With the growth of the internet and digital technology, business transactions are no longer limited to paper documents and physical signatures. Today, contracts are frequently formed through electronic means, especially in online transactions, e-commerce, banking, and software usage. These contracts are known as E-contracts.
For CMA Foundation students, understanding E-contracts and electronic signatures is important because they combine principles of the Indian Contract Act, 1872 with provisions of the Information Technology Act, 2000. This lesson explains the meaning, legal requirements, parties, types, and validity of E-contracts in a structured and exam-friendly manner.
Meaning of E-Contracts
An E-contract is a contract that is created, executed, and stored in electronic form instead of paper form. These contracts are entered into through electronic devices such as computers, mobile phones, or tablets, usually via email, websites, or mobile applications.
E-contracts are mainly used for speed, convenience, and ease of communication, especially when parties are located in different geographical areas. For example, when a person books a flight ticket online or purchases goods from an e-commerce website, an E-contract is formed between the buyer and the service provider.
Legal Recognition of E-Contracts
Section 10A of the Information Technology Act, 2000 (as amended) gives legal validity to contracts formed through electronic means. According to this section, a contract will not be considered unenforceable merely because the offer, acceptance, revocation, or communication is made electronically.
Example:
If an offer is sent through email and accepted by clicking a confirmation link, the contract remains valid even though no physical document exists.
Requirement of Signature in E-Contracts
In traditional contracts, signatures of parties are required to authenticate the agreement. In E-contracts, this requirement is fulfilled through electronic signatures.
An electronic signature performs the same function as a handwritten signature, that is, it confirms the identity of the person and shows consent to the contract terms.
Meaning of Electronic Signature
Section 2(p) of the Information Technology Act defines an electronic signature as the authentication of an electronic record by a subscriber using electronic techniques specified in the law. This definition includes digital signatures, which are further explained under Sections 3 and 3A of the Act.
Section 5 of the Information Technology Act clearly states that where the law requires a signature, such requirement is deemed to be satisfied if an electronic signature is used.
Example:
While filing income tax returns online, a digital signature or Aadhaar-based authentication is accepted instead of a physical signature.
Presumption as to Digital Signature
Section 85C of the Indian Evidence Act provides that courts shall presume the correctness of information contained in a digital signature certificate unless proven otherwise.
This means that digital signatures carry evidentiary value and are legally reliable in court proceedings.
Parties to an E-Contract
Originator
As per Section 2(za) of the Information Technology Act, an Originator is a person who sends, generates, stores, or transmits an electronic message. The originator does not include an intermediary.
In the context of E-contracts, the originator is the party who initiates the contract electronically.
Example:
An online retailer sending terms and conditions to a customer is the originator.
Addressee
According to Section 2(b) of the Information Technology Act, an Addressee is the person intended by the originator to receive the electronic record, excluding intermediaries.
In E-contracts, the addressee is the party who receives and accepts the electronic contract.
Example:
A customer receiving and accepting the terms of service while making an online purchase is the addressee.
Types of E-Contracts
Browse Wrap Contracts
A browse wrap agreement is formed when a user continues to use a website. The terms and conditions are usually available through a link, and continued usage is treated as acceptance.
Example:
Websites that state “By continuing to browse this site, you agree to our terms and privacy policy.”
These contracts are common but sometimes challenged in court if the terms are not clearly visible.
Shrink Wrap Contracts
A shrink wrap contract is commonly used in software purchases. The terms and conditions are enclosed inside the product package, and acceptance occurs when the consumer opens the package.
Example:
When a user opens a boxed software product and installs it, they are deemed to have accepted the license agreement inside the box.
Such contracts usually protect the manufacturer against intellectual property violations.
Click Wrap or Click-Through Agreements
Click wrap agreements require the user to explicitly agree to the terms by clicking an “I Agree” or “OK” button. If the user disagrees, they cannot proceed with the service.
Example:
While creating an email account or installing an app, the user must click “I agree” after reading the terms and conditions.
These contracts are considered more legally enforceable because consent is clearly expressed.
