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Validity And Enforceability of Click-wrap Agreements Validity And Enforceability of Click-wrap Agreements

Bronze medal Reporter Kishan Dutt Kalaskar, Advoate (Retired Judge) Posted 7 Oct 2020
Validity And Enforceability of Click-wrap Agreements

Validity and Enforceability of Click-wrap agreements               

Due to the recent technology development, there has been a rapid growth of the online Indian market, and it has considerably changed the everydayliving of people. Therefore, communication is no longer within the four reachable walls and has a wide reach in today’s times. Businesses opened through electronic media has flourished,and a lot of employment has been generated. Electronic commerce is a means of the transaction of business electronically and is associated with the buying and selling of information, products and services over computerized or artificial intelligence communication networks.

As the country has witnessed a steady growth of e-commerce, its transparency and credibility havebecome one of the major issues which haveto be dealt by Indians, and therefore the electronic contracts are looking for a place in the Indian legal world.The law of contract in India, which it the Indian Contract Act, 1872 gives statutory recognition to the common contractual rule. It does not lay down the rights and duties which the law will enforce, but it deals with the limiting principles, according to which parties may become liable for some rights and duties towards the other party.

Indian Contracts

To understand what e-contracts are, it is much more important to first understand what a normal contract is and how a simple contract is drafted. The Indian contract act speaks about the principles of the law of contract, its important elements, and the way it is formed, its performance and the remedies or solutions for breach of such contracts. It also helps in determining the circumstances in which promises are made by the parties to a contract, general principles of the formation of the contract and also prescribes the remedies which are available in the Court of law for the breach of contract against a person who fails to perform his undertaking created under the Contract.

According to section 10 of the Indian Contract Act, 1872, an agreement between two parties is a contract which is enforceable by law. An agreement is enforceable by law and can be termed as a valid contract if it is made by competent parties, out of their free consent and for lawful object and consideration. In layman words, a contract is an agreement binding between two or more parties intending to create a legal relationship, in which one makes the proposal while the other accepts the proposal or offer and thus it becomes a promise. Such acceptance has to be certain and not vague and must be free from any undue influence, force or misrepresentation.

Online Contracts

Due to the advance use of internet and electronic commerce in today’s times, online contracts needs to be given due importance mainly in terms of its multiplicity and reach. An electronic contract is also known as the online contract is an agreement drafted, modelled, signed and executed electronically, mainly with the use of the internet. Talking about the similarity of online contracts with paper made contracts, they both are drafted in the same manner. In case of an online contract, the seller intends to sell the products, present their products, terms and prices for buying such products to the prospective buyers. In return, the buyer or the interested person shows his/her interest by clicking on the ‘I Agree’ or ‘Click to Agree’ option for indicating the acceptance of the terms presented by the seller or they can sign electronically. Some of the contracts require electronic signatures which can be done in different ways like typing the name of the signer’s in the specific signature space, copying and pasting the scanned version of the signature or clicking an option meant for that purpose. The communication is basically made between two computers through servers. The online contract is brought to the scenario to help people in the way of formulating and implementing policies of commercial contracts within business directed over the internet. Online Contract is modelled for the sale, purchase, supply of products and services, and for stating terms and conditions of one party to another party involved in the contract.

Online contracts can be categorized into three types, mainly, i.e. browse or web wrap contracts, shrink wrap contracts and click wrap contracts. Though these online contracts havebecome a major part of everyone’s routine life, most of the people are still not aware of the complex legal consequences that such contract brings to an individual’s life as these contracts face a lot of legal as well as technical challenges.

This article will entirely focus on “Click-wrap agreements” which mainly states Terms and Conditions of an online website to its visitors or buyers who agrees to this Terms and Conditions and follow them rigorously.

They are web-based agreements which ask the consent of the user by way of clicking “Ok” “I Agree” “I Accept” button on the dialog box. In these agreements, the user basically hasto agree to the terms and conditions for usage of the particular software. Users who don’t agree to the terms and conditions will not be able to use or buy the product upon cancellation or rejection. A person witnesses web-wrap agreements almost regularly. The terms and conditions for usage are exposed to the users prior to acceptance. For agreement of an online shopping site etc.

