 Government that the departure was not arbitrary, butwas based on some valid
principle which in itself was non-irrational, unreasonable or discriminatory.

The Government which represents the executive authorityof the State may act
through the instrumentality or agency ofnatural persons or it may employ the
instrumentality or gency of juridical persons to carry out its functions. Withthe
advent of the welfare state the civil service, whichtraditionally carried out
functions of Government throughnatural persons, was found inadequate to handle
the newtasks of specialized and highly technical character. To fill thegap it became
necessary to forge a new instrumentality oradministrative device for handling
these new problems andthat is done by public corporations which has become
thethird arm of the Government. They are regarded as agenciesof the Government. In
pursuance of the industrial policyresolution of the Government of India corporations
werecreated by the Government for setting up and managementof public enterprises
and carrying out public function. Thecorporations so created, acting as
instrumentality or agency of Government, would obviously be subject to thesame
limitations in the field of constitutional andadministrative law as Government
itself though in the eyeof law they would be distinct and independent legal entities.It
Government acting, through its officers is subject to certainconstitutional and public
law. Limitations, it must follow that Government, though the instrumentality
oragency of corporations should equally be subject to the samelimitations. But the
question is how to determine whether acorporation is acting is instrumentality or
agency of Government.
It is well established that Art. 14 requires that action mustnot be arbitrary and must be
based on some rational andrelevant principle which is non-discriminatory. It must notbe
guided by extraneous or irrelevant considerations. TheState cannot actarbitrarily in enter
into relationship,contractualor otherwise, with a third party. Its action must confirm to
some standard or norm which is rational andnon-discriminatory.The above stated
observation makes it amply clear that the State has toexerciseits discretion in such manner
so as to promote transparency andto eliminatediscrimination. This sort of governance can
safely be achievedby the e-curement.

In nutshell it can be said that e-procurement as part of e-contracts hasminimized

discrimination and has led to the enhancement oftransparency. It is pertinent to mention

28
here that in State of Karnataka aspecial law has been enacted as ―The Karnataka
Transparency in PublicProcurements Act, 1999. Further, under this Act, Karnataka
Transparencyin Public Procurement Rules, 2000 were enacted. These Rules provide
forprocedure as to how the authorities should proceed so as to enter intoagreements.
Further, all public contracts up to Rs. 10,00,000.00 can beawarded without following e-
procurement. Whereas any contractinvolving amount more than Rs. 10,00,000.00 has to be
awarded only byway of e-procurement. This change in policy has given level playing fieldto
all the participants. Thus, it has contributed in cause of upholdingvalues enshrined under
Art. 14, Art.19 and Art.21 of Constitution of India,1950.

Thus, so far we discussed about e-contracts and other allied topics. As thiswork is related to
e-contracts, it is essential to understand evolution ofcontracts.

29
 CHAPTER 3

JURISPRUDENTIAL ASPECTS OF LAW OF CONTRACT:

3.1.INTRODUCTORY

There is widespread understanding about e-commerce that it is growingrapidly worldwide.

Specifically there is an increase in online transactionsin India. Instead of visiting to local
market, people are favoring topurchase goods and services online. This is not the case with
India alone,this situation prevail almost every corner of this earth. As everybodyaware
that jurisprudence is referred as mother of all laws. Almost all laws originate from the
womb ofjurisprudence. In broader sensejurisprudence means study of knowledge of law.
Here we are not arguingabout what is jurisprudence and what are its functions? Our concern
is tofind out how law of contract is considered concept of jurisprudence.Before going to
the crux of our discussion first let us have look atdefinition of jurisprudence.

As such there is no particular definition of jurisprudence. Eachphilosopher expresses his

view differently. Most part of the jurisprudenceis developed during theological period,
wherein the Pope was exercisingpowers of the State. Almost all definitions have theological
background.For some philosophers jurisprudence is philosophy of positive law,for some it
may science of first principles of the civil law. Further questionarises before us that, what
exactly jurisprudence is about, social orscientific? We must be clear here that we are not
bothered scientific aspectof jurisprudence.

Sir Thomas Erksine Holland defines Jurisprudence as the formal scienceof Positive Law‘.
Further he says, jurisprudence deals with the humanrelations which are governed by rules of
law rather than with the material rules themselves‘. This definition was doubted by Prof.
John ChipmanGray in his work The Nature and the Sources of the Law but the objection
hadno strength at all, so we can accept jurisprudence as formal science, as it iscalled by
Holland.

Now the next question before us is about the subject-matter ofjurisprudence.

Jurisprudence doesn‘t deal about set of rules derived fromsome authority. According to
Salmond, jurisprudence is the name given toa certain type of investigation into law, an
investigation of an abstract,general and theoretical nature which seeks to lay bare the

30
essentialprinciples of law and legal systems. The subject matter of jurisprudence isdivided
into three branches, first, it deals with the various legal theories;second, it deals with the
sources of law; and last, deals with the elementsof law.

The first branch of jurisprudence focuses on meaning of law and views ofjurists on law. In
second branch of jurisprudence we consider pros andcons of codification, the value of a
strict system of judicial precedent andthe methods of judicial reasoning. And in last branch
we analyze legal concepts. However there are nine elements of law, but our concern
isconfine to only three in number. Those are:

 Rights and Duties

 Titles and
 Obligations
Before discussing above elements of law we must know the definition ofcontractfirst.

3.2. DEFINITION

Oxford dictionary defines contract as, a written or spoken agreement,especially one

concerning employment, sales, or tenancy that is intendedto be enforceable by law.It is the
view of William Markby that Contractbelongs to that class of acts which give rise to legal
rights and duties uponoccasions when the parties themselves have agreed so to declare.In
hisbook entitled Elements of Law, Markby quoted Savigny‘s definition ofcontract.
Savigny defines contract as,

A contract is the concurrence of several persons in adeclaration of intention whereby their

legal relations aredetermined.

From the above definition of Savigny, it can be observed that the contractincludes not only
those agreements which are a promise to do or toforbear from, some future act, but also
which are carried outsimultaneously with the intention of parties being declared.

Section 2 (h) of Indian Contract Act, 1872 gives broader definition. Itdefines, an agreement
enforceable by law is a contract‘. Markby criticizesdefinition saying that it restricts the
word contract to those agreementswhich the party making the promise is compelled by
law to perform.

31
Further, he states the definition of contract is very vague because there isno guidance with
regard to what agreements or what classes ofagreements are enforceable by law. Markbyis
of view that Savigny‘sdefinition is very comfortable to adopt, he also provides reason for
the same.

 That the agreement in order to become a contract must be one in which the parties
contemplate the creation of a legal relation between themselves.
 That it clearly describes the true relation of the parties and how itarises.

According to Treitel, a contract may be defined as an agreement which iseither enforced by

law of recognized by law as affecting the legal rights orduties of the parties. This definition is
commonly being used by Englishlawyers. Similar definition is widely used in the American
Restatement ofContracts:

A contract is a promise or a set or promises for the breach of which the lawgives a remedy, or
he performance of which the law in some way recognizes as a duty.

Chitty adopts definition given by Pollock that is a contract is a promise orset of promises
which the law will enforce. 12 More or less the definition ofcontract is same throughout
world. But Atiyah criticizes these definitionsthat the lawyers constantly talk about
contracts being enforced‘.

According to him courts hardly ever enforce‘ contracts themselves, andthey rarely even
order the parties to perform their promises. Atiyah makesit clear that the law does not
actually compel the performance of acontract, it merely gives a remedy, normally damages,
for the breach.

In furtherance with above paragraph Atiyah adds that, the final clause ofthe definition from
the Restatement is inserted because to take away thisproblem. He finds another fundamental
problem in above definitions thatagreements and promises are things‘ which exist outside the
law, whichcan be recognized as such. It is better to quote Atiyah‘s words:

Agreements and promises are not promises are not physicalobjects which can be seen and
recognized by the senses.

They are themselves abstract concepts, just as much as theconcept of contract itself. Of
course agreement‘ and promise‘ are ordinary English words, and do haverecognized
meanings in ordinary speech so it may bepossible to recognize them when one sees them,

32
as it were,without any legal training. No doubt thisis true of someagreements and promises,
but it is not true of all. There aremany difficult questions involved in actually identifying
asagreement or a promise. We have, for instance, alreadytouched on the problem of the
person who signs a documentwithout reading it. Does his signature show that he agreesto the
contents of the document, whatever they may be, that he promises‘ to do whatever the
document says, eventhough he has not read it? In many cases of this nature it isnot possible
to say whether there is an agreement or apromise until we have first of all analyzed the
issue in legalterms. In other words, it is the law itself which provides theonly precise
definitions we have of the concepts ofagreement and promise, so definitions of contract
which usethese concepts are either incomplete, or circular.

Overall we can say that there is no particular definition of contract, whichgives exact
meaning of it. Now we can enunciate that Markby‘s remarksabout definition of contract‘
given under the Indian Contract Act, 1872 aretrue, and there is nothing wrong in adopting
definition of Savigny.

3.3. RIGHTS AND DUTIES

The idea of rights and duties is central to the functioning of any legalsystem. People
recognize the need for law primarily as a means to protecttheir rights. When we think of one
person‘s rights, the idea of duty followssimultaneously. Right and duties are coextensive.
There is no value forsuch right which doesn‘t have coextensive duty.

The English word right‘ literally has two meanings. In one sense, it meanswhat is correct or
just to do. That is the meaning when we say I am right‘or he is right‘. However, we use the
word in a different sense when wesay that I have a right to speak‘ or you have right to get
admission‘. Thefact that many languages including English, German and French have
thesame word to denote right, both in the sense of being right and having aright, shows that
the human mindconsiders these two meanings as thesame or at least inter-related. We
may, therefore, say that a person has aright only when others consider it right to allow such
right. The rightness‘of the right must be accepted by others, by the society, and formally by
thestate and the legal system.

A legal right is commonly defined as an interest recognized and protectedby law. Individuals
will have many interests. It is obvious that law cannotrecognize and protect all these interests.

33
It, therefore, becomes necessary toselect some interest as worthy of legal protection. On
what basis suchinterests are selecteddepends on the policies and priorities of
eachindividual legal system.

Salmond defines a legal right as an interest recognized and protected by rule of justice. The
word interest‘ implies any interest, respect for which isa duty and disregard of which is a
wrong.This definition contains twoessential elements, viz. legal recognition and legal
protection. Both theseelements shouldsimultaneously and concurrently be present in an
interestfor its transformation as a legal right. A legal recognition of an interestwithout legal
protection does not make it enforceable in a court of law, ase.g. time barred debts. So also
legal protection, of an interest without its legal recognition cannot make it a legal right.
When law prescribespunishment for cruelty animals, it protects theinterests of animals.
However, the interest recognized by them is that of the society at large which desires the
welfare of its animals.Salmond maintains that animals have no rights of their own.

The second part of Salmond‘s definition that a legal right is any interest,respect of which is a
duty and disregard of which is a wrong, needs someelaboration. Whether a person‘s interest
amounts to a right or not dependson whether there exist with respect of to it a corresponding
duty imposedupon any other person. Further, the right is an interest, the violation ofwhich
would be wrong. Rights like wrongs and duties are either moral or legal. A moral or natural
right is an interest recognized and protected bymoral or natural justice, violation of which
would be moral or naturalwrong and respect for which is a moral duty. A legal right on
the otherhand is an interest recognized and protected by a rule of legal justice. It isan interest,
a violation of which would be a legal wrong and respect forwhich is a legal duty

Gray defines a legal right as that power which a man has to make a personor persons to do or
refrain from doing a certain act or acts, so far as thepower arises from society imposing
a legal duty upon a person orpersons.

According to Holland, a right is a capacity residing in one man ofcontrolling, with the
assent and the assistance of the State, the actions ofother‘. The definition of legal right‘
adopted by Holland involves thefollowing things:

• Right distinguished from Might;

• Imperfect Rights;

34
• Right enforceable by its Owner; and

• Right and Duty correlative.

Salmond states that rights and duties are correlatives. He also states that,there can be no right
without a corresponding duty, and duty without acorresponding right any more than there can
be a husband without a wifeand parents without a child. For every duty must be duty towards
someperson or persons in whom correlative right is vested and converselyevery right
must be right against some person or persons upon whom acorrelative duty is imposed. Thus,
every right or duty involves a vinculamjuris, a bond of legal obligations by which two or
more persons are boundtogether.

Our concern is not about the technicalities of right and duty. The abovediscussion is
adequate for concern. Our point of discussion is confined tohow concept of right and duty is
relevant to law of contractLaw of contract is a part of right called right in
personamconversely to this we have right in rem.

First we will discuss right in rem. This term isderived from the Roman termactio in rem ,it
was an action for therecovery of dominium. Later this term came to be called as jus in
rem.Aright in rem is also called a real right for it is a right over a res or thingwhich
thus becomes real. A real right corresponds to a duty imposed uponpersons in general. A
real right or a right in rem is available against theworld at large or persons generally. Right
in rem is always a negative right.

E.g. my right of possession and ownership is protected by law against allthose who may
interfere with the same.

As it is in case of right in rem same way in case of right in personam theterm derived
from the Roman terminology actio in personam. Later it cameto be known as jus in
personam.Rightin personam is also called aspersonal right. This right is available against a
person or determinate classof persons. A right inpersonam corresponds to a duty imposed
upondeterminate persons. Right under a contract is rightinpersonam as theparties to the
contract alone are bound by it. The right of a creditor against a debtor is a right in personam.
Rights in personam are usually positive, andare negative only in exceptional cases. This is
so in the case of sale ofgoodwill when the seller promises not to set up a rival business
within aparticular locality and for a specific period. The right of the purchaser isboth negative
and inpersonam. He acquires the right of exemption fromcompetition from the seller.

35
The source of right in personam is usually arises out of a contract. Contract, however, is not the
sole source of right in personam. It is possible to have right against a definite individual
independently of any agreement with him. For instance one may have the right to receive
compensation from a wrongdoer for the breach of duty imposed on him by law and out
by contract. Such aright is a personal right arising independently of contract.

The rights which arise out of status are also rights in personam; but they arenot of so
definite a character as to be reducible to a money value. Therights and duties which
arise out of membership of family, for instance,consist often in lifelong courses of conduct
and do not always have aneconomic significance. In this respect they differ from rights
in personamthat arise out of contractThe commonest and the most important kind of jus in
personam is thatwhich has been termed by the civilians and canonists‘ jus ad rem.
Salmondsays that, if I have a jus ad rem when I have a right that some other rightshall be
transferred to me or otherwise vested in me. Jus ad rem is a right to aska right. It is clear
that such a right to a transferred, however-the subject matter of the jus ad rem – may be
either in rem or in personam, though it is more commonly in rem. An agreement to assign a
chattel creates a jus ad jusin rem; an agreement to assign a debt or a contract creates a jus ad
jusinpersonam.
It is vital for us to point out something about the distinction between rights in rem and
in personam. These apply not only to rights in the strict sense, but also to liberties, powers
and immunities. Thus, freedom of speech is, within its limits, a liberty in rem, while a
license to walk over land of a particular landowner is a liberty in personam. The power to
make a contractual offer is a power in rem, while the power to accept an offer made, and
thus to create a contract, is a power in personam, availing only against the person who has
made the offer. Whatever it applies for contract law in general, same thing applies to e-
contract too. There is no much difference between paper contract and e-contract.

3.4. TITLES

Every right arises from a title. The term title‘ is derived from the termTitulus of Roman
law and Titre of French law.According to Salmond,every legal right has a title, that is to
say, certain facts or events by reasonof which the right has become vested in its owner‘. A
person has right to athing because he has a title to that thing. According to Justice
Holmesevery right is a consequence attached by the law to one or more factswhich the

36
law defines and wherever the law gives anyone special right,not shared by the body of the
people, it does so on the ground that certainspecial facts, not true of the rest of the world, are
true to him‘.It is thesefacts which constitute the title. Title means any fact which creates a
rightor duty.

Again quoting Salmond, the title is the de facto antecedent of which theright is the de jure
consequent. If the law confers a right upon one manwhich it does not confer upon another,
the reason is that certain facts aretrue of him which are not true of the other and these facts
are the title ofthe right.

Jurisprudence interprets the term title‘ in a broad sense and treats theexistence of this
statute as the title of the particular rights claimed by trust.In practice, it is impossible for the
law to confer every tight directly, forlaw has to operate over a wide field and is bound to
generalize in order to achieve economy of thought and time; therefore certain
particularsituations of fact are specified by the law as giving rise to certain rightsand
duties.

