INTRODUCTION
Our lives are interwoven with contracts, which are essential to business and everyday transactions. Contracts are used in everything from the smallest transaction at a neighbourhood shop to the largest agreements signed by multinational corporations. A significant shift has occurred with the advent of the digital age, as contracts are now drafted and communicated via instant messaging and email platforms. These days, everything from buying things to signing official contracts can be completed from the comfort of one’s own home, making stacks of paper unnecessary. Contracts were traditionally exchanged via a lengthy procedure in which both parties thoroughly put pen to paper. There were delays in reaching the recipient due to the lengthy route involving postal services. The current model has changed significantly in the era of digital technology. These days, contracts fly across the internet, with offers and acceptances sent immediately, turning what used to be a drawn-out process into a quick exchange in the blink of an eye. The Indian Contract Act of 1872 raises a crucial question in light of this move to a digital environment: Do contracts created and delivered through third-party applications have legal standing? The Blog assumes the task of deciphering this complex question.
COMMUNICATION OF OFFER UNDER INDIAN CONTRACT ACT
An offer or proposal is specifically defined in Section 2(a) of the Indian Contract Act [1] as the declaration of one party’s willingness to take action or refrain from taking action to obtain the consent of the other party. In support of this, Section 4 [2] states that an offer’s communication is complete when it reaches its intended recipient and the letter containing it is received and acknowledged. Let’s say that on July 4th, after B receives and acknowledges a letter from A on July 2nd offering to repair his roof for five thousand rupees, the communication process is considered to have been completed on that date
Types of Offer
- Express Offer and Implied Offer – Express offers and implied offers are distinguished under Section 9[3] of the Indian Contract Act. An express promise is made through verbally communicated proposals or acceptances, while an implicit promise occurs when proposals or acceptances are communicated without words. For instance, a bid at an auction constitutes an implied offer expressed through actions rather than clear verbal exchanges.
- General Offer – A general offer is extended to the entire public, and acceptance through condition fulfilment is validated by Section 8[4] of the Indian Contract Act. The landmark case of Carlill v. Carbolic Smoke Ball Co.[5] established the legal significance of general offers. Mrs Carlill’s claim for the £100 reward, advertised by the company, was upheld by the court without explicit acceptance. The company’s deposit of funds indicated intent to enter a legally binding relationship.
- Specific Offer – Specific offers are tailored for a single identified person and can only be accepted by them. Exclusivity is crucial in contracts involving personal services or owed set-offs. The legal principle, exemplified by Boulton v. Jones,[6] dictates that when person A intends to enter a contract, person B cannot enter it without consent or to the detriment of the contracting party. The court in Boulton v. Jones emphasized that agreements involving set-offs or personal services cannot be transferred without consent, affirming specificity in contracting parties.
EMAIL AS A MEDIUM OF COMMUNICATION OF OFFER
Email’s invention revolutionized contract formation, replacing in-person meetings. Its benefits include instantaneous outreach, accessibility, record-keeping, tracking, efficiency, and cost-effectiveness, making it a primary communication channel for many companies.
Validity of Communication by Email
Even though they seem simple to implement, the validity of e-contracts frequently prompts questions about whether they are equivalent to traditional written contracts. The Indian Contract Act of 1872 does not state clearly how an offer must be made or accepted; it can be made orally, in writing, or by conduct. This means that an electronic contract is just as legally binding as a written one as long as it contains all necessary components. Electronic contracts
are legally enforceable and valid, as stated in Section 10-A 7 of the Information Technology Act of 2000. Indian courts have upheld this recognition through the application of the Indian Evidence Act of 1872[7]. The formation of contracts through email correspondence has been recognized and validated by Indian courts consistently. A supply agreement for bauxite was reached by the parties in Trimex International FZE Limited, Dubai v. Vedanta Aluminium Ltd [8]. After extensive email negotiations. The Supreme Court maintained the legality of the contract despite the lack of a formalized document, highlighting the fact that an oral or written contract’s conclusion is unaffected by the need for a formal document later on. The Court maintained that the acceptance of the contract and its execution are unaffected by the failure to initiate a formal contract. This ruling aligns with the Indian Contract Act, which recognizes oral contracts between competent parties with free consent and a lawful object. Consequently, the Act does not prohibit email contracts as long as they fulfil the essential elements of a valid contract.
Usage in E-Commerce Activities
E-commerce thrives on computer networks, facilitating robotic process automation, digital transactions, and cross-border trade via e-contracts. Legal precedents like M/S BASE Educational Services Pvt. Ltd vs. Kayaka Foundation PU College of Science & Commerce affirms the enforceability of electronic contracts, which comply with the Indian Contract Act of 1872. E-commerce websites serve as offerors, inviting public participation in transactions, exemplifying the accessibility and effectiveness of e-contracts. Similarly, email facilitates contract formation, showcasing the flexibility and ease of e-contracts across various transactions, from commercial deals to private agreements, underscoring their significance in modern business and interpersonal interactions. [9]
COMMUNICATION OF OFFER VIA INSTANT MESSAGING APPS
Instant messaging apps like WhatsApp, Facebook Messenger, and Telegram are immensely popular for daily communication, potentially leading to contractual agreements. The legality of these contracts warrants further investigation. In India, contracts formed via WhatsApp are legally binding if they adhere to Section 10 of the Indian Contract Act of 1872. Sections 10A of the Information Technology Act, 2000 and 85A of the Indian Evidence Act, 1872 recognize the validity of electronic contracts. In the case of Ambalal Sarabhai Enterprise Limited v. KS Infraspace LLP Limited, the Supreme Court highlighted that contract validity hinges on content, not communication method, underscoring the importance of meeting statutory requirements. [10]
Problems Posed With Instant Messaging Apps
Email and messaging apps like WhatsApp pose differing challenges for drafting legally binding contracts. WhatsApp’s “delete” and “edit” features, absent in emails, raise concerns. Deleted messages may alter offer conditions, complicating evidentiary proof in court. The discreet marking of edited messages adds complexity, potentially enabling one party to alter responses without the other’s knowledge, making contract enforcement difficult. Given WhatsApp’s widespread business use, caution in feature implementation is vital. A thorough analysis of such features’ impact on e-contracts is essential, holding WhatsApp accountable for user rights violations. Responsible development and legal considerations are crucial for serving diverse user needs. [11]
ENFORCEABILITY OF DIGITAL CONTRACTS
One important factor to take into account is whether or not digitally formed contracts can be enforced in court. This section aims to provide insight into the growing judicial recognition and acceptance of agreements facilitated by digital means by delving into precedent-setting cases that have established the legal validity of e-contracts.