Although these e-contracts have carved a way to our life’s, no one really knows how to deal with it or how much to depend on it. Moreover, there are no precise judicial precedents on the validity and enforceability of click wrap agreements which makes it tougher to understand it. Other countries like the USA has dealt with such situations where they have stated that as long as the essential elements of a contract are not disturbed, click wrap agreements are equally enforceable just like the other contracts.

Essential elements of a Click-wrap agreement

Some of the most important elements that makes a click-wrap agreement a valid contract are:

  1. Offer

Just like a paper made contract, click wrap contracts do make an offer to the other party. The click wrap agreements make an offer by laying down terms and conditions for the other party, thus stating, what the party is offering to another party. So here, the click wrap agreements complete the requirement of making an offer. What here important is that the offer is made with an intention to create a legal relationship between the parties. Moreover, an offer is only converted to a promise when accepted by the other party on an unconditional and absolute basis.

  1. Acceptance

In the click wrap agreements, an acceptance by the other party is the most important thing. In short, a click wrap agreement cannot be formed unless and until the party does not click on “I Agree” or “OK” buttons mentioned it in the dialog box, thus giving a valid acceptance. As the name suggests, a click wrap agreement is not formed till the time the other party “clicks” the agreement. Once the agreement is clicked, the agreement is automatically wrapped and formed. Therefore, acceptance plays a major role in forming of an online click wrap agreement.

Apart from these two mentioned elements, there are other essential elements too, which contributes to the formation of a valid online contract. They are:

  • Intention to create a legal relationship
  • There must be a lawful object in the contract
  • There must be a lawful or legal consideration
  • Capacity of Parties
  • Free and unaffected consent of both the parties
  • Possibility of Performance

Drafting of an online contract

The Indian Contract Act, 1872 gives legal status to the basic contract law. A valid agreement is shaped by free assent of competent parties for a legitimate consideration. This Act doesn't put a particular arrangement for conveying offer and acceptance. It might be made in writing, in oral, or by seeing the conduct of the parties and the circumstances. The express agreement is supposed to be communicated and gone into by words expressed or composed where the offer and entered into by words spoken or written where the offer and acceptance are expressly agreed upon at the time of formation of the contract. At the point when the agreement is derived from the conduct of the parties, an agreement is supposed to be implied. Such a contract comes into existence on account of conduct or Act of the parties.

The Information Technology Act, 2000 has made certain arrangements for the legality and the validity of online agreements yet no particular enactment has been fused for the legitimacy of online agreements in India. Regardless of whether no particular arrangement is made for the legitimacy of online agreements, it can't be challenged on technical grounds.

There are few ways accessible for shaping an electronic agreement, for example, email by which offers and acceptances can be traded. An online agreement can be framed by completing the website form provided for availing good or services offered by the seller on the website, for example, air tickets. The individual who plans to benefit the great or administrations offered in the site can submit a request on the site by filling the concerned structure and imparting such. The products offered can be conveyed straightforwardly through electronic methods for eg. e-tickets or might be later for, eg. Clothes. Another way accessible for the arrangement of an online agreement is through online agreements by tapping on the catch that says ' I Accept' while interfacing with a product and by tapping on 'I Agree' button while pursuing an email account.    

The online agreement is framed through new methods of communications, for example, email, web, fax and phone. The necessity of fundamental component, for example, offer and acceptance in online agreement arrangement areas much basic all things considered for the development of the paper-based customary agreement. Agreement formation over sites is very not quite the same as the previous methods of agreement development. Online agreement arrangement predominantly brings issues up according to the relevance of the offer and acceptance rule.