Bentham criticizes the word title‘ because, while it denotes the facts whichgive rise to the
creation of right, it does not denote those which destroy aright. He proposes to call every fact
by which a right or duty is created ordestroyed a dispositive fact—he further divides those
divides thosedispositive facts into investitive which create rights and duties, anddivestitive
which extinguishes them. 30 We are not looking into thetechnicalities of vestitive facts
and itsdivision.
Now coming to our point of discussion i.e. how contract is related toconcept of title‘?
What Salmond called acts in the law‘ in his book onjurisprudence, Paton used juristic
act‘ for the same. Salmondis notsatisfactory on this point as compared to Paton. He makes it
clear aboutare the elements of juristic act.

According to Paton, by juristic acts legal persons create, modify, or destroyrights and duties
and thereby affect legal persons. He gives outline of fourelements of a juristic act
 The Will: Here will means free consent of the parties to the contract.
 The Expression of the Will or Declaration of Intention: The will must be expressed
or made manifest.

37
  Power to bring about the Legal Result Desired: A juristic act can be effective only if
the party is empowered by the law to act in this way.
 Material Validity: The object which it is desired to achieve must notbe prohibited by
the law.
Salmond doesn‘t describe above elements. Further, he continued the legacy of Bentham
about vestitive facts and its classification.

Both Paton and Salmond enunciate types of juristic acts or acts in law, intwo categories,
first, unilateral and second, bilateral. There descriptionabout both the categories is similar. A
unilateral act is one in which there isonly one party whose will is operative; as in the case
of testamentarydisposition, the exercise of a power of appointment, the revocation of
asettlement, the avoidance of a voidable contract, or the forfeiture of a leaseof breach of
covenant. A bilateral act, on the other hand, is one whichinvolves the consenting wills of
two or more distinct parties; as, e.g. acontract, a conveyance, a mortgage, or a lease.
Bilateral acts in the law arecalled agreements in the wide and generic sense of the term.
There is,indeed, a narrow and specific use, in which agreement is synonymouswith
contract, that is to say, the creation of rights in personam by way ofconsent.

Great importance is attached to agreements between the parties. That ispartly due to the fact that
agreements are evidence of right and justice andthe parties adjust their rights and liabilities by
their own free consent.Moreover, agreements create rights and liabilities. As legislation is
thepublic declaration of the rights and duties of the parties concerned.
Ordinarily, agreements are enforced by the courts. An agreementconstitutes the best evidence of
justice between the parties and should beenforced. It is proper to fulfill the expectations of the
parties based on theirmutual consent if the same is not opposed to the idea of natural justice.

It is worthwhile to mention here that in jurisprudence we deal contractsas part of generic term called
agreement‘. Salmond classifies agreementsinto three categories. First category creates rights, second
transfers themand third extinguishes them. Let us deal them one by one:

The agreements which create rights are of two kinds; contracts andgrants. Contracts create rights
and obligations among the parties inpersonam. A contract greats a legal tie of a personal right
and that liebinds the parties. According to Salmond, contracts are bilateral bitthere are some

38
unilateral contracts as well. Contracts are unilateralwhen a promise is made by one party
and accepted by the other.Grants are agreement by which rights other than contractual rights
to privilege are created.

 Agreements which transfer rights are called assignments.

There are agreements which extinguish rights and those are known as release. Salmond
articulates some cases in law in which, although in fact there is no agreement, the law regards
an agreement as existing. These cases are particularly prominent in contract law in
practice. Thus, if A makes anoffer to B, and then writes a letter to B purporting to revoke
the offer, and B accepts A‘s offer before A‘s revocation has come to his knowledge, there
is a valid contract, notwithstanding to consensus ad idem at a single point of time. Again, if A
leads B to suppose that he is agreeing, when in fact hedoes not agree, he is stopped from
setting up his real intention. Thesecases have led to the formulation of an objective‘ theory
of contract, in contrast to the traditional subjective‘ one. According to the objective
theory, a contract is not an agreement, a subjective meeting of the minds,but is a series of
external acts giving the objective semblance of agreement.Anson gives good description
about these theories.

3.4.1. THEORIES OF CONTRACT

3.4.1.1. SUBJECTIVE THEORY OF CONTRACT34

The fact that most contracts originate in an agreement fortified certainjuristic writers,
especially those of the nineteenth century, in placing greatemphasis upon the subjective
nature of contractual obligations. Theessence of a contract was said to be the meeting of the
wills of the parties;an agreement was the outcome of free and consenting minds. The
reasonsfor this doctrine are twofold.First, great emphasis had been placed in the political
philosophy of theeighteenth century upon the concept of human liberty. Everyman, it
wassaid, should be free to pursue his own interest in his own way. It was,therefore,
conceived to be the duty of the law to give effect to the wills ofthe parties as expressed in
their agreement, and it was asserted that as fewrestrictions as possible should be placed upon
freedom of contract‘.

On this point Anson quoted Henry Maine who postulated, in his bookAncient Law, that
the movement of progressive societies had hitherto beena movement from status to contract.

39
This movement was not onlydesirable, but inevitable. Imperative law‘, Maine said, has
abandoned thelargest part of the field which it once occupied, and has left men to settlerules
of conduct for themselves with liberty never allowed to them till recently. Anson pointed
out that writings of Maine were written close toan epoch in which the champions of
individualist social philosophy hadbeen attacking legal and social restriction behind which
privileges wereentrenched which were almost entirely indefensible; freedom of
contractwas outcome of those attacks as trophy of victory.
Today the position is seen in very a very different light. Freedom ofcontract is a
reasonable social ideal only to the extent that equality ofbargaining power between
contracting parties can be assumed, and noinjury is done to the economic interests of the
community at large. In themore complicated social and industrial conditions of a collectivist
societyit has ceased to have much idealistic attraction. It is now realized thateconomic
equality often does not exist in any real sense, and thatindividual interests have to be made
to subserve those of the communityHence, there has been a fundamental change both in
our social outlookand in the policy of the legislature towards contract, and the law
todayinterferes at numerous points with the freedom of the parties to makewhat contract
they like. The relations between employers and employed,for example, have been regulated
by statutes designed to ensure that theemployee is properly protected against redundancy and
unfair dismissal,and that he knows his terms of services.

In the era of standard form of contract the freedom of contract has become illusion in many
consumer transactions, like railway tickets, wherein thereis no negotiation of contract.

The second reason for the subjective approach is more philosophical. Thisdeals with nature of
defences against the breach of contract. For example,it may be alleged that the contract was
induced by the misrepresentationof the plaintiff, that the defendant was suffering from
some incapacitysuch as mental disorder or drunkenness, or that the parties had
contractedtogether under some false and fundamental mistake. The presence of
thesedefences, indicates the subjective nature of contractual obligations. Inaddition to the
external phenomenon ofagreement, it must further beshown that each party consented to be
bound, and that this consent wastrue, full and free‘. If this condition is not satisfied, no
real consensusexists, and the contract will fail.

The main difficulty about this argument is that it is impracticable to placeemphasis solely

40
upon the subjective nature of an agreement, and to insiston true consensus is every case. It
would be impossible to hold that asecret mental reservation by one or other parties, or
some tacitmisunderstanding, should be permitted to destroy the obligation. Andeven if
resort is had to their declared will‘ that is their will as declaredand announced to the
other party, all difficulties will still not yet besurmounted. For reasons of convenience, the
law may hold that a contracthas been concluded even though the parties are overtly in
disagreementWhere, for example, an offer is accepted by post, it is settled law that
thecontract is effective as soon as the letter of acceptance is posted. But a letterrevoking an
offer has no effect until it has been brought to the notice of theofferee. If, therefore, before a
letter of revocation reaches the offeree, theofferee sends off a letter of acceptance, a
contract comes into existenceeven though the parties are manifestly not ad idem. Even if
terms of theparties‘ declared will, no consensus exists in this case.

3.4.1.2.OBJECTIVE THEORY OF CONTRACT

The difficulties attendant upon a definition of a contract in subjectiveterms have led to the
formulation of an objective theory which places littleupon the meeting of wills and much
more upon the legal expectationsaroused by the conduct of the parties. The supporters of this
theory arguethat, when the law enforces a promise, it does so in order that thepromisee‘s
reasonable expectations of performance should not be disappointed. It is therefore
immaterial whether or not the promise trulyrepresents the intention of the promisor. So, if
one party makes to theother a promise which is reasonably understood by the promisee to
beintended to affect legal relations, the promisor will be contractually boundby the promise
even though he did not intend tocontract, or to contract inthose terms.

Although this is more satisfactory explanation is adopted by the commonlaw towards the
inception and interpretation of contractual obligations, itcannot be accepted as an entirely
exhaustive description of the nature of acontract. The reason for non-adoption of this theory
is the draconianrequirements of commercial contracts. If this has to be adopted
firstrequirements of commercial convenience have to be reconciled with themoral
qualifications introduced by the concept of fair dealing. Commonlaw has admitted that
most of the defences are depend upon subjectiveconsiderations.

41
3.5. SOCIAL CONTRACT THEORY

This theory promotes that subjects have either expressly or impliedlyagreed for giving up
their rights to the sovereign for protection of some oftheir other rights. This theory was found
in Greek Law, Roman Law, andCanon Law. In Indian context, some jurists advocate that
King Asoka wasvotary of social contract.

The theory of Natural law in modern classical era became a theory ofnatural rights of man
and states. Natural law was used for theemancipation of people from political tyranny.
Struggles for emancipationrose in different ways in the English Revolution of 1688, the
American Declaration of Independence of 1776, and the French Revolution of 1789.The
governments claimed unlimited power over people, and the peopleclaimed democratic
rights to control the government. Both relied on socialcontract theories.
Thomas Hobbes (1588 – 1679) proposed that individuals come together byceding some of
their rights so that others would cede their rights finallyresulting in formation of state. John
Locke (1632 – 1704) advocated thatby individuals in a state were bound morally by the Law
of Nature to notto harm each other. They would live in fear if there is no government to
defend them and protect them. He contended that government gets poweras citizens give it
that authority under self-defense . Jean-JacquesRousseau (1712 – 1778) published his
philosophy in a book called ―TheSocial Contract. As per Rousseau, liberty was not
possible unless peopledirectly rule. He proposed that citizen cannot pursue their interest by
being egoistic. They can better serve their interests by being subordinate tolaw created
collectively by citizens.

With this backdrop, there were considerable developments duringEuropean Renaissance

especially in the legal jurisprudence. Sovereignty‘and liberty‘ were more frequently used
terms. More clarity was put inthoughts and greater emphasis was laid on individual
freedom. Withthese things in mind, we shall now revert to law of contract
fromjurisprudential perspective.

3.6. KINDS OF AGREEMENTS

Salmond divides agreements into three kinds. They can be either valid orvoid or voidable. A
valid agreement is one which is fully operative as perthe intent of the parties. A void
agreement, on the other hand, is onewhich totally fails to receive legal recognition or

42
sanction. It isunenforceable as the declared will of the parties is wholly destitute of
legalefficacy. A voidable agreement stands midway between valid and voidagreements. A
voidable agreement is not a nullity but its operation isconditional and not absolute. It is
liable to be cancelled or disregarded ordestroyed at the option of one of the parties to it, but
is operativeotherwise. Anson adds fourth kind to this list, i.e. unenforceableagreements.43
According to him, an unenforceable agreement is one whichis good substance, though, by
reason of some technical defect, one or bothof the parties cannot be sued on it.44 Void and
voidable agreements may beclassed together asinvalid.

3.6.1. VALIDITY OF AGREEMENT

All agreements are valid until and unless they are short of any disability.The agreements
become invalidity if it is void or voidable. The mostimportant causes of invalidity are six
in number viz.:

1. Incapacity
2. Informality
3. Illegality
4. Error
5. Coercion and
6. Want of Consideration

Incapacity: Only persons who are competent to enter into a contract cancreate enforceable
obligations. In the eye of law, certain persons are notcompetent to enter into contracts and
consequently contracts by them areinvalid.Informality: There are certain agreements which
require certain legalformalities to be fulfilled and if those formalities are not fulfilled,
theagreement becomes invalid.

Illegality: Some agreements are declared to be invalid by law. Suchagreements are immoral
or against public policy, e.g. wageringagreements or agreement in restraint of trade.

Error or Mistake: An agreement may become invalid on account of someerror or mistake.

A mistake may be either essential or unessential. In caseof an essential mistake, the parties do
not in reality mean the same thingand do not agree to anything. In the case of an unessential

43
mistake, it doesnot relate to the nature or contents of the agreements, but only to
someexternal circumstances which induced one party to give his consent andwhich does
not make the agreement invalid. It is the duty of the buyer tobeware and if he has failed to
do so, he cannot be allowed to takeadvantage of his own mistake.

Want of Consent: An agreement also becomes invalid if the consent of anyparties is

obtained by means of compulsion, undue influence or coercion.

Want of Consideration: The last condition is want of consideration. Ifthere is no

consideration of agreement, the agreement becomes invalid. InRoman law it is
callednudumpactum. The consideration involved in acontract should be adequate.

3.7. OBLIGATION

According to Salmond, an obligation may be defined as a proprietary right in personam

or a duty which corresponds to such a right‘. Obligations are merely one class of duties,
namely, those which are the correlatives of rights in personam. An obligation is the vinculum
juris, or bond of legal necessity, which binds together two or more determinate individuals.
It includes the duty to pay a debt, to perform a contract, or pay damages for tort, but not
the duty to refrain from interference with the person, property or reputation of others. 48 In
general sense the term obligation is synonym to duty. We must know one thing about duty
that it is only part of the broader term obligation.
H.L.A. Hart observes that obligation exists by virtue of rule. According to him obligations
can be moral as well as legal. He identifies the following differences between moral and legal
obligations:
• Every moral rule is treated as being important, but this not so with every legal rule.
• Moral rules are not changed by deliberate single acts, while legal rules can be so changed.
• Breach of moral rules requires voluntary and blameworthy conduct, but many legal rules
can be broken without fault.
• Moral pressure is applied mainly to appeal to the morality of the conduct, whereas legal
rules are applied mainly by coercion.

Dias considers duty as a species of obligation. He differentiates between aduty and an

obligation summed asunder:

44
• Obligation is a duty in personam. Duties in rem, such as the duty to refrain from
interference with the person, property or reputation ofothers is not considered as an obligation
in the legal sense.
• Obligation denotes the legal bond or vinculum juris in its entirety including both the right of
one party and the liability of the other in the same transaction. When we look at the
transaction from the point of the person entitled, an obligation is a right. From the point of
view of the person bound, it is duty. Thus, we may say that the creditor acquires, owns or
transfers an obligation. Correspondingly, the debtor has incurred or has been released from an
obligation.

According to Holland, ‗an obligation, as its etymology denotes, is a tie whereby one
person is bound to perform some act for the benefit of another. In some cases, the two
parties agree thus to be bound together; in other cases, they are bound without their consent.
In every case, it is the law that ties the knot and its untying,solution is competent only to
the same authority‘

Solidary Obligation

Ordinarily in an obligation, there will be one creditor and one debtor. However, there may
be transactions in which there are two or more creditors or two or more debtors. An
obligation in which two or more debtors owe the same debt to the same creditor is called
a solidary obligation‘. Solidary obligations may be classified into:
 Several
 Joint and
 Joint and Several

We will not look into the technicalities of solidary obligation. Our point of consideration is
contract. But it is necessary to mention here that contract finds its place into the third kind
that is, joint and several.For instance, if A and B owe Rs. 1000/- to C, the common creditor,
and A has been compelled to pay the whole debt of Rs. 1000/- to C, then A can sue B for
contribution.

45
Salmond classifies sources of obligations into four main heads:

• Contractual—Obligationes ex contract
• Delictal—Obligationes ex delicto
• Quasi-Contractual—Obligationes quasi ex contractu
• Innominate

Our business with respect to sources is confined to contractual obligation. Rest others are not
of our concern.
As we have already dealt with contractual obligation in our former section. Now, here we
would be dealing some more additions to contract. Contract is one of the most important and
foremost sources of obligation. Here we will be just stressing about how contract is source of
obligation.

Contract create rights in personam between the parties, this we have already dealt
discussed above. It can be said that the law of contract is almost wholly embraced within
the law of obligations. There may be a few exceptions like promise of marriage, which fall
within the law of status and not within that of obligation. Salmond says, neglecting the small
class of personal contract, the general theory of contract is simply a combination of the
general theory of agreement with that of obligation.

