LAW RELATING TO ELECTRONIC CONTRACTS IN INDIA, ENGLAND AND UNITED STATES A COMPARATIVE STUDY (SUMMARY)

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1 1 LAW RELATING TO ELECTRONIC CONTRACTS IN INDIA, ENGLAND AND UNITED STATES A COMPARATIVE STUDY (SUMMARY) A. General With the advancements in computer technology, telecommunication and information technology, the use of computer networks has gained considerable popularity in the recent past. Computer networks serve as channels for electronic trading across the globe. Goods and services of diverse nature are being offered to the businesses inter se or to the consumers globally via internet. With the fast emergence of internet, the whole world has become a market where everything is available on a click of a mouse on your laptop. Electronic commerce encompasses all kinds of commercial transactions that are concluded over an electronic medium or network, essentially, the Internet and E-commerce covers three main types of transactions, i.e. business-toconsumer (B2C), business-to-business (B2B), and business-to-government (B2G). For every commercial transaction, there must be a contract- oral or in writing, to make it legally enforceable, so is with regard to e-commerce for which the transactions are done through e-contract. Nowadays, creating an ID or chatting with friends by using a social networking site is very common. Use of websites like Google, Yahoo, Facebook, Twitter are very common for accessing an information as well as to communicate with others, same is the use of websites like Amazon, Tradus, Quickr, Olx and many more for the sale and purchase of goods and services online. Whenever information is accessed from a website or a simple click is done on a hyperlink, it leads to a valid contract which a person never thinks while doing so and its legal consequences are rarely pondered upon. On-line commerce is one of the fastest growing components of Western economies. The way a Government chooses to regulate e-commerce is, therefore,

2 2 of central importance to that country s economic policy. If regulation is too heavy-handed, they risk stifling entrepreneurial activity, causing a slow-down in the e-commerce sector. If regulation is too weak, they risk damage to consumer confidence, leading to an equally dangerous downturn. At the heart of the development of the e-commerce lies the ability for consumers to enter into and perform contracts online. 1 Due to the uncertain legal environment as to the Internet, the businessmen think twice before venturing forth into the world of the Internet. Those who venture into the virtual world of e-commerce face with challenges- whether contract is concluded or not, contract is enforceable or not, whether communication isby the person from whom it is expected, whether e-records will be admissible in the court and the biggest and the haunting question is to which nation s jurisdiction, parties will be subject to? Without legal enforceability, no commercial transaction can take place by traditional ways or by ways of internet and, if takes place, the commercial activity doesn t have legal significance attached with it. Therefore, the need to provide a solid and balanced legal foundation upon which e-commerce may flourish persuaded the United Nations to provide a Model Law designed to afford certainty and security for all parties involved in electronic data transactions which was ultimately finalized in 1996 as the UNCITRAL Model Law on Electronic Commerce which is used by all the countries as the basis upon which individual national regulations are being made. Similarly, UN has also adopted Model Law on Electronic Signature and arbitration etc. to provide more certainty in the online world. Due to international character of electronic contract, the Law of England and United States are also studied. The United States (the federal of 50 States), as may be expected of a country with the most developed e-commerce community, has led the way through the enactment of several provisions designed to give effect to the Model 1 Andrew Murray, Regulating Electronic Contracts: Comparing the European and North American Approaches also see, ACP/HIPCAR/Documents/FINAL%20DOCUMENTS/ENGLISH%20DOCS/etransactions_assessment.pdf (last visited on 12th Aug, 2013).

3 3 Law. The US legislation which gives primary effect to the Model Law is the Uniform Electronic Transactions Act (UETA). UETA is neither a Federal nor State Law but is in fact simply another model law. It can only achieve authority through further enactment by State legislatures. By the year 2003, UETA has been enacted by forty-seven States except for Alaska, New York and Washington, however, these States have statutes pertaining to electronic transactions. In addition UETA has achieved a degree of Federal recognition in 102(a) of the Electronic Signatures in Global and National Commerce Act, 2000 (E-sign) which specifies that State Law may modify, limit or supersede the electronic contracting provisions of E-Sign under limited conditions. The US, with all Federal States, regulates through a mixture of Federal and State Laws. The responsibility for the regulation of commerce falls to the States and therefore the Federal Government has no right to intervene. The requirements of interstate commerce, though, demand a uniform response from the state legislatures: this is the foundation of the Uniform Commercial Code (UCC) which provides a common code for sales and leases, commercial paper, bank deposits, letters of credit and more. From time to time the UCC needs to be updated to reflect new practices and technologies. The European Union has set out to give recognition to the Model Law in two key Directives. The first of these is the Directive on Electronic Signatures and the second Directive is the E-Commerce Directive.Within the guidance of Model Law and European Directives, Electronic Communication Act 2000, Electronic Signature Regulations, 2002 and Electronic Commerce (EC Directive) Regulations, 2002 were passed in England. E-contracts can be formed, generally, either through the medium of or website. Web-wrap agreements are web based agreements which requires assent of the party by way of clicking the I agree or I confirm link. When it comes to formation of such e-contracts entered between two or more parties, we need to look into the basic provisions of law regarding the contracts which are given in the Indian Contract Act, 1872 unless the Information Technology (IT) Act 2000 (amended in 2008) specifically provides contrary. Chapter IV of the IT

