E Contracts

International Journal of Law and Legal Jurisprudence Studies :ISSN:2348-8212:Volume 3 Issue 4 43
ANALYSIS OF THE LEGAL ISSUES INVOLVED IN

ELECTRONIC CONTRACTS UNDER INDIAN LAW WITH
REFERENCE TO BUSINESS-TO-CONSUMER MODEL OF
E-COMMERCE
Megha Nagpal1
With the progress in technology the standard contract has become technically complex and
consequently, difficult to comprehend by an average consumer thereby further limiting her/his
choices. Often, especially in the cyberspace, such contracts contain terms that are drafted to
reduce the liability of manufacturer or distributer if anything goes wrong. In light of the specific
characteristics e-contracts have acquired, the pressures such contracts have put on freedom of
contract, and the viability and proliferation of standard form of contracts in the cyberspace, the
present paper discusses the legal provisions applicable thereto in business-2-consumer e-
commerce model, especially from consumer’s perspective. The paper argues that the present
Indian law is inadequate to protect the rights and interests of consumers with respect to breach of
B-2-C electronic contracts.
I. INTRODUCTION
The digital age has paved numerous ways to make an ordinary day in an average
internet user‘s life more comfortable than ever. Today, with a few clicks consumers can order
electronic goods and receive them at their doorstep, book travel tickets, send gifts, order food
and much more. No longer there is a need to stand in queues at the bank for basic
transactions. However, with every new click, the consumer, or better referred hereto as the ‗e-
consumer,‘ is binding himself to a set of terms and conditions, mostly, unknowingly.
Electronic contracts or e-contracts are generally standard forms of contracts that have non-
negotiable standardised terms formulated by one party, often the manufacturer/distributor, or
service provider, giving, in most cases, limited to no choice to the consumer to negotiate any
contract term.
The present paper involves an analysis of the legal issues involved in formation of
electronic contracts, including remedies for their breach. It tests the possible scope of
applicability of traditional principles of Indian Contract Law as prevalent in the physical
world, to electronic contracts. The paper begins by a brief study of formation of a contract
under the Indian Contract Act, 1872. It proceeds to analyse the competence of the Indian
Contract Law in dealing with electronic contracts highlighting the pitfalls. This is followed
by a discussion of the provisions of the Information Technology Act, 2000 as applicable to
electronic contracts. Next, the paper discusses practical issues that consumers face if e-
contracts are not honoured as promised. Then the paper presents remedies available to an e-
consumer under the Indian Contract Act.2 Lastly, the analysis concludes that the current
Indian Law is not fully equipped to appropriately respond to the problems of e-consumers.
1 Assistant Professor ,Symbiosis Law School, Noida,Constituent of Symbiosis International University.
© Universal Multidisciplinary Research Institute Pvt Ltd

The paper proposes to answer questions relating to liability of service provider/

distributor/ manufacturer under the Indian Contract Laws; and also the remedies available
with the ordinary consumer in cases of breach of e-contracts in the business-2-consumer3
model of e-commerce, in the form of non-delivery of goods, incomplete delivery of goods,
one-sided rescission of contract etc. under Indian laws and in the absence thereof, explores
the scope for introducing legislative changes.
II. ELECTRONIC CONTRACT AND ITS CONFLICT VIS-À-VIS INDIAN

CONTRACT LAW
A. FORMATION OF TRADITIONAL OFFLINE CONTRACT UNDER INDIAN LAW
Contract law in India is governed by the provisions of the Indian Contract Act, 18724.