So far, the discussion was about evolution of contracts from jurisprudential perspective.
Now in coming chapter, we will discuss about development of contract law in English
system, Ancient Indian system and under Mohammedan Law.

46
 CHAPTER 4

GENESIS OF CONTRACT LAW:

4.1. INTRODUCTORY

When we say history, the first question which arises in our mind is, why do we read history?
What is the purpose of reading history? The obvious answer to this would be that, we read
history to know the roots of subject matter. Another purpose of reading history is to learn
from experience of past and not to commit the same mistakes, which were committed by our
ancestors. Next obvious question would be why should we read legal history? By reading
legal history we try to understand law and how various institutions of law came into
existence. Further, it can be said that, modern law can be properly understood only in the
light of history.

Same way, here we would be analyzing historical background of contract law. It is

worthwhile to mention here that the concept of contract was existed in ancient era, but not
in the form which is existed now. In earlier systems contracts were recognized through
following transactions sale, mortgage, pledge, bailment and loan. In modern society whole
business life revolves around the contracts. But in early system of law there was no scope for
rights in personam. In this section we will be investigating genesis of contract law in two
jurisdiction i.e. English and Indian law.

4.2. ENGLISH LAW

The history of English Law is not of its own, it is of entire European nations. There is
something interesting about English law, that it has a great influence of Roman law on it.
The history of English law starts from Babylonian era and ends up till recent. During Roman
Empire the law was based on Twelve Tables. When Christianity became official religion
law was being enforced by the Church i.e. papal, that law was called ecclesiastical law.
During fifth and sixth century Theodosian and Justinian codified law came into existence.
After sixth century it was Anglo-Saxon and Canon Laws which left great impact on the
English Law. Truly speaking the history of English law got its identity only after the Norman

47
Conquest. From the eleventh century onwards the common law started taking its own
shape.We can say that common law began from this century.The contribution of Glanvill2
and Bracton3 to English common law cannot be neglected. Until sixteenth century, common
law played very vital role in development of the English law. For almost five centuries
common law was at its zenith. Then from sixteenth century onwards statutory law took
upper hand on common law. For our discussion this brief history about English law is
nough.

Now coming to contract law, which is our moot point, the history of English contract
law commences with the reign of Henry II. Before that we should consider contributions of
Hammurabi code, Roman law, Anglo- Saxon law and then coming to common law.

4.2.1. BABYLONIAN LAW

In Babylon people were governed by Hammurabi Code. It is believed that the Babylonian
law of contracts was the first highly developed system on this branch of jurisprudence in the
history of the world. During that period many formalities were to be followed in making a
contract.

The lack of slaves in the country made the creation of the relation of master and servant an
important branch of contracts. The time of these contracts were generally for one year, and
an advance payment was customarily paid to the servant. The labourer acted as a free
agent in making the contract, but the law was strict in enforcing them, and an attempt to
avoid their performance on the part of servants met with severe penalties (upto death).
Partnerships were common, and the law of partnership was very much complete. Future
as well as present transactions could be made the subject of contract.

4.2.2. ROMAN LAW

During Roman Empire the Twelve Tables were law. Prior to establishment of Roman
Empire agreements were divided into three kinds based on sanctions. Those three kinds of
agreements were:

48
1) An Entirely Formless Compact: A formless compact was called pactum in the language
of the twelve Tables. This kind of compact was merely based on understanding of parties to
the agreement.

2) A Solemn Appeal to the Gods: This kind of agreement was based on religion. The
promisor was supposed to take oath on gods.

3) A Solemn Appeal to the People: According to this agreement the promisor was supposed
to perform his part in view of public at large.

Now let us deal about contracts which were existed during regal period of Roman Empire.
Following are the list of contracts which were prevalent:

• Ivsivrandum
• Sponsio
• Nexum
• Dotis diction

IVSIVRANDUM: Ivsivrandum is derived by some from Iouisiurandum , which merely

indicates that Jupiter was the god by whom men generally swore. According to this contract,
promisor had to call upon the gods and declare verbally that he will behold his good faith, in
case if he breaches the promise, he shall be punished. The sanction available for breach was
the promisor would be subject to withdrawal of divine protection, which means any person
would slay him.

SPONSIO: This form of contract is similar to Ivsivrandum. But there is slight

difference, let us see what it was? This contract grew in three stages:

• At first stage, it was a sacrifice of wine annexed to a solemn compact of alliance or

of peace made under an oath to the gods.

• Next stage, it became a sacrifice used as an appeal to the gods in mcompacts not
made under oath. Just as Ivsivrandum for many purposes was sufficient without the
pouring out of wine, so for other purposes sponsio came to be sufficient without the oath.

49
• Lastly it became a verbal formula, expressed in language implying the
accompaniment of a wine-sacrifice, but at the making of which no sacrifice was ever actually
performed.

The sanction for breach was based on the decisions of priests.

NEXUM: This form was normally concerned to sales and loans. In loan contract, the
borrower was supposed to declare himself as indebted for the some weighed amount. A sale
could be made only in the presence of five Roman citizens as witnesses, the amount to be
paid was weighed out by an official weigher, and the purchaser could then take possession.
The sanctions for breach were violent measures. The creditor was at his option to choose any
of the violent measure.

DOTIS DICTIO: According to this form, dowry was considered as contract. In this
form an oral declaration had to be made by, the bride‘s father or male cognates, or the
bride herself, or a debtor of the bride, setting forth the nature and amount of the property
which he or she meant to bestow as dowry, and spoken in the presence of the bridegroom.
As such there was no sanction for breach of this contract. Only thing was the bridegroom‘s
family could force the promisor for performance of contract.

Other Contracts: Apart from above list few more contracts which were prevalent during
Roman era. Those are:

• Lex Mancipi: This contract was like a covenant for transfer of property.

• Fiducia: This form was ancillary to Lex mancipi.

• Uadimonium: This form was similar to present day law of guarantee.

After seeing various kinds of contracts, now it is time for examining general
characteristics of contracts. Basically there were three attributes:

• Firstly, unilateral, in this the promisor alone was bound and he was not entitled to
anything from promisee.
• Secondly, consent of parties bearing popular or divine approval.
• Lastly, intention of parties had to be conveyed to each other unequivocally.

50
4.2.3. COMMON LAW

As it is already made it clear that in ancient period the English law of contract was
based on Roman law. It was not until Henry III reign the contract of law saw any drastic
changes. Even Glanvill and Bracton didn‘t deal contract as separate stream of law. Both of
them in their works gave little place to law of contract. At this instance the Roman law‘s
influence on English law was disinterring.

The remedy under common law was based on common law actions or various kinds of
writs. Accordingly the discussion of contract is based on five kinds ofrits, Accounts, Surety,
Debt, Covenants and Assumpsit. Let us discuss them one-by-one.

4.2.3.1. COMMON LAW ACTION OF ACCOUNT

It is not known to us that when the action of Account made its first appearance. But one
of the earliest known cases in which it was used was in year 1232.16 After sometime this writ
was superseded by writs of debt and assumpsit. This writ was modeled upon the
proprietary writs; the command‘ was that the defendant should render the plaintiff an
account, while the plaintiff in stating his case must show how the liability to account
arose, and how and where the money claimed was received.

According to common law, this action existed for only one purpose i.e. to enforce the
obligation to account. Following are the essentials of this writ:

• The person on whom the obligation is to be imposed must have received property
not his own, of which the person imposing the obligation is owner.

• The receipt of the property must not amount to a bailment.

• The receiver must have possession, as distinguished from custody.

• There must be privity between the parties.

51
4.2.3.2. COMMON LAW ACTION OF SURETY

Even it is uncertain that when this common law action of surety came into existence.
According to O.W. Holmes Jr. this writ plays very vital role in development of history of
contract. In his book titled Common Law‘ he gave detailed accounts about suretyship. In
that book he explained action of surety through story of Huou of Bordeaux. Following
passages are from Holmes‘s Common Law:

In the old metrical romance of Huou of Bordeaux, Huon, having killed the son of
Charlemagne, is required by the Emperor to perform various seeming impossibilities as
the price of forgiveness. Huon starts upon the task, leaving twelve of his knights as hostages.
He returns successful, but at first the Emperor is made to believe that his orders have been
disobeyed. Thereupon Charlemagne cries out, I summon hither the pledges for Huon. I will
hang them, and they shall have no ransom.‘ So, when Huon is to fight a duel, by way of
establishing the truth or falsehood of a charge against him, each party begins by
producing some of his friends as hostages.

When hostages are given for a duel which is to determine the truth or falsehood of an
accusation, the transaction is very near to the giving of similar security in the trial of a cause
in court. This was in fact the usual course of the Germanic procedure. It will be
remembered that the earliest appearance of law was as a substitute for the private feuds
between families or clans. But while a defendant who did not peaceably submit to the
jurisdiction of the court might be put outside the protection of the law, so that any man might
kill him at sight, there was at first no way of securing the indemnity to which the plaintiff
was entitled unless the defendant chose to give such security.

Later in modern days the above concept developed as bail in criminal law. The part of giving
surety resembles to modern day law of guarantee. Holmes says, this was the first
appearance of law of contract.

4.2.3.3. COMMON LAW ACTION OF DEBT

Originally Debt included the action of Detinue, and it was not until the reign of Edward I
that we find the distinction between Debt and Detinue recognised. In Glanvill and Bracton,
and even in Britton,19 the action of Debt was simply the general means for enforcing the

52
duty, howsoever arising, of delivering chattels. No distinction was made between money
and other chattels, and none between obligation and property. Any duty to deliver chattels
was a Debt, whether the chattel belonged to the debtor or to the creditor, whether it was an
ox, a quarter of wheat, or a shilling.

In later period, actions of Debt and Detinue got divided on the basis of property and
obligation. Debt became the general remedy for the enforcement of all obligations to pay
money or deliver chattels not the property of the plaintiff, while Detinue became the writ
of right for chattels.

Now let us deal with nature of action of Debt. This action was used to enforce a variety
of claims—for the repayment of a loan, for the price of goods sold, and for the rent reserved
in a lease. Or there might have been no contract‘ and sum might have become owning in
some other way—for example, as customary dues, or by the judgment of a court. These
claims were grouped by later medieval lawyers into three classes: Debt on the Record (for
the payment of money ordered to be paid by a court and entered upon its record), Debt
on an Obligation (where the plaintiff produced a sealed instrument), and Debt on a Contract.
Thus in 1410 it was said, each writ of Debt is general and in one form, but the count is
special and makes mention of the contract, the obligation or the record, as the case require.

The description Debt on a Contract‘ is, however, rather misleading from a modern standpoint,
for a contract would result in a Debt‘ being owed to the plaintiff only after he had
performed his own part under it. For instance, if the plaintiff had agreed to sell goods, there
would be no Debt‘ owing to him until he had delivered them.22 Or to put the same point
from the side of the defendant, he would only be liable to an action of debt if he had received
some benefit or performance, a Quid Pro Quo in return for his promise to pay the money.
Mutual promises were thus insufficient to sustain an action of Debt unless the plaintiff had
himself performed his side of the bargain. It is possible that the courts might, in time, have
modified the conditions of this action and developed out of it a remedy for the enforcement of
contracts which were completely executory, but as will see, they invented another, and more
convenient, remedy to meet that case.

One reason why action of Debt did not develop in this way was probably because there were
certain inconvenient incidents attaching to it which made it unpopular. One of these was
that in Debt, the defendant might normally wage his law‘ and the action would then be
determined, not upon its merits, but by an archaic process known as compurgation‘, in

53
which the defendant came into court and declared upon oath that he did not owe the debt, and
twelve respectable neighbours, his compurgators‘ or oath helpers‘ declared also upon oath,
that they believed that his (defendant) oath was good. 24 A second was that Debt could
only be brought to recover a certain sum of money; and the plaintiff had to recover the
precise sum claimed, or fail completely. Finally, the recuperatory nature of the action, and
the requirement of a Quid Pro Quo, stifled its development as a remedy based on
agreement, so that it could be very little adapted to meet changing commercial conditions.

4.2.3.4. COMMON LAW ACTION OF COVENANT

The writ of Covenant had emerged by the beginning of the thirteenth century, and by the
reign of Henry III, it was a frequently used form of action. It covered consensual
agreements of various kinds, and in particular agreements to do something, such as to
build a house, other than to pay a definite sum of money. But by the middle of the fourteenth
century it was clearly established that Covenant required the production of a sealed
instrument. The agreement was enforced not because the parties had exchanged mutual
promises, but because it had been made in a particular form to which the law attached a
peculiar force.

This requirement of seal confined the action within formal limits. Moreover, it the plaintiff‘s
claim was for a fixed and certain sum of money, the proper action was that of Debt. Covenant
could therefore scarcely be expected to produce a general contractual remedy.

There was yet another action of a contractual‘ nature. This action has already been dealt in
preceding paragraphs. But still, as matter of flow, we will deal here. The action of Account
which could be used against those whose duty it was to account for moneys received by them
on behalf of another. Its importance however lies mainly in the field of quasi-contract.

4.2.3.5. COMMON LAW ACTION OF ASSUMPSIT

In pages of history much is written about writ of Assumpsit, but here we attempted to give
bird‘s eye view. The remedy which was eventually found for the enforcement of informal
promises is a curious instance of the shifts and turns by which practical convenience evades

54
technical rules. Such remedy was developed out of two actions - action of Trespass and
action of Deceit.

Trespass lay for a direct physical injury to the person or to property, but by some process, the
details of which are contentiously obscure, there had developed out of it a modified form of
action which would lie for injuries which were not direct or physical, and this came to be
known as Trespass on the Case, or simply as Case. It is the parent of many of our
modern torts as for instance, nuisance and negligence, but with that side of its prolific
development we are not here concerned. Deceit, too, was at first a very narrow and
technical form of action, but out of it seems to have developed an action of Deceit on the
Case which had a wider compass. The boundaries between these two types of the action
on the Case are difficult to trace, but both appear to have been instrumental in the future
development of Case in relation to the enforcement of mutual promises.

Case lay originally for damage caused by one man to another by the commission of an
unlawful act, a misfeasance, but one not amounting to an actual trespass. But one common
occasion of one man injuring another by misfeasance is where he has promised to do
something for that other, and has fulfilled his promise so negligently or otherwise improperly
that the other has been damnified by his conduct. So, for example, where a ferryman
undertook to carry a mare in his boat across a river, but so overloaded the boat that it
sank and the mare drowned, and where a man promised to cure a horse and yet did it so
negligently that the horse died, an action was given to the owner in respect of the damage
suffered.

At this stage in the story we begin to see a special form of Case breaking off from the parent
stock, applicable to the case where damage has been caused by the mis-performance of that
which a man has assumed‘ or promised to do. This is the action of Assumpsit, which was
destined in course of time to supplant the older actions of Debt and Covenant, and to mould
the conditions on which mere informal promises were to become actionable in our law. But
at this stage the action is still delictual: the promise which the defendant has given has
provided the occasion for the wrongful act by which he has injured the plaintiff, but it is for
the harmful consequences of that the action is allowed. There still had to be a positive act;
and a mere nonfeasance, or failure to carry out a promise, would not suffice. In such a case
the judges held that the action, if any, would have to be in Covenant and the plaintiff would
have to produce a sealed instrument.

55
It was perhaps this limitation which led litigants to explore the possibility of eceit as an
alternative remedy. In Doige s Case in 1442, an action of Deceit was brought against Doige
before the King‘s Bench. The complaint was that the plaintiff had bought from Doige a plot
of land for £ 100 that he had paid this sum to Doige, and that Doige had promised to
enfeoff him within fourteen days. In fact Doige had enfeoffed another and so deceived
him. It was contended for Doige that the proper cause of action was in Covenant, but the
Court of Exchequer Chamber gave a verdict in favour of the plaintiff. The case was clearly
one of nonfeasance, and it is thus probable that both Deceit and Trespass contributed to the
evolution of that branch of Case known as Assumpsit. By this time, however, the obvious
inconvenience of there being no remedy for the breach of an executory contract, unless it had
been made under seal, was beginning to influence the Courts and there was besides a special
reason why the common law Courts could not rest content with the law as it then was. The
Chancellor was showing signs of being willing to enlarge a jurisdiction which he already
exercised over contracts, and the Courts began to fear that he might annex a subject which
they regarded as their own. So we find there, at the beginning of the sixteenth century, they
began to allow Assumpsit to be brought for the nonfeasance of mere promise. At first, it
seems that Assumpsit was only allowed in these cases of nonfeasance where the plaintiff had
paid money under the agreement, but before long it was enough if he had suffered some
detriment under it other than payment of money. The way was now clear for the formulation
of a general contractual remedy based on agreement and with no requirement of forms.