Rudder vs Microsoft
In the case of Rudder vs Microsoft, two law graduates sued Microsoft Network (MSN) for misappropriation, contract breach, and other claims. The case centred on whether clauses not read by the plaintiffs were enforceable if a “forum selection clause” was valid, and what happened to parts of the contract not immediately visible. The court upheld the enforceability of the “click-wrap” agreement, comparing scrolling to turning pages in a paper document. The agreement’s use of plain English and clarity in requiring two clicks to agree contributed to its enforceability, setting a precedent for digital contracts. [12]
Trimex International FZE ltd. V Vedanta Aluminium Ltd.
In Trimex v. VAL, the issue was whether a valid contract existed despite no formal written agreement. Trimex offered to supply bauxite via email, which VAL accepted for five shipments from Australia to India. Although a draft contract existed, it was not finalized. The Supreme Court ruled that through extensive email exchanges covering key contract details, a valid contract was established. The court affirmed that electronic approvals, like emails, hold the same legal weight as written agreements, validating digital contract formation.[13]
Tamil Nadu Organic Private Ltd. v. State Bank of India
In Tamil Nadu Organic Pvt. Ltd. v. State Bank of India, petitioners contested e-auction procedures, claiming they were illegal. Respondents defended e-auctions as a remedy against syndicates, benefiting property owners. The court recognized the bank’s efforts to secure fair prices and upheld its right to use e-auctions under Rule 8(5) of the 2002 Rules. Dismissing the petition, the court lauded e-auctions for enhancing efficiency and transparency, marking a significant advancement in legal technology. [14]
CONCLUSION
In conclusion, the fusion of digital technology and contract law has drastically transformed how agreements are made and communicated. While email and e-contracts offer convenience, challenges such as message editing and deletion require careful consideration. Despite technological progress, ensuring fairness, transparency, and enforceability is paramount in modern contract formation to uphold trust and equity in digital interactions.
Author(s) Name : Aryan Gupta (Rajiv Gandhi National University of Law, Punjab (RGNUL))
Reference(s):
[1] Indian Contract Act 1872, s 2(a)
[2] Indian Contract Act 1872, s 4
[3] Indian Contract Act 1872, s 9
[4] Indian Contract Act 1872, s 8
[5] Carbolic Smoke Ball Company v. Carlill [1892] EWCA Civ 1
[6] Boulton v Jones [1857], Hurlstone and Norman 564; 157 ER 232.
[7] Sapana Jaiswal, ‘E- Contract Its Validity and Legal Provisions in India’ [2022] 212.169.38
<http://210.212.169.38/xmlui/handle/123456789/10081> accessed 22 March 2024.
[8] Trimex International FZE Ltd. v. Vedanta Aluminium Ltd., (2010) 3 SCC 1
[9] Dr. Rahul Sharma, ‘Legal Challenges and Enforcement Mechanisms in India’s Contract Act, 1872 for ECommerce Transactions’ (2023) 12 Eduzone: International Peer Reviewed/Refereed Multidisciplinary Journal 236 <https://www.eduzonejournal.com/index.php/eiprmj/article/view/462> accessed 22 March 2024.
[10] ‘Enforceability of Electronically Executed Contracts in India’ (Ikigailaw.comApril 2020)
<https://www.ikigailaw.com/article/315/enforceability-of-electronically-executed-contracts-in-india> accessed 22 March 2024.
[11] Archit K.P, ‘Implications of WhatsApp’s “Edit” Feature for the Enforcement of E-Contracts’ (CBFL21 October
2023)<https://www.cbflnludelhi.in/post/implications-of-whatsapp-s-edit-feature-for-the-enforcement-of-e-contracts#:~:text=Validity%20of%20e%2Dcontracts%20in%20India&text=In%20India%2C%20electronic%20agreements%20concluded,provisions%20enshrined%20in%20section%2010> accessed 22 March 2024.
[12] ‘Summary of Rudder v. Microsoft | CanLII Connects’ (Canliiconnects.org2014)
<https://canliiconnects.org/en/summaries/31474> accessed 23 March 2024.
[13] ‘Trimex International Fze Limited v. Vedanta Aluminium Limited’ (Indian Case Law 17 January 2013)
<https://indiancaselaws.wordpress.com/2013/01/17/trimex-international-fze-limited-v-vedanta-aluminiumlimited/#:~:text=FACTS%3A,bauxite%20from%20Australia%20to%20India.> accessed 23 March 2024.
[14] 15 T.N. Organic (P) Ltd. v. State Bank of India, 2014 SCC OnLine Mad 423