However, the Act only provides a set of rules and regulations which govern formation and
performance of contract, including possible consequences of a breach, thereby giving the
parties to contract the freedom to choose specific terms and conditions that would govern
them in the performance of the contract including the specific consequences that may follow
in case of breach/non-performance.5 Thus, the rights and duties of parties in relation to object
sought to be achieved through contract, and terms of agreement are decided by the
contracting parties themselves. The court of law acts to enforce agreement, in case of non-
performance.6 The ICA consists of limiting factors subject to which contract may be entered
into, executed and breach enforced.7
The ICA lays down three basic and essential requirements of a valid contract: i) offer,
ii) acceptance of that offer, and iii) lawful consideration; other requirements being iv) free
consent of the parties, v) lawful object, vi) competence of the parties, and vii) agreement
being not expressly declared to be void under the ICA.8 As per § 2 (h) of the ICA, ―an
agreement enforceable by law is a contract‖. Further, all agreements are contracts 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 expressly declared to be void.9 Also, the parties to contract must
have the legal capacity to do so.10 There is no direct provision in the ICA requiring that an
offer or its acceptance should be made with an intention to create legal relations.11 The
1
The author has restricted herself to the already available literature on the issues/perspectives and analysed the
current law in its light. However, some case studies, as they have already been documented on the web, have
been included to support the analyses or present the factual problem and discuss the surrounding legal issues.
3
Hereinafter referred to as ‗B-2-C contracts‘.
4
Hereinafter referred to as ‗the ICA‘.
5
See ROHAS NAGPAL, ECOMMERCE – LEGAL ISSUES 72 (2008).
6
ROHAS NAGPAL, ECOMMERCE – LEGAL ISSUES 72 (2008).
7
Ibid.
8
Under the English law, however, the condition of intention of the parties to bind them legally is also an
essential requirement of a valid, enforceable contract; Rodney D. Ryder, CLA – BL Supp. (Mag.) 2000,
FORMATION OF A CONTRACT IN CYBERSPACE‖, 115.
9
The Indian Contract Act, 1872, § 10.
10
This is provided for under the Indian Contract Act, 1872, § 11 as: ―Every person is competent to contract who
is of the age of majority according to the law to which he is subject, and who is of sound mind and is not
disqualified from contracting by any law to which he is subject.‖
11
AVTAR SINGH, LAW OF CONTRACT AND SPECIFIC RELIEF 13 (9th edn., 2005). Social relations may
also at times give rise to binding legal contract. For example, in Chandrakant Manilal Shah v. CIT, (1992) 1
SCC 76, the Supreme Court of India observed that a contract of any kind including that of partnership between
the undivided members of a Hindu family is possible.
intention to create legal relations is inferred from other essential elements of a formation of a
valid contract. 12
For each of the essential requirements of a valid contract, the ICA details out specifics
to be adhered to in that respect. For example, an offer as well as an acceptance is valid and
binding only if it is communicated to the person to whom it is made.13 Such communication
is complete when the offer/acceptance comes to the knowledge of the person to whom it is
made.14 Thus, if A, by a letter, proposes to sell a house to B at a certain price, the
communication of A‘s proposal shall be complete only when B receives the letter.15
Similarly, the communication of B‘s acceptance shall be complete as against A when the
letter of acceptance by B is posted so as to be out of his power, and leading to a legally
binding contract between A and B.16 This rule known as the postal rule, is well established
and was developed in the early 19th century as representing the fairest method of allocating
the risk and consequences of letters going astray in the post.17 It may however, be noted that
knowledge of the terms of the offer is essential for a valid and binding acceptance. 18 Further
rules of acceptance provide that acceptance must be absolute and unqualified and must be
expressed in some usual and reasonable form.19 However, an acceptance may be given by
performing the conditions of the offer.20
Consideration is another essential requirement for the formation of a valid contract.21
Under the Indian Law, an agreement made without a consideration is void.22 Further,
consideration for any promise/agreement is required under the Act to be lawful.23 That is,
such consideration must not be forbidden by law, or involve or imply injury to the person or
property of another, or the Court regards it as immoral or opposed to public policy, or is
12
However, in English law it is settled principle that ―to create a contract there must be a common intention of
the parties to enter into legal obligations,‖ ibid.
13
14
The Indian Contract Act, 1872, § 4. It provides: ―Communication when complete.- The communication of a
proposal is complete when it comes to the knowledge of the person to whom it is made.