The next development came after thirty years later in the sixteenth century, when the
Court of King‘s Bench began to allow Assumpsit to be brought in cases where, in fact, Debt
was the proper remedy. It was a cardinal principle of English law at this time not to allow
two alternative remedies on the same set of facts. But King‘s Bench showed itself prepared to
disregard this ‗rule against double remedies‘ and to allow a plaintiff to choose between Debt
and Assumpsit. This step was bitterly resented by the older actions. Owing to the superior
efficacy of the action of Assumpsit, business (and, with it, revenue) began to flow out of
Common pleas into King‘s Bench to the satisfaction of the latter and the chagrin of the
former. For a time, there was an unfortunate conflict between the two Courts—a conflict
which eventually culminated in victory for King‘s Bench.

The case which brought about this victory was Slade s Case in 1602, which, so Justice
Coke tell us, was twice argued before all the justices of England and Barons of Exchequer
assembled in the full Court of Exchequer Chamber:

56
Slade had sold wheat to Morley the price to be paid on certain date fixed by the parties.
Morley failed to pay. Slade sued on an Assumpsit. The jury found that the defendant had
made no subsequent promise to pay. It was decided in favour of the plaintiff. The promise in
such circumstances was implied by law and Assumpsit would lie upon any simple debt.
This came to be called the indebitatus assumpsit. It was held that, every contract executor
imports in itself an Assumpsit, for when one agree to pay money or to deliver anything,
thereby he assumes or promises to pay or to deliver it.

In 1852 it became no longer necessary to mention in the writ by which an action was began
the particular form in which it was being brought, and in 1875 the Judicature Act abolished
the forms of action altogether. Thus, English law was left with a generalized law of
contract—a situation which contrasts favourably with the lack of generality in the
companion subject of torts.

4.2.4. MODERN LAW

The development of the law of contract during the eighteenth and nineteenth centuries in
no way interfered with the basic notions thus laid down. But, during this period, the judges
formulated the principles which now appear as those of modern law. This was a gradual one,
but it gained momentum with the advent of the industrial revolution and the consequent
need for more sophisticated rules to deal adequately with the expansion of trade and
commerce. In this period, too, the treaties writers began to expound the judgments of the
Courts in a systematic ashion and to impose on the English law of contract a conceptual
structure. The nineteenth century, in particular, was a period of great innovation in and
expansion of contract law. Nevertheless, this branch of law is today by no means stagnant,
and the principles enunciated by the Victorian judges are constantly being modified and
adapted to meet the changes in economic nand social conditions of the twentieth century.

The last hundred years has also seen a rapid growth in the importance of statute law. There
are the great codifying Acts of the nineteenth century, such as the Bills of Exchange Act,
1882 and the Sale of Goods Act, 1893. There are also a number of reforming statutes such
as the Law Reform (Frustrated Contracts) Act, 1943, the Unfair Contracts Act and the
Misrepresentation Act, 1967, which have been enacted to remedy defects or to make good
deficiencies in the common law. But the most important and far-reaching proposal has been
one for them codification the entire body of general principles of contract law.

57
In 1965, the English and Scottish Law Commission announced their intention to codify
the English and Scots law of contract. The code as originally envisaged was to be uniform
body of the applying throughout England and Scotland, and it was to embody amendments to
the existing law of both countries. Subsequently, however, the Scottish Law Commission
withdrew from this enterprise. Presently most of the English contract law is regulated by
the Principles of European Contract Law 2003‘ and the Contracts (Rights of Third Parties)
Act 1999.

4.3. INDIAN LAW

The tale of Indian law is distinct from the other systems of law. It is not unknown to
everyone that India was considered as golden bird‘ due to her economic strength. In
ancient era almost all foreigners were attracted to the luster of India. She was culturally
rich in her nature. India was never ruled by any single ruler, throughout history she was
exposed to many invasions by the foreigners. If we look into the ancient period, we come
across Greek invasion. Later in medieval era it was invaded by many rulers such as
Muhammad of Ghazanvid et al. And lastly it was the European rulers who ruled India.
After seeing all this we can come to conclusion that India was exposed to diverse legal
systems. Here we attempted to establish history of legal system in nutshell.

At first we will start with ancient legal system. The ancient Indian society was based on duty,
which means whole society was bound by Dharma. It is said that the definition of Dharma
includes righteousness, duty, justice and truth. The body of Indian law was comprised of
system of duties religious and civil. It was Vedas which played vital role in emergence
of law in Indian society. Almost all sages of ancient era gave prominent place to the Vedas.
One can say that the Vedas are the roots of Indian legal system. One of the most prominent
codes of India is Manu Smriti or Manu‘s Code. During ancient period whole society was
well established and people were happy with their lives and thought of wellbeing of entire
society. If any men or women fail in performing his/her duty, he was subject to
punishment. The fear of punishment forced people to perform their respective Dharma. For
instance, in ancient society, if artisans like blacksmith or carpenters caused any unreasonable
delay interception handing back finished articles, they were to receive one-fourth less
than the proper wages and were to be fined twice the amount of wages.

58
The above society continued until invasion of Islamic rulers. During Sultanate and Mughal
rules the rulers started using Sharia laws for administration of justice. But in villages above
system was in continuation.

During modern era when British invaded, they found that the legal system was at its chaos.
So for this they started introducing common law doctrines in administration of justice.
They enacted laws on the basis of common law doctrines. After independence India
continued to follow the system which was established by Britishers.

For the purpose of this work, we are concerned about law of contract; the above discussion
was made for better understanding of system. There are references of contract law in Manu
Smriti and various other texts.

Generalized form of contract was not existed in ancient era. The contract law was existed
through various vyavaharapadas, those are debts, deposits and pledges, sale without
ownership, mortgages and gifts. We are going to deal about these vyavaharapadas in infra
section. In this section we are going to see what the status of law contract was in Hindu law
and Muslim law in India.

4.3.1. HINDU LAW

When we say Hindu law the first question which arises in our mind is, whether Hindu
law is religious law? The second question arises in our mind, is Hindu a religious?
Because if we look into Smritis, Srutis, Puranas and Epics, we don‘t find any evidences of
Hindu as religion. There is a group of scholars which is trying to demonstrate that Hindu
is not religion, but it is a culture and way of life.37 Here we are not concern about whether
Hindu is religion or not, our point of discussion is about position of law of contract in Hindu
jurisprudence.

The character of Hindu jurisprudence is different from that of English jurisprudence. The
Hindu law is outcome of immemorial customs and works of Smritikaras. The Smritikaras
interpreted and explained Vedas for general public, from that Hindu law got developed.38 As
it is in the case of English law they gave prominence to right in personam, same way in
Smritis the prominence is given to Dharma i.e. duty in rem. The ancient of sources of Hindu
law are:

59
 • Srutis
• Smritis
• Customs and
• Judicial Precedents

In Hindu law prominence is/was given to Srutis or Vedas, because it is believed they are
of divine origin. In ancient India the law was divided into two heads, first,Rajadharma and
second,Vyavaharadharma. Rajadharma is equated with current day constitutional law and
vyavaharadharma with legal proceedings both civil and criminal. As our discussion is
limited to the status of law of contract in Hindu law, so we won‘t be dealing about
Rajadharma, contract is part of vyavaharadharma.

As it is already pointed out that the contract law was existed through various
vyavaharapadas, those are debts, deposits and pledges, sale without ownership, mortgages
and gifts. Before dealing them one-by-one, we should know what is vyavaharadharma and
vyavaharapadas in brief.

The word vyavahara‘ is defined by several smritis and commentators. Katyayana gives two
definitions, one based on etymology (referring principally to procedure) and the other
giving the conventional sense having in view a dispute. Etymologically, vi means
various‘, ava means doubts‘, hara means removing‘—so vyavahara means, removing of
various doubts‘. This definition places the administration of justice on a high plane. Another
definition is, when the ramifications of right conduct, that are together called dharma and that
can be established with efforts (of various kinds such as truthful speech & c.,) have been
violated, the dispute (in a court between parties) which springs from what is sought to be
proved (such as a debt) is said to be vyavahara.

A vyavaharapada means the topic or subject matter of litigation or dispute‘. It is the same
thing as vivadapada which word occurs in Kautilya and Narada. Yajnavalkya defines it
as, 'if a person, who is set at naught by others in a manner that is opposed to the rules of
smriti and to good usage or conventions,informs the king (or his judge), that is a
vyavaharapada.

Almost all smritikaras have given list of vyavaharapadas, but the difference lies in number
and nomenclature. In toto there are eighteen padas, we will classify them according to list
given by Manu.

60
They are:

• Runadana—Payments of Debts
• Nikshepa—Deposits
• Aswamy Vikraya Sale without ownership
• Sambhuya Samuthana—Joint undertaking (Partnership)
• Dattasyanapakarma—Resumption of Gift
• Vetanadana—Payment of Wages
• Samvidvyatikarma Violation of convention of guilds and corporations
• Krayavikrayanusaya—Sale and Purchase
• Swamipala Vivada—Dispute between Master and Servant
• Simavivada—Boundary Disputes
• Vakparushya--Defamation
• Dandaparushya--Assault
• Steya--Theft
• Sahsa—Offence by Violence
• Strisangrahana—Adultery
• Stripumdharma—Duties of Husband and Wife
• Vibhaga--Partition
• Dyutasamahvaya –Betting and Gambling.

4.3.1.1. GENERAL PRINCIPLES OF CONTRACTS

As it is mentioned above in ancient India contract law was enforced through titles. The
Smritikaras dealt contract law by taking up titles one after another. That doesn‘t mean they
did not say anything about general principles of contracts. They did say a good deal about the
competence of persons to enter into contracts, about fraud vitiating all contracts, about
damages for breach of contracts and etc.

Capacity

Manu Smriti‘s Chapter gives list of person incompetent to enter into contract. A
contract, entered into by an insane or intoxicated person, a cripple, a dependent, an infant

61
(minor) or a very old person or by a person not authorized by the party on whose behalf he
entered into the contract, is invalid.Kautilya repeats the same disqualifications and further
includes another isqualifications such as a father‘s mother, a son, a father having a son, an
outcast brother, the youngest brother of a family of undivided interests, a wife having her
husband or son, a slave, a hired labourer, any person who is too young or too old to carry on
business, a convict (abhisasta), a cripple, or an afflicted person.

In this regard Narada Smriti says an infant upto eight to an embryo. After that age till sixteen
it is boyhood. After sixteen only a person is competent to enter into contract. But one
becomes independent after one‘s father‘s death. From this we can understand that earlier
the age of majority was sixteen.

According to Yajnavalkya, a transaction entered into by a person who is intoxicated or insane

or afflicted with disease or in distress etc should not be upheld.

Consent

According to Colebrook, a true assent implies a serious and perfectly free use of power, both
physical and moral. This essential is wanting to promises made in jest, or compliment; or
made in earnest, but under mistake; or under deception or delusion; or in consequence of
compulsion.

Therefore, consent not seriously given, or conceded through error, extorted by force, or
procured through fraud, is unavailable.

Manu declares that a fraudulent mortgage or sale, fraudulent gift or acceptance, and any
transaction where the fraud is detected, shall be null and void. Further he says, what is given
under the threat of force, what is enjoyed under the threat of force, and any document
prepared under the threat of force—all transactions executed under the threat of force has
declared to be void.

Invalid Contracts

Any agreement which has been entered into contrary to law or to the settled usage can
have no legal force through it is proved.

62
Breach of Contract

Katyanana says, where there is a failure (to perform a contract) even though an earnest had
been given by one party, then (the king) should make the other party (who is in default)
pay double (of earnest). The purpose of taking an earnest is to make the party suffer the loss
of it when he does not abide by the agreement.‘

Having discussed about basic principles of contract law in Hindu jurisprudence, now an
attempt is made to discuss about principles of contract law under Mohammedan
jurisprudence.

4.3.2. MUSLIM LAW

The Islamic law is considered as divine origin and it is believed that this law is revelation of
God or Allah. Most of the law is based upon customs and usages followed during theera of
Prophet. Unlike Hindu law, the Islamic law is based on religion. There is doctrine in
Islamic law called certitude‘ which is same as the doctrine of Good and Evil‘ as in the case
of Hindu law.

Islamic belief begins with Prophet Muhammad, the Messenger of God (Allah). The
Prophet‘s mission was to establish peace in this world based on divine revelations made to
him by God (Allah). These divine revelations are recorded in the Quran, the sole scripture of
the Muslims.

The spiritual and secular practices of the Prophet came to be known as Sunna. These two
sources constitute the main guidelines for spiritual as well as temporal Muslim conduct in
this life as a preparation for the hereafter, and are called Sharia. The word Sharia means
the highway to good life. Over a period of time, two additional sources of Sharia came into
existence. They are: 1) Qiyas, or analogical reasoning, and 2) Ijma, or consensus of the
Islamic community on a point of law. According to Sharia, sovereignty vests in God
(Allah), requiring the state to act within the limits of divine law, or Sharia. This sovereignty
is recognized by incorporation of haria into the Islamic legal system and community. In
this sense Sharia is the constitutional law of a Muslim society.

63
In to we can come to conclusion that there are four sources of Islamic law those are:

• Quran
• Sunna
• Qiyas and
• Ijam

In this discussion we are not gone explain each and every source of law. Now coming to the
development of Islamic law in the world, it is said that the Islamic law is nearer to Jewish law
and Canon Law. These laws have left their impact on the Islamic law. According to Fyzee,
the Islamic law originated into two theories, first, Fiqh:51 the Classical theory; and second,
Fiqh: the Modern Theory.

According to Schacht, the Islamic law saw development in two Islamic states, the
Ottoman Empire in the Near East and the Mogul Empire in India; in both empires in their
heydays (the sixteenth and the seventeenth century respectively). It said that during Mogul
Empire Islamic law enjoyed the highest degree of actual efficiency which it had ever
possessed in a society of high material civilization since the early Abbisid period.

4.3.2.1. GENERAL PRINCIPLES OF CONTRACT

If we clearly focus on the Islamic law, we would find that whole of the civil law
comprises of contract itself, e.g. marriage is a contract, and inheritance of property is
another contract, like this we can impart many examples. The initial source of Islamic
contract law is Quranic revelation in Surah5. Al-Maida.

Fulfil (all) Obligations.

This Quranic verse is basis for sanctity of wide variety of obligations. The Arabic word uqud‘
or aqd‘ covers the entire field of obligations, including those thatare spiritual, social, political,
and commercial. In the spiritual realm uqud‘ deals with the individual‘s obligation to
Allah; in social relations the term refers to relations including the contract of marriage; in the
political arena it encompasses treaty obligations, and similarly, in the field of commerce, it
covers the whole spectrum of obligations of parties in regard to their respective
undertakings. Hence the generic word ‗uqud‘ forms the foundation of contract and attendant
liabilities.

64
Quran doesn‘t give direct references to law of contract, but it speaks about sale, loan, hire-
purchase, mortgage, gifts, surety ship, agency. In Quran law of contract was never a legal
concept. Quran only prohibits those transactions which are coupled with riba (usury)and
gharar.

According to Sura 2 Al- Baqarah, Ayah 27556 of Quran, God permitted trade and prohibited
usury i.e.riba. Usurious transactions were divided into two kinds: (1) riba al-fadl, which
produced unlawful excess in exchange of counter values in a contemporaneous transaction
and (2) riba al-nasi a, which produced unlawful gain by deferring the completion of
exchange of counter values, with or without an increase in profit. At later juncture one more
kind was added, riba al-jahilyya or pre-Islamic riba exemplified by the lender asking the
borrower at maturity date if he will settle the debt or increase it. All those transactions
which were coupled with usury where considered as void in nature.

Another doctrine which is dealt by Quran is gharar. According to this, transaction which
are coupled with gambling, contingent agreements, wagering agreements are prohibited.
The relevant verses in the Quran dealing with the prohibition of gharar are Sura 2 Al-
BaqarahAyah 21959 and Sura 5 Al-MaidaAyah 9360& 94. These verses refer to gambling.

The gharar prohibition is applied to whole range of commercial activities involving

speculative and aleatory contracts. The doctrine becomes applicable if the subject matter
of contract the price or both are not determined and fixed in advance. It is like future
performance of contract. Sometimes it can be felt that the doctrine of gharar may be equated
with modern day concept mistake of fact.