Validity and Enforceability of e-contracts

The Information Technology Act, 2000 gives different procedural, authoritative rules and manages provisions relating to all kind of online transactions. These incorporate computer information assurance, confirmation of reports by the method of the advanced or electronic mark. Althoughthe IT Act, 2000 has given electronic agreements a certain type of acknowledgement, yet there are no solid legal points of reference for the legitimacy and enforceability of online agreements in India. In case of wrap contracts, we ordinarily acknowledge the terms and states of the agreement by tapping the catch that shows ' I Agree'. Many tend not perusing the terms and conditions cautiously before consenting to such. Yet, these moves ought to be made intentionally and cautiously simply in the wake of perusing the conditions of the agreement appropriately as it prompts a legitimate agreement, and the terms can be carefully implemented against them.

In the year 2015, an activity known as 'Digital India' was introduced by Narendra D. Modi, the current Prime Minister of India. This mission was launched to guarantee that taxpayer driven organizations accessible to the residents of our nation in any electronic manner which will prompt the improvement of online foundation and internet network in our nation. The activity of Digital India expects to interface provincial zones with rapid web organizations and comprises of three segments, for example, creation of digital infrastructure, Delivery of services digitally and digital literacy. Its fundamental article is to make our nation carefully enabled in the field of innovation.

The Indian Contract Act, 1872 gives a fundamental legally binding standard that an agreement is substantial in the event that capable parties make it out of their free assent for legal consideration. There is no particular method of imparting offer and acceptance; it tends to be done verbally, in writing or even by conduct. In this way, oral agreements are as legitimate as paper or traditional agreements. However, the main condition is that they should possess all the essential elements of a valid contract.

It was held on account of Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas, “that ordinarily, it is the acceptance of offer and intimidation of that acceptance which results in a contract. This intimation must be by some external manifestation which the law regards as sufficient. Hence, even in the absence of any specific legislation validating e-contracts cannot be challenged because they are as much valid as a traditional contract is.”

An online agreement is basically a communication between two parties as to move of merchandise/administrations. What's more, according to the Indian Evidence Act, any email correspondence and other correspondence made electronically is perceived as substantial proof in a Court of law. By thinking about the focuses, it very well may be inferred that the agreement that follows the correspondence is substantial as well and Indian law hence perceives the legitimacy of online agreements.

The residents of India are empowering the idea of Digital India. However,no unequivocal enactments are identifying with the exchanges done over mechanized correspondence organizations. A few laws, for example, The Indian Contract Act, 1872, Information Technology Act, 2000, Indian Copyright Act, 1957 and the Consumer Protection Act, 1986 somewhat are working and following up on settling issues that emerge identifying with the arrangement and approval of online agreements. The Information Technology Act, 2000 is the Act that administers the exchanges directed over the internet and clarifies the impressive method of acceptance of the offer and gives the standards to the renouncement of offer and acceptance in an obscure or inconclusive way. Subsequently, a different law for managing contracts dependent on electronic contracts is strongly suggested.

Online Contract as evidence

In a nation like India, where the proficiency rate isn't so high, the idea of 'Digital India' is a far reach. Individuals actually feel unreliable to do online-based transactions principally in light of the fact that the terms and states of such agreements are not straightforward. Another significant issue is the idea of the law administering the electronic agreements. Regardless of whether the IT Act, 2000 has authorized electronic agreements, there are no unequivocal arrangements referenced in the Act.

Reports are fundamentally registered for the preservation of proof, the affirmation of title, and to shield oneself from misrepresentation. The evidentiary estimation of electronic agreements has been given acknowledgement and can be perceived in the light of different areas of the Indian Evidence Act. Section 65B of the Indian Evidence Act manages the admissibility of electronic records. According to Section 65B of the Indian Evidence Act any data contained in an electronic record delivered by the computer in printed, put away or duplicated structure will be considered to be an archive and it tends to be acceptable as a proof in any procedure moving along without any more verification of the first subject to following conditions are fulfilled, for example, the computer from where it was created was in normal use by an individual having legitimate authority over the framework at the hour of delivering it, during the ordinarycourse of exercises the data was taken care of into the framework consistently, the output computer was in an appropriate working condition and have not influenced the precision of the information entered.