The communication of an acceptance is complete,—
as against the proposer, when it is put in a course of transmission to him so as to be out of the power of the
acceptor;
as against the acceptor, when it comes to the knowledge of the proposer.
The communication of a revocation is complete,—
as against the person who makes it, when it is put into a course of transmission to the person to whom it is
made, so as to be out of the power of the person who makes it; as against the person to whom it is made, when it
comes to his knowledge.‖
15
The Indian Contract Act, 1872, Illustration (a) to § 4.
16
The Supreme Court as far back as in 1966 held in Bhagwandas Goverdhandas Kedia v. Girdhari Lal & Co.,
AIR 1966 SC 543, that it is the acceptance of the offer and intimation of that acceptance which results in a
contract. A mere making of an offer does not form part of the cause of action for damages for breach of contract
which has resulted from the acceptance of the offer.
17
RYDER, supra note 7, 118.
18
Thus where a person sent his servant in search of his missing boy and subsequently offered a reward to
anyone who would find the boy, the servant, on finding the boy, could not claim the reward, as his search for the
boy could not be regarded as a consideration for the promise of reward; Lalman Shukla v. Gauri Datt, (1913) 11
ALJ 489.
19
20
Carlill vs. Carbolic Smoke Ball Co., (1893) 1 QBD 256.
21
The Indian Contract Act, 1872, § 2(d) defines ‗consideration‘ as, ―When, at the desire of the promisor, the
promise or any other person has done or abstained from doing, or does or abstain from doing, or promises to do
or abstain from doing, something, such act or abstinence or promise is called a consideration for the promise‖.
22
23
fraudulent, or is of such a nature that if permitted, it would defeat the provisions of any law. 24
If a consideration or any part of it is unlawful, the agreement is void.25 Thus, if A promises to
give an iPod to B without any consideration, it is a void agreement. If however, A, for natural
love and affection, promises to give her daughter, B, Rs.1,000, and puts her promise to B into
writing and registers it, this is a contract.26
Consideration under the Indian law needs to be of some value, however, it may not be
adequate.27 It must be however, real and not illusory even if it is not adequate; it must carry
some value in the eyes of law.28 Normally, the doctrine of freedom of contract permits the
parties to an agreement the freedom to bargain as they wish but in extreme cases, a court may
look into the amount or value (the adequacy) of the consideration.29
In an online medium, the transaction is so fast that it may be difficult to pinpoint as to
exactly when and where the contract is concluded. Further, the questions as to whether an
offer was communicated to the buyer and whether the consumer‘s acceptance was ―absolute
and unqualified‖ remain unanswered. Though conduct under ICA constitutes a valid
acceptance,30 yet, an inadvertent user may enter into an online contract by mistake, or may
not be aware of the complete terms and conditions of the contract. It may also be a case of
acceptance without reading the terms of agreement.31
B. OFFER AND ITS ACCEPTANCE IN ONLINE MEDIUM
The digital medium, it may be seen, presents a dichotomy of offer and invitation to
treat/offer. Therein, it is not easy to distinguish between offer and invitation to offer. A
statement may actually be an invitation to treat although it contains the word offer. 32 It may
thus, depend on a case to case basis. Some authors maintain that statements on a website need
to be judged by the language used and usage of trade. A statement on a website may be
treated as an offer where the person making it intends to be bound as soon as the offeree
accepts its terms but where it can be read from the language used in the statement that the
seller is simply making known to others the terms on which he is willing to negotiate, he
cannot be said to have made an offer but only an invitation to treat.33 Notwithstanding the
difficulty of distinguishing between an offer and an invitation to treat, there is a commercial
expediency to maintain this dichotomy. Otherwise, the shopkeeper might be exposed to many
24
Ibid.
25
26
The Indian Contract Act, 1872, § 25(1) read with illustration (b) to § 25.
27
Chidambara v. P.S. Renga, AIR 1965 SC 193.
28
This was held by the Madras High Court in Kulasekaraperumal v. Pathakutty, AIR 1961 Mad 405.