At this stage it is worth to mention here that the concept of riba has held sway in Muslim
societies from inception. Since riba typically applied to deferred transactions, any contract
dealing with future performance was suspected to have the double taint of riba and gharar.
The effectiveness of these two concepts has been moderated under the overriding doctrine of
necessity; however, they continue to be alive and well and a subject of debate for Muslim
scholarship. This short background of Sharia as the root principle of Islamic law must be kept
in mind for an analysis and understanding of Islamic contract law.

In contrast to Islamic law, the Western common law of contract, which developed during
the eighteenth and nineteenth centuries, grew out of the economic and legal theories of the
period in which it was formulated. In its nascence it was formulated by natural law theories

65
and later by laissez faire economic theory. Both these theories have undergone
considerable revision over time.

Islamic contract law, by contrast, started taking its shape in the seventh century. It is fair
to assume that at this time in human history commerce was limited to market overt and
that goods consisted of surplus farm products or handicrafts. The Islamic law of contracts
reflects and addresses the transactional reality of this period. The Anglo-Saxon common
law of contracts was reshaped in the wake of the industrial revolution of the eighteenth
century. The Muslim world in general did not experience the challenges of the Industrial
Revolution. But in recent years the sudden oil-based prosperity of some Islamic lands has put
the Islamic law of contract in full gear. We find that through its history that its responses
are reminiscent of the common law tradition. Hence its growth should also be responsive to
changing needs and times, as has been the common law.

Neither the Quran nor Hadith (Hedaya) specifically deal about the law of contract, these two
texts indirectly touches the law, by way of explaining what is the obligation of an individual.
The Hedaya deals law of contract

while explaining concepts such as sale, hire-purchase, gift, sirf sale, loans,etc…

Even Futawa Alumgeeree64doesn‘tgive accounts about the law of contract. It explains about
the law of sale. According to Futawa,sale is form of contract. It levies certain conditions
for fulfillment of contract of sale.

Conditions were divided into four broad categories viz., conditions which were necessary to
constitute it; to give it operation; to render it valid; to make it obligatory. 65 Contract of sale
was divided into four kinds: Operative (Sahih), Dependent, Unlawful (fasid) and Void
(batil)

Abdur Rahim explains concept of contract in following manner:

The corresponding Arabic word for contract is aqd‘ which literally means conjunction, tie.
In law it means conjunction of the elements of disposition, namely, proposal (ijab) and
acceptance (qabul). Analysing it in further detail the conception of a contract in the
language of the jurists will be found to involve four causes:

(1) faa lia or that which appertains to the persons making the contract,

66
(2) Mad dia or that which appertains to the essence, namely, proposal and acceptance,

(3) Suaria or that which appertains to the outward manifestation and (4) Ghayia or that
which relates to the result aimed at. In other words a contract requires that there should he
two parties to it, that one party should make a proposal and the other should accept it, that the
minds of both must agree, that is, their declarations must relate to the same matter, and the
object of the contract must be to produce a legal result. Proposal and acceptance are the
constituents of a contract so that, if either of them be wanting, there can be no contract.
For instance, if A offers to sell or to make a gift of certain property to B but B does not accept
the offer the sale and the gift will fail.

The dominant idea of a contract in Islamic law is that it establishes a tie of legal relations
arising from the consent of the minds of two persons to deal with each other in respect of
certain rights of theirs. For instance, when A sells or gives an object to B, the former consents
to pass on his proprietary rights therein to the latter who consents to take the property
with whatever obligations might be incidental thereto, such as the liability to pay taxes if
the subject-matter of the transaction be land, to take care of and to feed if the thing sold or
given be an animal and in the case of a sale, also to pay the price. In the case of a gift, on the
other hand, there is the moral obligation of gratitude on the part of the donee towards the
donor, and the Islamic law does not ignore the moral aspect of a transaction.

The question of creation of legal relations is treated in the Islamic legal theory as distinct
from the question of completion of such relations. The latter depends on the nature of
particular transactions. For instance, if it is intended, by a transaction to effectuate a transfer
of a physical object, the legal relations in such a case will not, strictly speaking, be said to
be completed until the transfer has actually taken place. In certain cases, however, the law
relaxes the principle taking the declaration of consent by both the parties, as a complete
creation of legal relations and compels each party to carry out what he declared he would do.
This it does only when a contract involves a mutuality of advantage as in a sale because in
such a case generally speaking there is no danger of injury to any one and the necessities
of every-day business call for it. For obvious reasons, however, the law does not step in to
complete what has been left incomplete by the parties in a case where there is no mutuality of
pecuniary advantage as in a simple gift and leaves it to the party who is making the
sacrifice to complete it by actually delivering possession of the thing. But an exception to this
is sometimes allowed as in a contract of surety-ship. In such a contract which is defined as

67
the adding of the surety's liability to that of the person originally liable, the consideration that
passed to the latter is considered sufficient to support the new promise. The case of a pledge
has given rise to a difference of opinion, some holding that the money lent is opposed to the
promise to repay and the delivery of the property to the lender is to be regarded as
something separate for which there is no consideration; others hold a different view. A
waqfor Aukaafis also regarded as a contract and some jurists hold that there
should be a mutwalli to accept the grant on behalf of the beneficiaries.

Formation of Contract

The formation of a contract according to Islamic law, generally speaking, does not require
any formality. All that is required is declaration of consent by each party. The declaration
that is first made is called proposal and the second declaration is called acceptance. The
proposal and acceptance must be made at the same meeting (mujlis), either in fact or what
the law considers as such. Suppose a man proposes face to face to another to sell his horse
to him, if the person addressed leaves the place without signifying his acceptance the offer
comes to an end, because there is no obligation on the owner of the horse to keep his offer
open. But if the offer is communicated by means of a messenger or a letter, the meeting for
the purpose of acceptance is held to be at the place and time the message reaches the person
for whom the offer was intended. If the promisee then signifies his acceptance the contract is
concluded. The acceptance must be in terms of the proposal, that is to say, the two minds
must be in agreement, otherwise there is no real consent.

Conditions of a Contract

Following are the condition of contract. These conditions resembles to those given in Futwa-
E-Alamgiri. They are:

• Capacity
• Minimum two parties
• The acceptance must be made to correspond with the proposal, by the parties
accepting and for the consideration proposed
• Subject-matter (mahal)
• Unequivocal expression by the parties—Free Consent
• Offer and acceptance be made at same place

68
Classification of Contracts

In Muhammadan law contracts having regarded to their principal features may be thus
classified as:

1) (a) Alienation of property : for exchange, namely, sale,

(b) without exchange, namely, hiba or simple gift,

(c) by way of dedication, namely, waqf, (d) to create succession, namely, bequest.

2) Alienation of usufruct:

(a) in exchange for property, namely, ijara, which includes letting things moveable
and immoveable for hire, contracts for rendering services, such as for the carriage of goods,
safe custody of property, doing work on goods and domestic and professional services,

(b) not being in exchange for property, for example, accommodate loan (a riat) and
wadiyut (deposit).

3) Contracts, (a) for securing the discharge of an obligation, namely, pledge,

suretyship, (b) for representation, namely, agency and partnership.

4) Alienation of marital services, namely, marriage.

Grounds of Dissolution

In Sharia law gharar was a possible ground for dissolution of contract. Noel Coulson opines
that only two modes of dissolution were known to Islamic law, which were unique in their
application from a comparative standpoint and which have a vital significance in
contemporary commercial transactions in the Gulf States. The first is the right of a party to
rescind the contract unilaterally, and without fault or legal cause‘. The second is termination
on the legal ground of frustration. But most of the jurists disagreed with the opinion of
Coulson. They say Islamic law was known much more grounds for dissolution. The grounds
for dissolution of contracts may be categorized in following manner:

1) Dissolution by mutual agreement (iqalah);

69
2) Automatic dissolution by death, destruction of subject matter, expiry of period,
achievement of purpose and stipulated repudiation, etc.

3) Dissolution by revocation and termination (Al-Faskh):

4) Dissolution for impossibility (istihalah) of contractual performance - doctrine of

changed circumstances, doctrine of frustration, doctrine of intervening contingencies,
doctrine of force majeure and act of God, etc. But presently in India the law of contract is
uniform in nature. Irrespective of personal laws available the contract law is applied
uniformly to each and every person.

4.4. COMPARISON OF LAWS

English System

Under English system, the Common Law played an important role in development of law
of contract. The remedy was broadly granted by way of writ in actions for accounts, surety,
debt, covenants and assumpsit. After industrial revolution, there was development in trade
and commerce. Slowly, courts started to interpret contracts in different ways without
altering basic legal characters. This led to enactment of Contract Act of modern times with
retaining its essential ingredients.

Ancient Indian System

Under ancient Indian civilization, the concept of ―Dharma‖ played a vital role. This ancient
Indian civilization prescribed law consisting as religious duties and civil duties /
obligation. Anyone who disobeyed the system was punished and this fear of punishment
made people to observe ―dharma scrupulously. Law of contract during that time included
debts, deposits and pledges, sale without ownership, mortgages and gifts.

As per Manu Smriti, any contract, entered into by an insane or intoxicated person, a cripple, a
dependent, an infant (minor) or a very old person or by a person not authorized by the party
on whose behalf he entered into the contract, is invalid. Same disqualification was prescribed
by Kautilya. As per Yajnavalkya Smriti, it prescribed a disqualification upon a transaction
entered into by a person who is intoxicated or insane or afflicted with disease or in distress

70
etc. Further, laws of that time prohibited enforcement of contracts executed after obtaining
consent by other means.

Islamic System

Under Holy Quran, the law of contract was never a legal concept. Quran doesn‘t give
references of law of contract, but it speaks about sale, loan, hire-purchase, mortgage,
gifts, surety ship, agency. Law of contract under this system primarily based on consent of
two person relating their rights. Like English Law, it also prescribes certain qualifications
and conditions for formation of ontracts.

Now coming to the core topic, the sum and substances of English Law, Ancient Indian
Law and Islamic Law is almost same. As these laws originated at different time, different
place and amongst different people, absolute similarities cannot be expected. Further, the
difference or any special prescription has to be understood in the proper perspective of that
time. Generally, these three systems provided almost similar broad structure of contract
law. Though expression of certain terms may be different under different system, but, upon
careful examination, it can be said that all these three system have same structure. Further,
when time factor is taken into consideration, it appears that the Ancient Indian legal system
was much developed. Whereas, the English system changed rapidly especially to suit
growing commercial activities.

Finally, one striking feature of these three systems is the amount of scholarship put in by
those great philosophers and jurists of that time.

Even though English law is universally accepted to be the law governing contracts, the
concepts and themes proposed under Indian System and Islamic system have great
jurisprudential values and cannot be overlooked easily.

Under these three different systems, consensus of mind has been given prominence. As
time passed by, and due to changes in political and economical conditions, the English
system governing law of contract was accepted as a standard throughout the world. After
advent of Britishraj in India, principles of English contract law dominated human
transactions.Thus these principles of English contract law made applicable in India. This
application of English law substituted Hindu and Islamic law governing contract. The basic

71
principles of offer,acceptance,consideration and capacity to contract became essential
elements to the concept of contract in different parts of the world.

The scope of this research is about e-contracts. Therefore, it was necessary to discuss about
the principles of contract under different legal systems. Now, developments in information
and communication technologies transformed way of life. Contracts are executed using
electronic technology. This resulted in pplication of essential ingredients of contract law to
the e-transactions and consequently to e-contracts.

With this background, the above discussion was about genesis of contract law. As principles
of contracts are entirely applicable to e-contracts and as this study is about legal regulation
of e-contracts specially from Indian perspective, it is necessary to throw light on
principles envisioned by Indian Contract Act, 1872.

Therefore, now the discussion would be about Indian Contract Act, 1872 so that e-contracts
can be better understood in light of principles of Indian Contract Act, 1872.

72
 CHAPTER 5

FUNDAMENTALS OF INDIAN CONTRACT LAW:

After examining history of contract law, now it‘s time to discuss Indian Contract Act,
1872 (hereinafter it will be referred to as Act‘). Before moving on to provisions of the Act
we must look into the background of drafting of bill and also about societal situation
prevailed at that time. In previous chapter we have seen position of contract law in India. It
was a mixed bag, it was consisted of partly Hindu law, Muslim law and after advent of
British rule partly English law. During eighteenth and nineteenth centuries there was much
confusion as to application of law by the courts. As there was no uniformity available, the
courts were facing problems for its application of it. In the Presidency Towns, the
Supreme Courts1 were required to administer Hindu, Mohammedan and English laws of
contract. The application of law was different in the mofussil and Presidency areas. The law
was applied according to their convenience, it was never applied uniformly. The law in the
Presidency Towns was archaic,there pre-1726 English law applied and no post-1726. The
law lay was deeply buried in precedents and case-law and, thus, it became difficult even
for a lawyer to ascertain the law. The law of contracts was thus very inarticulate, and it
adversely affected proper development of trade and commerce in the country. Codification
of law in this area was a great desideratum.2

Sir George Claus Rankin in his book Background of Indian Law mentions that in
1855the Second Law Commission in its Second Report recommended the enactment of a
uniform body of the law of contracts which would be applicable to all. In pursuance of
this recommendation, the Third Law Commission sitting in England prepared a draft bill
with dealing the general principles of contract. The draft contained rules for sale of
movable property, indemnity and guarantee, bailment, agency and partnership. The draft bill
consisted of English law of contract which simplified and altered in some particulars so as
to accommodate it to the circumstances of India.3

The bill was sent to India by the Secretary of State and was published with its statement of
objects and reasons in 1867. The bill was introduced in the Legislative Council in 1867 and
was referred to a Select Committee for further recommendations. Later the bill was
forwarded to the Local Governments for their opinions. The bill was left pending for longer

73
time in Assembly. When Sir James Fitzjames Stephen came to India as the Law Member, he
found that the bill was still pending before the Select Committee. After significant
changes made by the Select Committee, further the bill was reconsidered in England. The
bill received permission of Secretary of State for enactment. The draft after revision by
Law Member Sir James Fitzjames Stephen, became law in 1872.4

Originally, the Act dealt specifically about various classes of contracts like, Sale of Goods
(Ss. 76-108), Indemnity and Guarantee (Ss. 124-147) including Pledge (Ss. 148-181),
Bailment and Warranty (Ss. 109-118), Agency (Ss. 182-238) and Partnership (Ss. 239-
266). Later provisions relating to Sale of Goods and Partnership were repealed and enacted
these into new laws. For the purpose of discussion of regulations of e-contract in India, it
is essential for us to deal with provisions of Indian Contract Act, because the concept of e-
contract stands on provisions of the Act. The 1872 Act originally comprised of 266
sections divided into XI chapters. In this segment we aren‘t going to deal this Act in detail,
here we would be trying to highlight vital concepts of the Act. The scheme of this chapter is
built in following manner:

 Formation of Contract

 Discharge of Contract

 Breach of Contract and

 Remedies for Breach of Contract

5.2. FORMATION OF CONTRACT

The term contract means, an agreement enforceable by law. Here agreement‘ means every
promise and every set of promises forming the consideration for each other.‘ And a promise
is defined as, a proposal, when accepted, becomes a promise. This is another way of saying that an
agreement is an accepted proposal. The process of definitions comes down to this: a contract is an
agreement; an agreement is a promise and a promise and a promise is an accepted proposal.
Thus, every agreement, in its ultimate analysis, is the result of a proposal from one side
and its acceptance by other.
A question arises in our mind, what agreements are contract? The answer to this would be
agreements which are enforceable by law are qualified to become contracts. Further, we can

74
say that all agreements are contract if they are made by the free consent of parties competent
to contract, for a lawful consideration and with a lawful object, and are not hereby
expressly declared to be void.From above para we can conclude that, to form a contract we
require some essentials ingredients. An agreement becomes a contract when the following
conditions are satisfied:

• Agreement (Offer and Acceptance)

• Capacity

• Free Consent

• Consideration and

• Lawful Object

5.2.1. AGREEMENT

An agreement is something which is consisting of offer, acceptance and consideration. For

example, A promises to deliver his watch to B and in return B promises to pay a sum of
Rs. 5000/- to A. There is said to be an agreement between A and B. Agreement are of four
kinds,

• Valid (Contract)—It is an agreement or set of promises giving rise to obligations

which can be enforce or are recognised by law.

• Voidable—An agreement which is enforceable by law at the option of one or more of

the parties thereto, but not at the option of the other.