Section 85A, 85B, 88A, 90A and 85C of the Indian Evidence Act manage the assumptions as to electronic records. Section 85A has been embedded later to affirm the legitimacy of electronic agreements. It says that any electronic record in the form of electronic agreement is finished up and gets acknowledgement the second a signature mark is attached to such record. The assumption of electronic record is valid just if there should be an occurrence of five years of age record and electronic messages that fall inside the scope of Section 85B, Section 88A and Section 90A of Indian Evidence Act.

Remedies for Breach of e-contracts

There is no particular standard in the event of a breach of the online agreement; however, the guidelines with respect to solutions for breaking of an agreement can be followed as given in The Indian Contract Act. A legitimate agreement offers rights to co-relative rights and commitments and they are enforceable in the courtroom when encroached on breach of agreement. The Contract Act fundamentally discusses two solutions for the breach of agreement, for example, Damages and Quantum Merit. Yet, barely any different remedies are additionally accessible as given in the Specific Relief Act, for example, specific performance of contract and injunction restraining the other party from making a breach of contract.

Section 73 and Section 74 of the Indian Contract Act, 1872 deals with the standards with respect to the cure of harms on breach of agreement. The individual whose rights are encroached by the break of agreement may bring an activity for harms or pay as far as money related an incentive for the misfortune endured by the parties.

There are two fundamental viewpoints to be considered as when any activity of harms i.e remoteness of damage and measure of damage. Sec 73 to 75 gives rules with respect to the appraisal of harms dependent on the popular case Hadley versus Baxendale. As indicated by the guidelines set down for this situation, there can be damages which normally emerged on the standard course of things from such break of agreement and can be called secondary damages and besides, damages for misfortune emerged from exceptional conditions i.e special damages. There are additionally different sorts of damages referenced in the Act, for example, nominal damage, pre- contract expenditure, compensation for mental agony and liquidated damages.

Different countries and their take

However, courts in other countries such as the US, have dealt with validity and enforceability of click wrap contracts. The validity of click wrap agreement was first considered in Hotmail Corporation v. Van $ Money Pie Inc., et al when the Court for the northern district of California upheld in the famous case of Hotmail Corporation that “the terms of the license bound the defendant as he clicked on the box containing “I agree” thereby indicating his assent to be bound.”

It was likewise held by the Appellate Division of Superior Court of New Jersey, that by tapping the "I Agree" alternative given in the exchange enclose the complainant party has entered to a substantial and restricting agreement and can be made obligated for the terms and conditions set down in the agreement. Click wrap arrangements are, in this way, legitimate and enforceable in the US as long as the offer and acceptance rule is taken into consideration.

Importance of Terms and Conditions

When we talk about Terms and Conditions in reference to anything, the first thing that pops up in mind is “a set of rules and regulations that an individual has to follow”. Terms and Conditions are mentioned priorly so that an individual knows, what he/she agrees to. We mostly see terms and conditions on a legal agreement, when you give an online exam, when you order food, or when a person subscribes for a particular thing. Now, when we subscribe for something, we are obviously paying for it,and at that moment it becomes utmost important to once go through all the terms and conditions a website wants to convey. A user using an application will often see a dialog box appearing on the screen, that ask the users two questions, which are, “I agree to Terms and Conditions” and “Cancel”. In the heat of the moment, the user mostly agrees with the terms and conditions and hardly gives it a read, but it is always advisable to have a look on it as it may lead to serious legal consequences in future.

A Terms of Service Agreement is a set of rules and regulations which users must agree to follow in order to use a service. Terms of Use is often namedTerms and Conditions, Terms of Service or Disclaimer when addressing website usage.

In simpler words, this agreement set out rules and terms that the user has to agree to use the website.

However, a Terms and Conditions agreement is highly recommended to every website, it’s not required by law to have it. Talking about these, only privacy policies are required by the law for a website to have its own as it collects personal data information such as name, age, gender, email ID etc.

Most of the online applications created in Indiado have their own Terms and Conditions agreement, as it imposes a higher degree of responsibility on the owners and on as well as its users. It is always necessary to know the importance of such an agreement before drafting it.

Following are some of the vital clauses one should consider before drafting a terms and conditions agreement for its website.