29
Warren H. Hyman, Adequacy of Consideration and the Unconscionable Contract, 86 Com. L.J. 500 (1981).
30
The Indian Contract Act, 1872, § 3. It provides: Communication, acceptance and revocation of proposals.-
The communication of proposals, the acceptance of proposals, and the revocation of proposals and acceptance,
respectively, are deemed to be made by any act or omission of the party proposing, accepting or revoking, by
which he intends to communicated such proposal, acceptance or revocation, or which has the effect of
communicating it.
31
Parties to an electronic contract appear to conduct themselves and expect others to conduct themselves in the
same manner as they have under traditional rules. However, in an electronic medium, this approach may not
always fit the bill; see Donnie L. Kidd, Jr. and William H. Daughtrey, Jr., Adapting Contract Law to
Accommodate Electronic Contracts: Overview and Suggestions, 26 Rutgers Computer & Tech. L.J. 215 (2000)
(for a discussion on adapting law of contract in the US to e-contracts).
32
FAROOQ AHMAD, CYBER LAW IN INDIA (LAW ON INTERNET) 217 (2011).
33
Id., 218.
actions of damages if more customers purported to accept than his stock could satisfy. 34
Courts in India are inclined to maintain this distinction.35
In an online medium, however, this difference may not be quite certain. The prime
test to determine whether a statement is an offer or an invitation to treat is the intention of the
parties.36 However, there cannot be any rule of thumb applicable uniformly to all situations
since websites fuse the advertising and the selling which makes application of general
principles infeasible.37 Thus, intention of the offerer may be derived from the statement on
the website in as much as if it reflects that the offerer intends to be bound to comply upon
acceptance of the terms the statement is an offer.38
The ICA requires an acceptance to be a ‗mirror image‘ of the offer, that is, the
acceptance is to be only of the offer extended and is required to be absolute and unqualified.39
Additional conditions introduced by an acceptor result in a counter proposal. When a counter
proposal is accepted, a contract comes into existence and the terms of the contract are the
terms of the counter proposal.40 Thus, in case of standard contracts, which is the nature of
most B-2-C contracts, the consumer is not offered the choice to negotiate the terms and a
contract may be concluded as soon as the consumer hits ‗order‘ or ‗download‘.
In the physical medium, goods displayed in, say a shop, do not amount to an offer, but
to an invitation to an offer. In an online medium, however, a website ‗offering‘ goods on sale
is not inviting the general public to make an offer but offering to sell the displayed goods at
the price mentioned/quoted therein. The exposure of goods by a shopkeeper does not amount
to an offer to sell. It is only an invitation to the public/target audience/select few (in some
cases), to make an offer to buy the advertised or displayed product at the fixed price or a
bargained one. On picking the goods, it is an offer by the customer to buy, and sale is not
effected until the buyer‘s offer price is accepted by the shopkeeper. 41 However, in the online
medium, the exposure of goods constitutes an offer. By clicking ―buy‖ on an online portal, a
buyer enters into a valid enforceable contract with the website. Online ‗offers‘ may also be
said to be general offers or offers to the whole world. Though an offer may be made to the
whole world, a contract can arise only by acceptance of the offer by one particular
identifiable person. Therefore, simply put, an offer by an online seller/distributor on an e-
commerce portal will take shape of a legally valid and enforceable contract upon its
acceptance by the consumer.
E-contracts are generally in the form of a standard form of contract where the terms
are one-sided, with the consumer merely given an option to decide the place of delivery of
goods, the mode of payment etc. The earliest forms of standard contracts can be found in the
34
Farooq Ahmad, Challenges of Information Technology to Existing Legal Regime: Common Law Principles
No More Panacea, 46 (3) JILI 428-442 (2004).
35
Badri Prasad v. State of M.P., AIR 1970 SC 706; MC Pherna v. Appana, AIR 1950 SC 184.
36
Assafa Endeshaw, The Proper Law for Electronic Commerce, 7(1) Information & Communication
Technology Law 5 (1998).
37
AHMAD, supra note 31, 218.