• Void—An agreement not enforceable by law

• Illegal—Agreements which are illegal in the sense that the law forbids the very act.

To understand the crux of contract we must first discuss offer and acceptance.

75
5.2.1.1. OFFER

The term offer‘ or proposal‘ is defined under Section 2(a) of the Act, as follows:

When one person signifies to another his willingness to do or to abstain from doing anything,
with a view to obtaining the assent of that other to such act or abstinence, he is said to
make a proposal.

The definition of offer can be understood through an example. If A‘s willingness to sell his
radio set to B for Rs. 1000/- if B accepts to purchase the same, amounts to proposal by a for
the sale of radio set. Suppose if the proposal is not made with an intention to enter into
contract such proposal may be concluded as invalid proposal.11Offer and Invitation to Treat It
is said that a proposal must be distinguished from mere statement of intention which is not
intended to require acceptance. The latter may be merely a statement of intention, or an
invitation to make offers, or to do business. Such a statement not intended to be binding is an
‗invitation to treat‘.In Harvey v. Facey the plaintiffs telegraphed to the defendants, ‗Will you
sell us Bumper Hall Pen? Telegraph lowest cash price.‘ The defendants replied, Lowest
cash price for the Bumper Hall Pen £900.‘ The plaintiffs then telegraphed, We agree to buy
Bumper Hall Pen for £900 asked for by you.‘ The Privy Council held that the defendants‘
telegraph was not an offer but merely a statement as to price; the plaintiff‘s second
telegram was in fact an offer to buy, but as this had never been accepted by defendants,
there was no contract. A general rule is that a display of goods at a fixed price in a shop
window or on a shelf in a self-service store is an invitation to offer and not an offer; an offer
may be made by a prospective buyer and this the shopkeeper may accept or reject. Auction
sale, advertisement of goods, timetables and passenger tickets and tenders, are few other
examples of invitation to offer.

76
 CHAPTER 6

CONCEPTUALISATION OF E-CONTRACTS:

6.1. INDIAN CONTRACT ACT, 1872 AND ISSUES

The personal computer has evolved from being an exclusive, expensive commodity to one
that is easily accessible to most of the developing countries population. Apart from that,
even cell phones are making internet easily accessible. A natural consequence of this has
been the astounding growth of global e-commerce transactions and web advertising. In a
global commercial environment, parties are constantly entering into different types of
transactions. These may include lease agreements, contracts governing the sale and
purchase of goods, negotiable instruments, loan agreements and the like. As commerce
moves to internet, there is an inevitable and ever-increasing need to conduct such transactions
in that electronic medium. Undoubtedly, process of entering into a transaction using
electronic means will give rise to a host of legal issues, hitherto not confronted with.

This segment is divided in following manner, firstly, formation of e- contracts, secondly,

performance of e-contracts, thirdly, standard form of e-contracts, fourthly, termination of e-
contracts, fifthly, remedy for termination and sixthly, online contracting & possible judicial
problems. Prior to dealing with above subject-matters in detail, let us deal with fewpre-
contractual considerations.

6.2.1. PRE-CONTRACTUAL CONSIDERATIONS

Pre-contractual considerations would encompass the actions that have to be undertaken

before forming a contract. Such prior considerations would entail e-businesses to create e-
presence on internet through a website, newspaper group advertisement, e-mail list and the
like. E-commerce is like any other form of commercial activity, and is bound by the
same regulations and legal principles regarding pre-contractual behavior. Further, e-
business may need to verify the identity of their customers, as they may not necessarily
want to contract with all people from all jurisdictions. It is a misconception that any e-
business is obliged to transact with any visitor to the site; failure to observe this

77
consideration can have a major impact on the performance and enforceability of any
subsequent e-contract. At the same time, consumers are also required to pay due attention
to terms and conditions and other declarations made by the e-business on its website before
entering into ane-contract or confirming the order they have placed. The information
requirements here would include—

• The technical steps necessary to conclude the contract,

• The language of the contract,

• The identification and correction of errors, and

• The filing and accessibility of the contract

Having discussed about preliminary aspect of pre-contractual aspects, now we will move
further to understand some concepts viz. unilateral and bilateral e-contracts, express terms,
and collateral contracts.

6.2.1.1. UNILATERAL AND BILATERAL CONTRACTS

Usually, contracts are bilateral in nature, implying that both parties are bound, as there is
an exchange of a promise for a promise.1 For example, suppose a person orders a pair of
shoes from a website, a bilateral contract is formed because the merchant promises to send
the goods in exchange for the consideration that the customer promises to pay. However,
online contracts may create unilateral contracts, where only one party, namely the
advertiser, is bound. An announcement, which is considered as a standing offer, which
offers money or some other reward for the performance of an action, would be termed as a
unilateral contract. In such a case, the accepting party does not need to notify the
advertiser but he/she only needs to do the required act.

The well-known case of Carlill v. Carbolic Smoke Ball Co.,2 would be a relevant
example with reference to unilateral contracts. In this case the Court enforced the contract.
Thus, unilateral contracts are dangerous not only because of a careless advertisement
creating unwanted legal obligations, but also because multiple parties can enforce them.

Therefore, online advertisements need to be carefully drafted to ensure that customers (and
Courts) interpret them as advertisements and not unilateral contracts. Perhaps, online

78
merchants can use disclaimers to emphasize that the ‗web-advertisement‘ is not an offer
or unilateral contract, but only an advertisement or an invitation to treat.

6.2.1.2. EXPRESS TERMS

Courts have, on a number of occasions, been encountered with the problem of whether a
representation made prior to the creation of a contract constituted an express term even
though the written contract did not contain it. Though the ‗parol evidence rule‘ seems to
restrict the possibility of such prior representations, verbal or oral online statements made by
e-mail or on web pages prior to contract formation may be interpreted as express terms,
despite their absence from the ‗actual‘ contract written or otherwise. Thus, if an online
customer enters into a contract due to some representation made by the e-business, the
courts have many ways of holding the e-businesses liable, whether such representation is
by way of an express contractual term part of a collateral contract or is considered to be a
misrepresentation.

6.2.1.3. COLLATERAL CONTRACTS

A collateral contract is one that is independent of, but subordinate to, an agreement affecting
the same subject matter. If representation induces a person to form a contract with a third
party, the court may hold that there was a collateral contract with the representation. For
example, a eading corporate business group, A, decides to purchase a microlite form B, a
specific maker of such aircraft. In the construction of such microlite, the company specifies
that some material be procured from particular company, C. in the event of such material
turning out to be faulty, A may successfully sue B for damages under a collateral contract.

Even product statements on a website may constitute grounds for collateral contract to be
ormed. Thus, even a website being used for purely promotional purposes, without
anticipating the creation of contracts online must take care not to make representations.

79
6.2.2. FORMATION OF E-CONTRACTS

Usually speaking e-contracts are formed through, click wrap, shrink wrap and browse wrap.
Fundamental principles envisaged in the Indian Contract Act, 1872 are equally applied to
online contracts. In addition to these principles procedures advocated by Information
Technology Act, 2000 must also be applied to it. As we have already discussed
fundamental principle of contract law now there is no point in discussing once again. It is
already stated above that to enter into a valid contract there are following essentials, but
they are dealt from perspective of e- contracts.

• Agreement (Offer and Acceptance)

• Capacity

• Free Consent

• Consideration and

• Lawful Object

6.2.2.1. OFFER

When a person makes an offer he/she is expressing a desire to enter into a contract, based on
specific terms and conditions, on the understanding that if the other party accepts it, the
agreement will be legally binding. In many transactions (whether online or conventional) the
offer is not made directly one-on-one. The consumer ‗browses‘ the available goods and
services displayed on the merchant‘s website and then chooses what he would like to
purchase. The mode of making an offer differs from contract to contract. This can be
understood to through the illustrations.

Illustration for E-mail Contract: Aryan sends a proposal to Preeti by using his e-mail
account that he is willing to buy her laptop for Rs. 30,000/-.

Illustration for Click WrapContract: A click wrap agreement is mostly found as part of the
installation process of software packages. A party posts terms on its website pursuant to
which it offers to sell goods or services. To buy these goods, the purchaser is required to
indicate his assent to be bound by the terms of the offer by his conduct—typically the act of
clicking on a button stating ― I agree. Once the purchaser indicates his assent to be bound,
the contract is formed on the posted terms, and the sale is consummated.

80
A. INVITATION TO OFFER

Invitations to treat are advertisements that promote the sale of products, but are neither
offers in themselves nor unilateral contracts. A similar principle is likely to apply to
websites and e-mail price lists. While websites are the electronic equivalent of shop
windows and catalogues, e- mail price lists are analogous to circulars in real-world
commerce.

However, in order to minimize unfavorable risks, websites and e-mail lists should have
statements explicitly defining them to be invitations to treat and not offers.Whether a
statement on a website amounts to an offer or an invitation to offer will largely depend on
whether the person making such statements intended to be bound or appeared to have
intended to be bound. Therefore e-commerce websites or e-mails should make their
intention very clear. Also communication agreements between parties using EDI should
make sure that they are certain about the status of the information being provided.

One more deciding factor whether the statement amounts to an offer or otherwise is the
distinction that arises where the delivery of the goods take place offline or the where the
delivery of the products take place online. For example, in the case of goods or services
like downloadable music, information, and software etc.

Invitation to offer or treat is more like browse wrap agreements. For example,
flipkart.com or ebay.com is the online shopping websites. These websites offer sales of
products online. The advertisements on these websites are nothing but invitation to treat,
here the websites – flipkart.com or ebay.com– are not giving any offer.

In traditional business display of goods or goods put up in a self-service store would amount
to invitation to treat. The buyer here makes the offer and it‘s for the seller to decide whether
he wants to sell or not. However in case of online contract or e-commerce sale, the seller
has an option to cancel or reject the order as his status is still that of a person
receivingorder.

B. COUNTER OFFER

It is an established rule that making a counter offer essentially means rejections of the
original offer. An acceptance is an unequivocal acceptance of all the terms of the offeror,
any additional or modified terms indicate the creation of counter offer, and thus no contract

81
may be formed on the basis of the original offer. As e-transactions usually involve the
application of their own standard terms and conditions, such a situation will rarely occur in
standardized web-contracts, though they may definitely occur during e-mail negotiations,
resulting in what is known as a battle of the forms‘. As a consequence of the complex nature
of such disputes, online businesses should refrain from any action that may even implicitly
indicate acceptance of the other party.7

As not all offers are accepted, the offer might lapse after a specified time or event, or it might
be revoked by the offeror. The offeree may also reject the offer, or propose a counter offer.
According to the Indian Contract Act an offer may be revoked before the acceptance of such
offer is complete as against the offeror. This withdrawal must be communicated actually to
the offeror. That is to say that if the website is intending to withdraw any of its offers then the
same must be communicated to the buyer making the offer.

In the context of e-contract such offers could be withdrawn by sending e- mails. It should
however be confirmed by the website sending such mail that the e-mail has been received by
the concerned person.This revocation of the offer can be applied only when the website
owner knows of the person to whom such offer has been sent, that is to say when the
promotion or details of the offer has been sent over e-mails.However if the offer is through a
web page it is generally accessible to a number of offerees and it becomes difficult to
individually communicate to each of the offeree as to the withdrawal of the offer.

However in practice this may not happen because of the fact that generally what is contained
in a webpage is an invitation to treat and not an offer. What a website has to note is that
this fact has to be categorically laid down in the website. Depending upon the nature of the
transaction, either the consumer can accept the offer and wait for delivery of the goods
or he/she may withdraw the offer made.

6.2.2.2. ACCEPTANCE

Contract law stipulates that after an offer has been made the offeree accepts same and
thus creates a contract. Acceptance in cyberspace, however, is a contentious issue because
the offeror and the offeree are distanced in time and space. How does one ascertain where
the contract was actually formed and how it was formed? what are the ways in which
acceptance may be communicated? These are some basic questions to be answered in relation

82
to the creation of an online contract. Assuming that the website is an invitation to treat this
section assumes that the customer response is an offer and thus it is the vendor who accepts
and forms the contract online.Acceptance is the unconditional agreement to the presented
offer. Speed and reliability of the method of acceptance are taken into consideration when
determining whether a particular method is reasonable‘ in particular circumstances. In most
cases, accepting an offer by the same means by which it was originally communicated
should be sufficient, unless otherwise specified in the contract. Most online contracts are
accepted by click wrap‘. A click wrap is where the contract is presented in a window online,
and the customer is asked to click an Offer‘ or I Accept‘ button. A US District Court has
held such agreements to be enforceable in America. 9 An online merchant can implicitly
accept a customer‘s offer through some form of action and though generally, acceptance
cannot be assumed from silence, in online transactions, if the terms are rigidly specified by
the supplier, silence may be construed as acceptance.

83
 CHAPTER 7

LEGAL REGULATION OF E-CONTRACT IN INDIA:

Presently in India the e-commerce is developing at a high speed. The conventional law
doesn‘t solve the problems related to e-contracts, so there is need for separate and stringent
law to regulate it. This chapter is dedicated to deal with laws relating to e-contract; in
addition to this various obstacles that e-contract has faced. Laws regulating e-contract are bit
clear about B2B transactions but in matters of B2C, C2C and C2B they are not vivid.

In Indian context, it can be said that Information Technology Act, 2000 (hereinafter
referred as IT Act) has solved some of the peculiar issues that arise in formation and
authentication of electronic contracts. IT Act has brought changes to various enactments,
such as, Indian Evidence Act, Indian Penal Code, Criminal Procedure Code, Reserve Bank
of India Act, and some of others. Here some of the enactment enactments will be analyzed
in the context of electronic contracts.

7.2. INFORMATION TECHNOLOGY ACT, 2000

Law governing electronic commerce can be divided into a number of categories. Some
laws enable e-commerce by dealing with actual or perceived obstacles presented by the
existing legal form like the requirements for written records and written signatures or any
other impediments pertaining to admissibility in evidence of electronic records and
signature. Others may regulate the detailed structure of particular electronic records and
signature methods whereas certain other laws may seek to extend or adapt existing regulation
of commercial activity to cover analogous aspects of e-commerce like security, taxation,
privacy etc. It is pertinent to note that many commentators are of the view that a
technology neutral approach is to be followed by legal regulation, i.e. one which does not
discriminate between forms of technology like paper and digital or electronic record.

A new era of trade, communication and transactions is coming to fore with the rapid
development of e-commerce affecting our social and economic activities in a large way.
This is on account of substantial influence that is rendered by information technology. There

84
are a number of fundamental legal aspects that the Information Technology Act, 2000
touches upon ranging from electronic government transactions to facilitating electronic
transactions per se. The policy which is embodied in the IT Act is one of recognizing both
paper and electronic commerce on the same footing and maintaining a technology neutral
approach. In this segment we won‘t be discussing IT Act in detail. Here we will confine
ourselves to provisions dealing with e-contracts.

7.2.1. PREAMBLE

The Preamble of the IT Act, 2000, states that it is an Act to provide legal recognition for
transactions carried out by means of electronic data interchange and other means of
electronic communication, commonly referred to as electronic commerce‘. This may
include the use of alternatives to paper-based methods of communication and storage of
information to facilitate electronic filing of documents with the Government Agencies.
Further, IT Act will seek to amend the Indian Penal Code, the Indian Evidence Act, the
Banker‘s Book of Indian Act, and the Reserve Bank of India, for related matters.

The Act, as laid down in the Preamble, also follows closely on the heels of the Model Law on
Electronic Commerce adopted by the UNCITRAL. The aforementioned Model Law
recommends that all States give favorable consideration to the said Law when they enact or
revise their laws, in view of the need for uniformity of the law applicable to alternatives to
paper based methods of communication and storage of information. Moreover, it has been
stipulated that the said resolution may be given effect to and efficient delivery of
Government services accomplished, by means of reliable electronic records. The Model
Law provides a starting point for identification and discussion of areas where the law could
be updated to consider new technology, as well as including certain internationally settled
provisions for dealing with those issues and:

• Establish rules that validate and recognize contract contracts formed through
electronic means;

• Sets default rules for contract formation and governance of electronic contract
performance;

• Defines the characteristics of a valid writing and an original document;

85
• Provides for the recognition of electronic signatures for legal and commercial
purpose; and

• Supports the admission of computer evidence in courts and arbitration proceedings.