Validity of E-Contracts
The Indian Contract Act, 1872 recognizes contracts if they satisfy essential elements such as free consent, lawful consideration, lawful object, and competency of parties. The Act does not prohibit electronic agreements.
Therefore, E-contracts are valid and enforceable provided they meet all essential elements of a valid contract.
Free Consent in E-Contracts
Free consent is a crucial requirement. However, E-contracts are usually standard form contracts with a “take it or leave it” nature, leaving no room for negotiation.
Indian courts have examined cases where one party held a dominant position and imposed unfair terms.
Judicial View on Unfair E-Contracts
In LIC of India v. Consumer Education and Research Centre, the Supreme Court observed that in dotted-line contracts, the weaker party has no real bargaining power and must either accept unfair terms or forgo the service entirely.
This judgment highlights that even electronic contracts can be declared void if consent is not truly free and terms are unreasonable.
Lesson Conclusion
E-contracts and electronic signatures play a vital role in modern commercial transactions. Indian law, through the Information Technology Act and the Indian Contract Act, provides clear recognition and enforceability to such contracts. Understanding the meaning, types, parties, and legal validity of E-contracts helps CMA Foundation students connect traditional contract principles with modern digital practices.
From online shopping to software installation, E-contracts have become an inseparable part of everyday life. However, courts continue to ensure fairness by protecting parties from unfair terms and misuse of dominant bargaining power.
Revision Questions
Click to reveal the answers.
1. Which Act gives legal recognition to electronic contracts in India?
Ans. Information Technology Act, 2000
2. Which section of the Information Technology Act validates contracts formed through electronic means?
Ans. Section 10A
3. What type of contract is created and executed in electronic form?
Ans. E-Contract
4. Which signature is used to authenticate an electronic record?
Ans. Electronic Signature
5. Which Act defines the term “electronic signature”?
Ans. Information Technology Act, 2000
6. Which section of the Indian Evidence Act deals with presumption as to digital signature?
Ans. Section 85C
7. Who initiates the electronic message in an E-Contract?
Ans. Originator
8. Who is intended to receive the electronic record in an E-Contract?
Ans. Addressee
9. Which type of E-Contract requires clicking “I Agree”?
Ans. Click Wrap Contract
Fill in the Blanks
Click to reveal the answers.
1. An agreement created and executed in electronic form is known as an __________.
Ans. E-Contract
2. Section __________ of the Information Technology Act gives validity to electronic contracts.
Ans. 10A
3. An electronic signature serves the same purpose as a __________ signature.
Ans. Handwritten
4. The person who sends or initiates an electronic message is called the __________.
Ans. Originator
5. The person who is intended to receive the electronic record is called the __________.
Ans. Addressee
6. Click wrap contracts require the user to click __________ to show acceptance.
Ans. I Agree
7. Shrink wrap contracts are commonly used in __________ products.
Ans. Software
8. Section __________ of the Indian Evidence Act provides presumption regarding digital signatures.
Ans. 85C
9. E-Contracts are valid if they satisfy all essentials of a __________ contract.
Ans. Valid
10. Free consent is an essential element under the __________ Act.
Ans. Indian Contract
True or False
Click the question to reveal the answers.
1. E-Contracts are invalid because they are not in written form.
Ans. False
2. Section 10A of the Information Technology Act recognizes electronic contracts.
Ans. True
3. Electronic signatures are legally equivalent to handwritten signatures.
Ans. True
4. A browse wrap contract requires the user to click “I Agree”.
Ans. False
5. Shrink wrap contracts become binding when the package is opened.
Ans. True
6. Click wrap contracts clearly express user consent.
Ans. True
7. An intermediary can be an originator under the IT Act.
Ans. False
8. E-Contracts do not require free consent to be valid.
Ans. False
9. Indian courts can declare unfair E-Contracts void.
Ans. True
10. Digital signatures have no evidentiary value in court.
Ans. False
You can also test your knowledge and understanding of this lesson by taking advantage of our MCQ Practice Questions (MCQs).
Let us know if you have any questions or doubts in the comments section.
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