38
It may however, be subject to stocks. A statement reflecting willingness to negotiate on the other hand is an
invitation to treat.
39
40
This is called the last short doctrine which means that where conflicting communications are exchanged, each
is a counter offer, so that if a contract results at all, it must be on the terms of the final document in the series
leading to the conclusion of the contract; Farooq Ahmad Mir, Mercantile Law in ANNUAL SURVEY OF
INDIAN LAW, 625, 626 (The Indian Law Institutte, 2009).
41
Pharmaceutical Society of Great Britain v. Boots Cash Chemists (Southern) Ltd., (1952) 2 QB 795.
railway corporations. The railway tickets purchased by the passengers contained the terms
and conditions written on the back of the ticket.42
Standard terms in traditional mercantile transactions were quite efficient since they
did not present the consumer with unfair terms. They were negotiated over a period of time
and had acquired a standard character only after they found general acceptance among the
parties involved, thereby laying down the path for all future transactions.43 Nowadays, in
most cases, SFOCs tend to bend in the direction of the drafting party, generally being the
multinational giant. The consumer‘s interests may therefore, be thrown away by giving a set
of terms that limit the liability of the drafter/seller/service-provider and place the consumer in
an extremely unfair position.
C. FORMATION OF CONTRACT
The ICA under § 4 incorporates the postal rule of communication however, with a
modification to the effect that an offer is complete only when it comes to the knowledge of
the offeree.44 In case of e-contracts the offer and acceptance may be instantaneous and it may
not be the case few times. A simple click to order a mobile phone from an online shopping
portal/website leads to a complex electronic contract and an ordinary consumer may lack the
capacity to understand the issues arising out of the same. For instance, in e-mail contracts, the
recipient may not be aware of the acceptance till he checks his e-mail. 45 Here, since the
acceptance is out of the hands of the offeree so as to be binding on him, as per the ICA, such
acceptance is complete against the offeror and a valid contract has already arisen irrespective
of whether the offeror has checked his messages or not. On the other hand, in case of website
contracts, offer and its acceptance may be simultaneous and instant resulting in a binding
contract upon a mere ‗click‘ even when such click may be due to server error or by mistake
on part of the consumer. Thus, both situations may be problematic for consumers and also the
sellers/distributors.
42
These terms were standard in the sense that they were same for every passenger travelling by that train in the
same class and were absolutely non-negotiable. The tickets for the waiting room on the platforms were also
similar, i.e., with standard terms. In the words of the English judge, Lord Diplock, one kind of standard form of
contract is of ‗very ancient origin‘. This kind is that,
―which set out the terms on which mercantile transactions of common occurrence are to be carried
out. Examples are bills of lading, charterparties, policies of insurance, contracts of sale in the
commodity markets. The standard clauses in these contracts have been settled over the years by
negotiation by representatives of the commercial interests involved and have been widely adopted
because experience has shown that they facilitate the conduct of trade.;
as quoted in M.P. FURMSTON, CHESHIRE, FIFOOT AND FURMSTON‘S LAW OF CONTRACT 25 (1st
Indian edn., 2007).
43
SFOCs had certain advantages, for example, they remarkably reduced transaction costs, especially in case of
mass production and distribution, since for every transaction a new set of terms need not be negotiated. SFOCs
further had the advantage of being uniform, thus ensuring uniform application.
44
Thus, in Lalman Shukla v. Gauri Dutt, (1913) MLJ 489, the court refused to grant the reward to the servant
upon finding the missing boy since the servant‘s actions were in line of following the orders of his master and
he was unaware of the offer of the reward. In absence of communication of the offer to the servant, there existed
no contract. For instantaneous means of communication like the telex in Entores v. Miles Far East Corporation
Ltd., 1955 (2) QB 327, ‗receipt rule‘ was made applicable and it was held that in such cases the contract came
into existence where the acceptance was received. This rule was followed by India in Bhagwandas
Goverdhandas Kedia v. Parshottamdas & Co., (1966) 1 SCR 656, where the Supreme Court confined the
operation of § 4 to the postal communications, and laid down that in cases of instantaneous means of
communication, the contract is concluded where the acceptance is received.