7.2.2. STATEMENT OF OBJECTS AND REASONS

Day to day living, and the way we conduct business and trade has been dramatically altered
by the growth and development of new technology and communications systems. This
revolution is being led by computers and internet, which are being used by businesses and
consumers on an increasingly large scale as a substitute for the traditional paper based
system of information creation and transmission. The advantages are apparent, speed and
cost effectiveness being the major plus points. In spite of these advantages the lack of a clear
legal framework had dissuaded many people from using this medium to conduct
transactions using the electronic form. The biggest roadblock in the way to electronic
commerce and its growth, speaking from a legal as well as a practical standpoint is that
standard evidentiary practice is based on oral testimony and paper records coupled with
this are the requirements as to writing and signature for legal recognition. Substantial
changes in the legal system or existing legislation thus become top priority as e-commerce
eliminates the need for paper based transaction. Moreover e-commerce has fuelled the growth
of International Trade, which has resulted in a number of countries making the shift from the
traditional paper based commerce to electronic commerce.

7.2.3. OBJECTIVES

The IT Act aims to give legal recognition in place of paper based methods of
communications to transactions carried out by means of electronic data interchange and other
means commonly referred to as e-commerce. Digital signatures are to be recognised as
legal modes of authentication of any information that requires authentication under law.
Among the main objectives of the Act is also the facilitation of electronic filing of
documents, storage and transfer of data and to give recognition for keeping of books
account by Bankers.

Attribution of Electronic Records

In the following circumstances, Section 11 mandates that the electronic record in the given
context is required to be attributed to the originator:

86
1) If the record was sent by the originator himself or herself or

2) If the record sent by a person who was authorized by the originator to act so with
regard to specific record or

3) By a system which was programmed either by the originator or by any person who is
authorized to do so to operate automatically or otherwise.

This section can best be understood with the help of suitable illustrations.

I llustration 1: Pooja logs in to her web-based gmail.com email account. She composes an
email and presses the ―Send button, thereby sending the email to Sameer. The electronic
record (email in this case) will be attributed to Pooja (the originator in this case) as Pooja
herself has sent it.

I llustration 2: Pooja instructs her assistant Siddharth to send the above-mentioned email. In
this case also, the email will be attributed to Pooja (and not her assistant Siddharth). The
email has been sent by a person (Siddharth) who had the authority to act on behalf of the
originator (Pooja) of the electronic record (email).

I llustration 3: Pooja goes on vacation for a week. In the meanwhile, she does not want
people to think that she is ignoring their emails.

87
 CHAPTER 8

INTERNATIONAL CONVENTIONS ON E-CONTRACTS:

As it is known to everyone that modern international law is part of European legal

system. Time and again it has developed in broader manner. Now international law is a
separate and distinct unit in the English legal system just as much as the law of bankruptcy
or of contracts, but it possesses this unity, not because it deals with one particular topic, but
because it is always concerned with one or more of three questions, namely:

• Jurisdiction of the Courts

• The choice of law

• Jurisdiction

Now almost everyone is cognizant about the fact that in this era of information and
technology, the world has become small. Till now we discussed about e-contract and its
meaning, in this era a person sitting in India can enter into a contract with a person staying
in some other country. The reason behind discussing international conventions is very
simple; the UNO has adopted certain conventions for regularization of e- contracts.
Following are the conventions which left mark in development of law relating to e-contracts:

• UNCITRAL Model Law on Electronic Commerce (hereinafter referred as MLEC)

• United Nations Convention on the Use of Electronic

Communications in International Contracts • United Nations Convention on Contracts for the
International Sale of Goods (hereinafter referred as CISG)

• UNCITRAL Model Law on Electronic Signatures

8.2. MODEL LAW ON ELECTRONIC COMMERCE

United Nations Commission on International Law was created with a mandate to

progressive harmonization and unification of the law of international trade and in that
respect to bear in mind the interests of all peoples, in particular those of developing
countries, in the extensive development of international trade.

88
For execution of objective of UNCITRAL and at the same time number of transactions in
international trade were carried out by means of electronic data interchange and other means
of communication, commonly referred to as -electronic commerce‖, so it felt to adopt MLEC.

Further model legislation on electronic commerce was adopted in response to the fact that
in a number of countries the existing legislation governing communication and storage of
information was inadequate or outdated because it does not contemplate the use of
electronic commerce. The lack of legislation in many countries in dealing with e- commerce
as a whole results in uncertainty as to the legal nature and validity of information
presented in a form other than a traditional paper document. Inadequate legislation at the
national level will inevitably create obstacles to international trade.

8.2.1. AIMS AND OBJECTIVES

1.The use of modern means of communication such as electronic mail and electronic data
interchange (EDI) for the conduct of international trade transactions has been increasing
rapidly and is expected to develop further as technical supports such as information
highways and the INTERNET become more widely accessible. However, the
communication of legally significant information in the form of paperless messages may
be hindered by legal obstacles to the use of such messages, or by uncertainty as to their legal
effect or validity. The purpose of the Model Law is to offer national legislators a set of
internationally acceptable rules as to how a number of such legal obstacles may be
removed, and how a more secure legal environment may be created for what has become
known as ―electronic commerce.

The principles expressed in the Model Law are also intended to be of use to individual users
of electronic commerce in the drafting of some of the contractual solutions that might be
needed to overcome the legal obstacles to the increased use of electronic commerce.

2.The decision by UNCITRAL to formulate model legislation on electronic commerce was

taken in response to the fact that in a number of countries the existing legislation governing
communication and storage of information is inadequate or outdated because it does not
contemplate the use of electronic commerce. In certain cases, existing legislation imposes
or implies restrictions on the use of modern means of communication, for example by
prescribing the use of ―written‖, ―signed‖ or ―original‖ documents. While a few countries
have adopted specific provisions to deal with certain aspects of electronic commerce, there

89
exists no legislation dealing with electronic commerce as a whole. This may result in
uncertainty as to the legal nature and validity of information presented in a form other
than a traditional paper document. Moreover, while sound laws and practices are necessary
in all countries where the use of EDI and electronic mail is becoming widespread, this
need is also felt in many countries with respect to such communication techniques as
telecopy and telex.

3.The Model Law may also help to remedy disadvantages that stem from the fact that
inadequate legislation at the national level creates obstacles to international trade, a
significant amount of which is linked to the use of modern communication techniques.
Disparities among, and uncertainty about, national legal regimes governing the use of such
communication techniques may contribute to limiting the extent to which businesses may
access international markets.

4.Furthermore, at an international level, the Model Law may be useful in certain cases as a
tool for interpreting existing international conventions and other international instruments
that create legal obstacles to the use of electronic commerce, for example by prescribing that
certain documents or contractual clauses be made in written form.

As between those States parties to such international instruments, the adoption of the Model
Law as a rule of interpretation might provide the means to recognize the use of electronic
commerce and obviate the need to negotiate a protocol to the international instrument
involved.

5.The objectives of the Model Law, which include enabling or facilitating the use of
electronic commerce and providing equal treatment to users of paper-based documentation
and to users of computer based information, are essential for fostering economy and
efficiency in international trade. By incorporating the procedures prescribed in the Model
Law in its national legislation for those situations where parties opt to use electronic means of
communication, an enacting State would create a media-neutral environment.

8.2.2. SCOPE OF MLEC

1.The title of the Model Law refers to-electronic commerce‖. While a definition of
electronic data interchange (EDI)is provided in Article 2, the Model Law does not specify
the meaning of -electronic commerce‖. In preparing the Model Law, the Commission
decided that, in addressing the subject matter before it, it would have in mind a broad notion

90
of EDI, covering a variety of trade-related uses of EDI that might be referred to broadly
under the rubric of electronic commercel, although other descriptive terms could also be
used.

Among the means of communication encompassed in the notion of ―electronic commerce‖

are the following modes of transmission based on the use of electronic techniques:
communication by means of EDI defined narrowly as the computer-to-computer transmission
of data in a standardized format; transmission of electronic messages involving the use of
either publicly available standards or proprietary standards; transmission of free-formatted
text by electronic means, for example through the INTERNET. It was also noted that, in
certain circumstances, the notion of ―electronic commerce‖ might cover the use of
techniques such as telex and telecopy.

2.It should be noted that, while the Model Law was drafted with constant reference to the
more modern communication techniques, e.g., EDI and electronic mail, the principles on
which the Model Law is based, as well as its provisions, are intended to apply also in
the context of less advanced communication techniques, such as telecopy.

There may exist situations where digitalized information initially dispatched in the form of a
standardized EDI message might, at some point in the communication chain between the
sender and the recipient, be forwarded in the form of a computer-generated telex or in the
form of a telecopy of a computer print-out. A data message may be initiated as an oral
communication and end up in the form of a telecopy, or it may start as a telecopy and end
up as an EDI message. A characteristic of electronic commerce is that it covers
programmable messages, the computer programming of which is the essential difference
between such messages and traditional paper-based documents. Such situations are
intended to be covered by the Model Law, based on a consideration of the users‘ need for a
consistent set of rules to govern a variety of communication techniques that might be used
interchangeably. More generally, it may be noted that, as a matter of principle, no
communication technique is excluded from the scope of the Model Law since future
technical developments need to be accommodated.

3.The objectives of the Model Law are best served by the widest possible application of the
Model Law. Thus, although there is provision made in the Model Law for exclusion of
certain situations from the scope of articles 6, 7, 8, 11, 12, 15 and 17, an enacting State may

91
well decide not to enact in its legislation substantial restrictions on the scope of
application of the Model Law.

4.The Model Law should be regarded as a balanced and discrete set of rules, which are
recommended to be enacted as a single statute.

Depending on the situation in each enacting State, however, the Model Law could be
implemented in various ways, either as a single statute or in several pieces of legislation.

8.2.3. STRUCTURE OF MLEC

The Model Law is divided into two parts, one dealing with electronic commerce in
general and the other one dealing with electronic commerce in specific areas. It should be
noted that part two of the Model Law, which deals with electronic commerce in specific
areas, is composed of a chapter I only, dealing with electronic commerce as it applies to
the carriage of goods. Other aspects of electronic commerce might need to be dealt with in
the future, and the Model Law can be regarded as an open-ended instrument, to be
complemented by future work.

UNCITRAL intends to continue monitoring the technical, legal and commercial

developments that underline the Model Law. It might, should it regard it advisable, decide to
add new model provisions to the Model Law or modify the existing ones.

8.2.4. ANALYSIS OF MLEC

The issue is the possible electronic legislation. This issue is of principal importance, and
decisions as to the application of possible legislation will require careful consideration of
possible exceptions to coverage.

Definitions

It is clear that the language of electronic commerce is still developing. A number of

definitions, including specifically technical ones, are being developed, but it is not always
the case that these are appropriate for inclusion in a legal text. International texts, such as
the International Chamber of Commerce‘s General Usage for International Digitally
Ensured Commerce (GUIDEC) are being developed. This text intended to serve as an
indicator of the terms involved in electronic commerce and to provide general background to

92
the issues raised by these terms. It also aims to set out standard practices or
recommendations relating to ensuring or secure authentication of digital information. To
the extent, those international texts represent both civil and common law treatment of the
subject matter, they present both business and governments with a comprehensive
statement of best practices for the emerging global infrastructure.

Model law defines some of the terminologies which needuniformity and consistency among
jurisdictions. Such as, Data message, Electronic Data Interchange (EDI), Originator,
Addressee, Intermediary and Information system.The definitions of ‗Data Message‘ and
EDI requires special discussion, rest of others doesn‘t require much stress.

Data Message: 2 The notion of ―data message is not limited to communication but
is also intended to encompass computer-generated records that are not intended for
communication. Thus, the notion of ―message includes the notion of ―record‖. However, a
definition of ―record in line with the characteristic elements of ―writing in Article6 may
be added in jurisdictions where that would appear to be necessary.

The reference to ―similar means is intended to reflect the fact that the Model Law was
not intended only for application in the context of existing communication techniques but
also to accommodate foreseeable technical developments. The aim of the definition of
―data message is to encompass all types of messages that are generated, stored, or
communicated in essentially paperless form. For that purpose, all means of communication
and storage of information that might be used to perform functions parallel to the functions
performed by the means listed in the definition are intended to be covered by the reference
to ―similar means, although, for example, ―electronic and ―optical means of
communication might not be, strictly speaking, similar. For the purposes of the Model Law,
the word ―similar connotes ―functionally equivalent.

The definition of ―data message is also intended to cover the case of revocation or
amendment. A data message is presumed to have fixed information content but it may be
revoked or amended by another data message.

93
 CHAPTER 9

CONCLUSIONS AND SUGGESTIONS:

Here, different technical and legal terms, which are frequently used in this work, have been
defined so as to remove any ambiguity and to bring clarity in expression. Contract is an
agreement enforceable by lawConsideration is when, at the desire of the promisor the
promise or any other person has done or abstained from doing, or does or abstains from
doing, or promises to do or to abstain from doing something, such act or abstinence or
promise is called a consideration.Acceptance means when a person to whom the proposal is
made signifies his assent thereto, the proposal is said to be acceptedAccess with its
grammatical variations and cognate expressions means gaining entry into, instructing or
communicating with the logical, arithmetical, or memory function resources of a computer,
computer system, computer network.

Browser is an application programme used to explore the Internet. A browser enables a

surfer to wander from one node to another, without concern for the technical details of the
links between the nodes or the specific methods used to access them, and present the
information namely, Computer means any electronic magnetic, optical or other high-speed
data processing device or system which performs logical, arithmetic, and memory
functions by manipulations of electronic, magnetic or optical impulses, and includes all
input, output, processing, storage, computer software, or communication facilities which are
connected or related to the computer in a computer system or computer network;

Computer system means a device or collection of devices, including input and output
support devices and excluding calculators which are not programmable and capable of
being used in conjunction with external files, which contain computer programmes,
electronic instructions, input data and output data, that performs logic, arithmetic, data
storage and retrieval, communication control and other functions;30 Connectivity, the extent
to which any given computer or application programme can co-operate with other network
components, either hardware or software, purchased from other vendors.

Cyber Law, encompasses the legal, statutory and constitutional provisions that affect
computers and computer networks. It concerns individuals, corporate bodies ad
institutions which (a) are instrumental for entry into cyberspace, (b) provide access to

94
cyberspace, (c) create the hardware and software which enable people to access cyberspace
and (d) use their own computers to go online and enter cyberspace. Major litigants in
cyberdisputes are internet service providing companies, regulatory agencies, personal
computer companies, software companies, internet service providers, school, colleges,
universities and finally, those individuals, firms and companies that have established a
presence on the internet.31 In Indian context, Information Technology Act, 2000 is
commonly referred to as cyber law.

Cyber security, means protecting information, equipment, devices, computer, computer

resource, communication device and information stored therein from unauthorized access,
use, disclosure, disruption, modification or destruction;32

Data, means a representation of information, knowledge, facts, concepts or instructions

which are being prepared or have been prepared in a formalised manner, and is intended to
be processed, is being processed or has been processed in a computer system or computer
network, and may be in any form (including computer printouts magnetic or optical storage
media, punched cards, punched tapes) or stored internally in the memory of the computer.
Etymologically,data is derived from the Latin word datum meaning an item of information.

Download, is the transfer of a file or files from on computer to another through a network
or by using a modem. The requesting personal computer initiates the download, stores the
downloaded file on it diskfor further processing. Sending of information/data from a
computer to a printer is also sometimes referred to as downloading.

Electronic Signature means authentication of any electronic record by a subscriber by

means of an electronic method or procedure in accordance with the provisions of section 3 of
Information Technology Act, 2000;

Electronic Record means data, record or data generated, image or sound stored, received or
sent in an electronic form or micro film or computer generated micro fiche.

Hardware, is a physical electronic components of a computer system, including

peripherals, printed circuits boards, printers, etc. Information includes data, message, text,
images, sound, voice, codes, computerprogrammes, software and databases or micro film or
computer generated micro fiche;

95
Intermediary, with respect to any particular electronic records, means any person who on
behalf of another person receives stores or transmits that record or provides any service
with respect to the record and includes telecom service providers, network service
providers, internet service providers, web-hosting service providers, search engines, online
payment sites, online-auction sites, online-market places and cyber cafes;Key Pair, in an
asymmetric crypto system, means a private key and its mathematically related public key,
which are so related that the public key can verify an electronic signature created by the
private key;

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 but does not include an intermediary;

Addressee means a person who is intended by the originator to receive the electronic
record but does not include any intermediary;

Internet is a global system of interconnected computer networks that use the standard
Internet Protocol Suite (TCP/IP) to serve billions of users worldwide. It is a network of
networks that consists of millions of private, public, academic, business, and government
networks, of local to global scope, that are linked by a broad array of electronic, wireless and
optical networking technologies. The internet carries an extensive range of information
resources and services, such as the inter-linked hypertext documents of the World Wide
Web and the infrastructure to support e- mail.