4 4 Act deals with electronic contract that contains merely three sections (sections 11, 12 and 13). Section 11 is related to the Attribution of electronic records, section 12 deals with Acknowledge of receipt of the electronic record and section 13 is related to Time and place of dispatch and receipt of electronic record.this Act also effects consequential amendments in the Indian Penal Code, 1860, the India Evidence Act, 1872, the Banker s Books Evidence Act, 1891 and the Reserve Bank of India Act, 1934 to bring them in line with the requirements of digital transactions. One of the issues discussed is whether the computer-generated agreements should be enforceable as legally binding contracts or not. The Indian Contract Act, 1872 is the basic law encompassing all rules dealing with the formation of a contract. Laws prevalent don t lay down any express provision when it comes to formation of computer-generated agreements and the difficulties arise only because of the legal doctrine of contract law which is based on an idealized model of communication between natural persons. Generally, web advertisements 2 are treated at par with the shop displays. As such web advertisements will be invitations to offer, however, it may indicate that the web advertiser intends to be bound upon the acceptance 3 converting it to an offer rather than invitations to offer. The essential requirement of Meeting of mind for contract formation isalso absentin case of contracts entered through electronic agent. With regard to communication of offer or acceptance online, section 12 compels that the communication is complete on the receipt of acknowledgement by the originator which impliedly results into a conflicting situation than that is prescribed in the Indian Contract Act concluding that communication of offer or acceptance will not be complete unless acknowledgement is received by the sender. The situation is further complicated by the section 13 of the IT Act which provides that the time of receipt of acceptance is (i) when it reaches the designated information system or (ii) information system of the addressee (if not 2 Partridge v Crittenden [1968] 1 WLR Something along the principle of Carlill v.the Carbolic Smoke Ball Co. Ltd (1893) 1 QB 256.

5 5 designated) or when it is retrieved by the addressee (if sent to the system other than designated). Receipt happens when it enters the information system not at the time when received by the addressee. By analyzing the rule, it can be very clearly concluded that neither receipt nor dispatch rule is applicable to the electronic contracts. Digital signature is technology specific created by using asymmetric crypto system and hash functionensuring the integrity of the content and also the identity of the person affixing digital signature, thereby, authenticate the electronic record. Electronic signature may be in the form of a simple password or a pin number or may be as complex as ratina scan or finger print, however, the authentication by electronic signature needs to be scrutinized on case by case basis that also has consequential effect on evidentiary value of Electronic records. A number of amendments were made in the Indian Evidence Act, 1872 by the introduction of the IT Act 2000 in order to bring it up to date with trends in electronic evidence. Section 65A and 65B were inserted in the IndiaEvidence Act which made computer printout relevant as in case of documentary evidences by making original/ duplicate difference non-existent. The information contained in e-record may be divulged out of emotions, it may be a conspiracy or merely a communication of hearsay information. No rule is specified with regard to the method to decide upon the credibility or authenticity of the information contained in the e-record. Another issue which is discussed in this thesis is the apprehension that the common man has in entrusting his business to the lack of a predictable legal environment governing transactions over the Internet. Given the multijurisdictional sweep of the Internet, there appears to be no easy solution either. As the judicial system is very complex, dilatory and having jurisdictional issues, ADR provides an easy and fast remedy. All the forms of ADR, whether it is negotiation, conciliation, mediation or arbitration, can be utilized to resolve online issues, though distance can be a great impediment. The solution to which is available in the form of Online Dispute Resolution that really gives a feel of face to face interaction in case video conference is used to communicate.