  1. Prevent abuses and exploitation

A Terms and Conditions acts as a legally binding contract between the website owner and itsusers.

This is the agreement that sets the guidelines and rules that users must agree to and follow in order to use and access your website or mobile application. This agreement gives you the liberty to include the necessary sections to inform users of the guidelines of using your website or mobile app, what happens if users are abusing your website or mobile app, and so on.

Examples of actions of abusive users can include posting defamatory content, spamming other users, or attempting to infect the website or app with malware.

If your website or mobile application’s hosts content that is generated by users, you can include a clause in the Terms and Conditions to inform users that harmful language won't be tolerated, as well as spamming other users which entirely depends on the function of your website: via public or private messages.

All of these can result in having those users who are found abusing or spamming the website would be temporarily banned.

  1. The owner can own the content

As the owner of the website, you are the owner of the logo you create and the brand you build up through your network or the website. It excludes the user-generated content, as most websites will inform users that any content created by users is theirs.

When you lay down the Terms and Conditions, the owner can mention that who is the owner of such content which is mentioned above, and it is also protected through the Indian Copyright Laws.

This kind of clause is generally referred to as “the intellectual property clause” and is mostly present in every agreement as it safeguards the intellectual property of the party through various governing laws.

This clause can be drafted as “The Site and its original content, functionality, and features are owned by [Owner of Website] and are protected by Indian copyright, trademark, patent, trade secret, and other intellectual property or proprietary rights laws.”

  1. Limited Liability

Terms and Conditions agreements commonly include a warranty period or disclaimer that tries to limit the website owner's liability or responsibility in cases where errors or mishaps are found in the content presented on the website.

This kind of clause helps to notify the user that the owner can't be held responsible for any errors in the content presented, or for the information provided iscomplete, accurate, or suitable for any purpose.

  1. Termination of Accounts

As mentioned earlier in point 1, that how a Terms and Conditions agreement helps to prevent abuses, in addition to it, such an agreement also helps to include the clause of “Termination” which is widely referred as the “Termination Clause”.

This clause informs users that accounts which use abusive language will be terminated and banned from using the service offered.

The Termination clause is aimed at websites that have a registration section (e.g. user must register before using and/or accessing certain sections of the website), as you can ban or disable the abusive users based on the activity of their accounts.

A termination clause is easy to draft, and it can be done in the following way:

The website may terminate your access to the Site, without mentioning any notice or cause, which may result in the destruction and forfeiture of all information associated with your account. All provisions of this Agreement that, by their nature, should survive termination shall survive termination, including, without limitation, ownership provisions, indemnity, limitations of liability and warranty disclaimers.

  1. Mention the governing Law

As it imposes a legal relationship between a user and the website owner, it becomes important to mention a law that will govern the entire agreement and any mishap occurring from it. Generally, the governing law has to be of the jurisdiction where the business or the website is registered.

For example, if the website is registered in India, the clause will look like:

The laws of India govern these terms and conditions.

Conclusion

An online agreement’s validity and enforceability is a debatable topic in a country like India, where the buyer and seller relationship is very unstable. People have drastically shifted to shop online but are still somewhere sceptical when it comes to card payments and similar things. Talking about click wrap agreements, which are generally the terms and conditions agreements, it has become utmost important to read and then agree with them, as it thus creates a legal relationship between the user and the owner, leading to legal consequences in future. However, there are still strong laws needed for the protection of such agreements to give them a better position in the judicial system. Due to no judicial precedents, right now, the stand of such agreements remains unclear. But as the IT Act recognizes such agreements, they do hold certain legal liabilities. 

The author of this blog/Article is Kishan Dutt Kalaskar, a Retired Judge and practising advocate  having an experience of 35+ years in handling different legal matters. He has prepared and got published Head Notes for more than 10,000 Judgments of  the Supreme Court and High Courts in different Law Journals.  From his experience he wants to share this beneficial information for the individuals having any issues with respect to their related matters .

Author :

Kishan Dutt Kalaskar

Advocate (Retired Judge)

No.74, 1st Floor, 6th Cross,​

Mob: 9686971935

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