Internet Protocol Suite(IP) is the set of communications protocols used for the internet and
similar networks, and generally the most popular protocol stack for wide area networks. It
is commonly known as TCP/IP because of its most important protocols; Transmission
Control Protocol and Internet Protocol, which were the first networking protocols definedin
this standard. It is occasionally known as the DoD model due to the foundational
influence of the ARPANET in the 1970s.

HTTP (Hyper Text Transport Protocol), is a protocol used to link one hypertext
document to another. HTTP is the mechanism that opens the related document when a
hypertext link is click, no matter where the related document happens to be in the Internet.

96
Offer definedas,when one person signifies to another his willingness to do or to abstain
from doing anything, with a view to obtaining the assent of that other to such act or
abstinence, he is said to make a proposal.

E-commerce can be defined as commerce conducted in a digital form or on an electronic

platform, or selling or buying goods and services on the Internet.

E-contract is a kind of contract formed by interaction of two or more individuals or

organization using electronic means, such as e-mail, the interaction of an individual with
an electronic agent, such as a computer program, or the interaction of at least two
electronic agents that are programmed to recognize the existence of a contract.

Online is a facility or capability available directly on a computer. A peripheral such as a

printer or modem when it is directly connected to computer and ready to operate. A
computer connected to another remote computer in a network through a modem link.Click
Wrap agreement is a type of contract that is widely used with softwarelicences and online
transactions in which a user must agree to terms and conditions prior to using the product
or service.

Shrink Wrap agreements are license agreements or other terms and conditions which can
only be read and accepted by the consumer after opening the product. The term describes
the shrink wrap plastic wrapping used to coat software boxes, though these contracts are not
limited to the software industry. Browse Wrap is contract or license agreement covering
access to or use of materials on a website or downloadable product.Communication Device
means cell phones, personal digital assistance or combination of both or any other device
used to communicate, send or transmit any text, video, audio or image;

URL (Uniform Resource Locator) is a method of accessing internet resources. URLs

contain information about the resources and also the method of access to be used. Web
browsers use URL to connect directly to a specific document or page in the Web, and the
user does not have to know where the resources are located physically. A sample of URL
might look like this:- http://www.yebhi.com.

World Wide Web47 abbreviated as WWW or W3, commonly known as the Web, is a
system of interlinked hypertext documents accused via the Internet. With a web browser,
one can view web pages that may contain text, images, videos, and other multimedia, and
navigate between them via hyperlinks.

97
Having thus discussed about some basic idea about this work, and the basic
conceptsofinformation technology, we now move to next leg of discussion that is about E-
contracts.

9.3. OBJECTIVES OF STUDY

Electronic contract is a contract which is formed through electroniccommunication. These

can be entered either through e-mail or click wrapor browse wrap agreements. At present
there is an increase in e-commerceconsequently there is also an increase in e-contract.The
law concerning this subject is still developing. Rapid developments ininformation and
communication technologies brought in some new issuesand judiciary is not so well equipped
to handle these techno-legal issues.Therefore, research in this area is necessary to
understand the legalregulation in Indian context. There are many issues which have to
beaddressed. The Information Technology Act, 2000 is good for cybercrimesbut it has
addressed little about e-contract and only three sections of thestatute speak about e-contracts.

Hence this study has following objectives:

• To understand how principles of traditional contract evolved inIndian context and can
be made applicable to e-contracts
• To understand adequacy of Information Technology Act, 2000 andIndian Contract
Act, 1872 to deal with e-contracts in India
• To understand overall legal framework and issues likely to arisebeforeIndian
judiciary while deciding disputes relating to e-contracts
• To understand whether same principle of law is applicable to e-
Contracts executed using different mode of electronic communication
• To understand international developments concerning e-contracts

9.4. REVIEW OF LITERATURE

However, there is no much literature is available on e-contract, theresearch topicis relying

more on the policies of the Government andtheories expounded by the renowned jurists, the
method adopted for theresearch is substantially doctrinal one. The research in question is
toderive its materials for its investigation fromboth Primary and Secondary resources. For the
analysis of law relating to e- contract primary resourcessuch as, Information Technology Act,
2000, Indian Contract Act, 1972, Saleof Goods Act, 1930 have been considered. In

98
addition to these laws,theModel Law on Electronic Commerce, the United
NationsConventionon the Use of Electronic Communications in International Contracts,
theUnited Nations Convention on Contracts for the International Sale ofGoods &
UNCITRAL Model Law on Electronic Signatures have been
Considered.
Apart from above primary resources the research is much relied onsecondaryresources.The
secondary resources like books including e-books, journals and study reports, seminar
papers have been used in thisresearch. Even some Indian and foreign case laws have been
examined forthis research. However, the laws concerned with e-commerce and alliedlaws
of contract have largely facilitated to understand crux of e-contract.

9.4.1. BOOKS

Prof. S.V. Joga Rao11 in his book titled Computer Contracts & InformationTechnology
Law, is the only work which speaks about e-contracts. Thisbook is being divided into
two parts. It contains impact of informationtechnology and analysis of Information
Technology Act, 2000. In additionto this, a specialchapter has been dedicated to fundamental
principles ofcontract law. Along with that, the book has enunciated how to draft e-
contracts and enclosed selectforms and precedents of e-contracts.
Bookscaters to the needs of both legal and non-legal like finance,marketing and technical
in information technology law field. Keeping thatin view, it is attempted to present the
subject matter in a simple and lucidstyle. The chapter on Electronic Contracts: Select Forms
and Precedentsoffer several model contracts covering hardware, software, webware,service
contracts, humanresource and computer system. Chapter onOnline Contracts: Legal
Principles and Practice describes the legalbenchmarks that are required to be complied with
while conductingbusiness transaction electronic medium. The astounding growth of globale-
commerce transactions and web advertising in a global commercialenvironment has
resulted in parties constantly entering into differenttypes of transactions in the electronic
medium. Title of the chapter speaksfor itself that it deals with legal principles of online
transactions.
Part 2 of the treaties deals with appendices, this part accounts list foreignstatutes,international
documents and Indian laws covering contract andinformation technology.
Cyber Law-The Indian Perspective written by Pavan Duggal is hefty book provides a
comprehensive overview of the cyber law scenario in India. It also provides

99
recommendations for upgrading the current cyberlawstatutes and contextualizes these
developments with respect to actualreported cases of cyber law in India. Duggal analyses
the issue ofjurisdiction from all angles, never failing to cite cases of other countrieswhere
the argument so demands. It is exciting and stimulating to the legalmind to see how judiciary
in other parts of the world is tackling theseproblems.
There are totally three chapters which are dedicated to e-contract. Chapter22speaks about
validity of online contract without digital signatures.Chapter 4 of the book analyses
sections 11, 12 and 13 of InformationTechnology Act, 2000. In Chapter 1,part dealing
with jurisdiction‘answers the issues relatingto cyber law and e-contractwith the help
offoreign cases.
Dr. Gupta and Agrawal have authored a book entitled Cyber Laws,describes fundamentals
of computer contracts in Chapter 30. This chapterconcentrates on UK‘s Unfair Contract
Terms Act, 1977. And it givesaccount of types of e-contracts. Also speaks about drafting
of e-contract.There isnothing much about issues relating to e-contract
includingjurisdiction, choice of law and many more.
Book titled Cyber Law in India authored by Dr. Farooq Ahmed14, is a veryhelpful book to
understand cyber law. A chapter named ElectronicCommerce‘discusses some issues relating
to e-contracts. This chapterdeals issues from fundamentals of e-contract to the issue of
identity ofparties.
Faye Fangfei Wangdealing with contemporary issues in the EuropeanUnion, United States
and China authored a book titled Law of ElectronicCommercial Transactions. This book is
an extensive work on issuerelating to online contracts. Book starts with introduction to
electroniccommerce and endsat future of electronic commerce. Part II of the bookdiscusses
about electronic contracts. In that part, following questions arediscussed:

 What is an electronic contract?

 When is an electronic contract made?
 Where is the contract made?
 Contemporary issue: Electronic battle of forms

In the course of discussion various issues of electronic contract aredescribed by the author.
Further, all conventions and treaties on electroniccommerce are analyzed. Wang‘s discussion
on Error in electroniccommunication is brilliant.

100
Apart from books on cyber law and electronic commerce, books oncontract law are used
for writing this research. Books written by Chitty,Anson, Atiyah, Treital, Pollack &Mulla
and Avatar Singh have beenreferred. Variousfundamentals of contract law are taken from
these books.

9.4.2. JOURNALS

Shmuel I. Becher& Tal Z. Zarsky16 authored an article on E-ContractDoctrine 2.0:

Standard Form Contracting in the Age of Online UserParticipation, speaks about B2C
contracts. This article, reframes theanalysis ofonline consumer contracts while taking into
account this newflow of information.The article also accounts for the major challenges tothe
success of suchinformation flow: the motivations of both informationproviders and receivers,
and the accreditation of the data which might becompromised bothunintentionally and
maliciously.
Goulash Sharma wrote an article onThe Crisis of Standard FormContracts which briefly
introduced standard forms of contract. In additionto this article, the article gives knowledge
about standard forms of e-contracts. It also gives outlineabout various essentials of standard
formsof contract.
C.M. Abhilash writing an article onE-Commerce Law in DevelopingCountries: An Indian
Perspective, analyses UNCITRAL Model Law onInformation Technology. This article is
divided into three parts. The firstpart gives a brief introduction to the Model law and an
overview of theInformation Technology Act, 2000. The second part points out the
maindifferences in the Model law and the Information Technology Act, 2000regarding the
provisions relating to Electronic signatures and E-contracts.The Žfinalpart addresses the
difficulties that might arise while implementing the said Act in a social and economic context
and it stresses the need to promote electronic governance.
An article on E-Contracting Challenges written by Lai Xu and Paul deVrieze, describes
history and background of e-contract. In addition to this article also defines meaning of e-
contract. This article explains technical issuesof e-contract.
Mark Allen Chen 21 has dealt about new type of e-contract which isformed on social
networking sites. In his paper on Interactive Contractingin social networks, the author
explains about emerging regime in cyber contracts. In this article Mark argues that there is
new trend is emergingwherein contracts are formed on facebook, orkut, myspace,
mocospace,etc.

101
There are other journals which are taken into consideration for writing thisresearch.

9.4.3. PRECEDENTS

In this research various precedents are used. These precedents form cruxof thisresearch. Here
all precedents are not discussed in detail but only alist of thoseprecedents is provided. They
are:

Arizona Retail Sys. v. Software Link,831 F. Supp. 759 (D. Ariz. 1993)
BhagwandasGoverdhandasKedia v. GirdharilalParshottamdas& Co. AIR 1966
SC 543
Entores Ltd. v. Miles Far East Corporation, (1955) 2 All ER 493
Hoffman v. Supplements Togo Mgmt. LLC,18 A.3d 210 (2011)
Hubbert v. Dell Corp.,359 Ill. App.3d (Ill. Ct. App. 2005)
In re Zappos.com Inc., Customer Data Security Breach Litigation,No. 3:12-cv-00325-RCJ-
VPC MDL No. 2357, 2012 WL 4466660 (D. Nev. Sept. 27, 2012
Klocek v. Gateway, Inc.104 F.Supp.2d 1332 (2000)
ProCD, Inc. v. Zeidenberg908 F. Supp. 640 (W.D. Wis. 1996)
Step-Saver Data Sys.v. Wyse Technology,939 F.2d 91 (1991)
Vault Corp. v. Quaid Software Ltd. 655 F. Supp. 750, 761 (E.D. La. 1987)
Yahoo!, Inc. v. La LigueContre Le Racism et L Antisemitisme, 2001 US Dist.
LEXIS 18378 (ND Cal. 2001)
Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119 (WD Pa.
1997)
In this research various precedents are used. These precedents form cruxof this research. Here
all precedents are not discussed in detail but only alist of thoseprecedents is provided. They
are:
Arizona Retail Sys. v. Software Link,831 F. Supp. 759 (D. Ariz. 1993)
BhagwandasGoverdhandasKedia v. GirdharilalParshottamdas& Co. AIR 1966
SC 543
Entores Ltd. v. Miles Far East Corporation, (1955) 2 All ER 493
Hoffman v. Supplements Togo Mgmt. LLC,18 A.3d 210 (2011)
Hubbert v. Dell Corp.,359 Ill. App.3d (Ill. Ct. App. 2005)

102
In re Zappos.com Inc., Customer Data Security Breach Litigation,No. 3:12-cv-
00325-RCJ-VPC MDL No. 2357, 2012 WL 4466660 (D. Nev. Sept. 27, 2012)
Klocek v. Gateway, Inc.104 F.Supp.2d 1332 (2000)
ProCD, Inc. v. Zeidenberg908 F. Supp. 640 (W.D. Wis. 1996)
Step-Saver Data Sys.v. Wyse Technology,939 F.2d 91 (1991)
Vault Corp. v. Quaid Software Ltd. 655 F. Supp. 750, 761 (E.D. La. 1987)
Yahoo!, Inc. v. La LigueContre Le Racism et L Antisemitisme, 2001 US Dist.
LEXIS 18378 (ND Cal. 2001)
Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119 (WD Pa.
1997)
Asian School of Cyber Laws has provided study material for students of

NALSAR University has also provided study material for diploma coursenin cyber law. The
book on electronic contract is divided into five chapters.First chapter gives overview of cyber
space. Second chapter speaks aboutjurisdictional issue. Third chapter describes fundamentals
of e-contract.Fourth chapter explains various types of e-contracts. Final chapterdelineates
Indian legal position with regard to cyber contracts. In thischapter various legal issues have
been dealt.

Not all books or journals have dealt elaborately about various issuesinvolved in e-
contract. There are only few literatures wherein one or twoissues are dealt. Looking into
literature on online contract the researcherhas felt that there is need for research in this area.

9.5. SCOPE OF THE STUDY

The concept of e-contract has brought new challenges to legal system. Thepresent day Indian
legal framework is not in position to deal with theseemerging issues. Hence, this research is
undertaken to study the possibleissues concerning e-contracts in India. This research focuses
on the Indianlaws mainly theInformation Technology Act, 2000 and Indian Contract Act,
1872 for the regularization of electronic contract. Further, the scope of this research is limited
to studying the basic principles of Indian ContractLawfocusing on electronic contract.

This study is limited to fundamental principles of contract law.The studywill examine

important international convention and treaties. It will alsoexamine Information Technology

103
Act, 2000 and its adequacy orinadequacy to deal with e-contracts. Other related Indian
legislations areanalyzed only from perspective of e-contract . Further, the study wouldalso
examine issues likely to counter Indian legal framework and possiblechallenges before it.

9.6. METHODOLOGY

Methodology

The method of study will be purely doctrinal or non- empirical. The studywill take note of the
latest developments and trends in the field of studythrough different literary sources
available. The nature of the topic is suchthat the best suited methodology of carrying out this
research will be thepure doctrinal method further, due to several constraints and the
natureand the complexity of the topic carrying out an empirical study does notseems to be a
viable option. So the best suited methodology is puredoctrinal in nature.

Tools

The present study will be carried out with the help of different books,including e-books,
written by Indian and foreign authors, legal and information technology journals national
as well as international. For carrying out this study different web resources will also be used
including legal data bases such as www.archive.org,
www.lexisnexis.com,www.westlaw.com,www.heinonline.com, www.jstor.com, Wilson
etc…further the journals written by professors of different universities anddifferent
resource persons such as research scholars on the relevant topic will also be used.

9.8. RESEARCH DESIGN

This study is designed to cover the aims and objectives of the research topic. The
research includes nine chapters to justify the theme of the work.It is in the following
manner:

The Sources Relied Upon for the Research

 Primary Sources: Statutes/Enactments, judicialdecisions (Reporters on

Judicial Decisions), International Conventions and other sources of binding legal
authority.

104
  Secondary Sources: Textbooks, Books of renowned authorities, magazine articles,
histories, criticisms, commentaries, encyclopedias, Journals, News Papers (Editorials
and Articles) andother Publications.

The study is taken out only to discuss legal regime of e-contract in India. Aprimary concern
of the study will revolve around the InformationTechnology Act, 2000 and Indian Contract
Act, 1872.

105