6 6 Simultaneously, it is really quick to interact, whatever method of online communication is used whether it is , chat, video conferencing, audio conferencing and so on. A quick and low cost remedy is available without losing anything. B. SUGGESTIONS 1. Aclear provision should be incorporated specifying the time when the communication of offer or acceptance will be completed. Therequirement of Acknowledgement should not be binding. 2. As the knowledge element necessary for determining the time for communication of acceptance in postal communications is irrelevant in case of electronic communications.as Sections 12 and 13 don t deal with the term knowledge, it is suggested that, as it is contrary to the Contract Act, it should have been clearly mentioned in the IT Act. 3. Determining the time of contract formation is essential since it identifies the moment of transfer of ownership and risk, among others. With regard to the rule of acceptance, need is to specially incorporate a provision specifying that only receipt rule is to apply whether the means of communication is instantaneous like website, chat etc. or noninstantaneous like , unless otherwise agreed by the parties. 4. Section 13 of The IT Act has prescribed the mode of sending acknowledgement. In absence of acknowledgement, offer is treated as not sent which seems totally absurd. Hence, the suggestion is that instead of mentioning never been sent, it should be mentioned as not accepted. 5. The IT Act contains merely three sections dealing with e-contract which, too, are creating unnecessary conflict with the traditional law. Need is to have more elaborate provisions clarifying the situation regarding formation of e-contract. 6. The IT Act has provided for an elaborative and cumbersome procedure for the appointment of the foreign certifying authorities which may hamper the smooth expansion of e-commerce. US is technology neutral, UK has adopted rules providing easy recognition to foreign certifying authorities.

7 7 Hence, it is suggested that the procedure for establishment of certifying authorities should not be too cumbersome. 7. As per section 20(3) of the original IT Act, the Controller shall maintain a computerized data-base of all public keys in such a manner that such database and the public keys are available to any member of the publicwhich was removed by the IT Amendment Act The author submits that the data should be available online. 8. The section 65B of the Indian Evidence Act 1872 should be amended to properly include within their ambit all the possibilities that e-records offers as evidence. 9. E-records are very easy to be temperedwith, hence, it is very crucial to authenticate the data to ensure justice. E-evidence should not be made admissible without corroboration unless genuine reasons are there to admit without corroboration. 10. Though computers are now an integral part of our lives, it appears that there is still a gulf between the legal and technical worlds that must be narrowed. The police having the first access to e-evidence should be trained how to handle data as not to lead to any alteration while copying or preserving. 11. The need is to train law officers and judges to comprehend the admissibility of e-signatures and equip them to look into the admissibility of e-signatures on case by case basis as the e-evidence in India may be considered not adequate as the courts might find it too difficult to understand due to the lack of competence of judges. 12. There is also a great need to create a technological awareness among the people regarding how to use it, what benefits arise out of it, where these can be misused and how to avoid it and the circumstances in which computer can help in creating e-evidence and also how to use computer to ensure that electronic evidence doesn t lose its authenticity. 13. India has very less number of forensic labs to investigate, examineor recover the electronic data. Hence, ittakesmore time to identify, extract,

8 8 document and interpret computer data. Hence, the need is to establish more forensic labs and also to create a human force having knowledge to recover and investigate digital evidence. 14. Owing to the absence of consistency in the regulations or legal principles followed to settle disputes of similar nature arising in the cyberspace in different places of the world has caused confusion. Indian laws have so far dealt with two sets of reasoning- cause of action and consequences that doesn t seem to be appropriate in online cases. Indian law should also be changed to incorporate minimum contact test and purposeful availment test to assume jurisdiction in India. 15. E-courts can also be a viable solution to settle online disputes. 16. It is desirable to provide a mechanism for online dispute resolution in the case of e-contracts, e- receipts and e-payments. There is a need to introduce accountability online in relation to the transactions on the internet. Even though e-records and digital signatures together with a secure system of payments provide a sufficiently safe mechanism for authenticity of the transaction, still the transaction may be marred by nondelivery of goods/services or defective/deficient goods or services. There might be a delay or the goods simply may not match with the expectations. In this situation, it is suggested to incorporate online dispute resolution clause in the agreement if the parties wish to evade the cumbersome procedure of legal trial. 17. AnOnline Dispute Resolution system should be established on the line of ICPEN to provide easy, quick and cost-effective remedy.

INTERNATIONAL JOURNAL OF RESEARCH AND ANALYSIS VOLUME 4 ISSUE 1

INTERNATIONAL JOURNAL OF RESEARCH AND ANALYSIS VOLUME 4 ISSUE 1 EVIDENTIARY VALUE OF E-CONTRACT IN THE LIGHT OF I.T. ACT, 2000 Introduction * PRAVEEN KUMAR MALL Contracts have become so common in daily life that most of the time we do not even realize that we have