45
There are more than one ways to form an online contract, like e-mail, filling out a website form, or online
agreements, etc.; supra note 5, p. 73.
E-contracts in the form of old shrink-wrap contracts46, or the new click-wrap

contracts47 derive an express legal validity and enforceability in the UNCITRAL Model Law
on Electronic Commerce (1996) under § 11. The issue of shrink-wrap and click-wrap
contracts first arose in the United States. The US Courts have faced the issue of clickwrap
contracts in two ways. In ProCD Inc. v. Zeidenberg,48 it was held that an enforceable contract
emerged as soon as the product was used after the consumer had had the opportunity to read
the terms.49 However, in Klocek v. Gateway, Inc.,50 the decision was that unless sufficient
evidence of notice as well as that of acceptance of standard terms was presented, the terms
were not binding on the parties. These decisions are divided on the issue of consent in the
manner it is obtained. In ProCD v. Zeidenberg, the Court of Appeals, 7th Circuit upheld the
shrink-wrap contracts/licences holding that once the software was opened for use, the user
was given the option to either accept the terms of use or reject the same. Thus, it was a valid
contract. It may be said that the rationale for enforcing click-wraps may be stronger than that
for enforcing shrink-wraps, since the concern over unfair adhesion contract terms
substantially reduces in the former as it requires an affirmative assent unlike shrink-wraps
where assent to specific terms is required.
The law of contract is not averse to the present changes in the formation of
contracts.51 Today contracts with banks, contracts with multinational companies, corporate
and government contracts, contracts for fast-moving consumer goods, are all carried out in
this fashion with much ease. It may be said that presently the Law of Contract is hitching
over such kind of contracts generally.52 It would be difficult for large organizations to draw
out a separate contract with every individual. They, therefore, use pre-determined forms of
contract containing standardised terms. It may however, be noted that presently, there are no
case law in India in respect of click-wrap, shrink-wrap or browse-wrap agreements.53
However, they are likely to be upheld if they fulfil the essential ingredients of a traditional
contract.
D. EFFECT OF FLAW IN CONSENT
Online transactions are contracts attracting principle of uberrimae faith (i.e. good
faith) in which the contracting parties are not dealing at arm‘s length but one party is entirely
46
Shrink wrap contracts are license agreements or other terms and conditions which can only be read and
accepted by the consumer after opening the product; see ROHAS NAGPAL, IPR & CYBERSPACE – INDIAN
PERSPECTIVE (2008). The term ‗shrink wrap‘ describes the shrink wrap plastic wrapping used to coat
software boxes, though these contracts are not limited to the software industry.
47
A click-wrap agreement is mostly found as part of the installation process of software packages which may be
either downloaded or used over the internet. It is also called a ‗click through‘ agreement or click-wrap license.
The name ‗click-wrap‘ comes from the use of ‗shrink-wrap contracts‘ in boxed software purchases where the
term ‗shrink wrap‘ refers to the shrink-wrap plastic wrapping used to coat software boxes, because such
packaging makes it impossible for the buyer to have read the contract before completing the purchase.
48
86 F.3d 1447.
49
See generally Robert A. Hillman & Jeffrey J. Rachlinski, Standard-Form Contracting in the Electronic Age,
available at http://ssrn.com/abstract=287819 (Last visited on June 22, 2016).
50
104 F. Supp. 2d 1332.
51
These new kinds of standard contracts are generally computerized or pre-decided, thus, enabling the parties to
conclude them within minutes and bind themselves legally to each of the standard terms.
52
Gokulesh Sharma, Crisis of Standard Form of Contracts, available at
http://drgokuleshsharma.com/pdf/STANDARD%20FORM%20CONTRACTS.pdf (Last visited on June 18,
2016).
53
KARNIKA SETH, COMPUTERS, INTERNET AND NEW TECHNOLOGY LAWS 65 (Updated edn.,
2013).
dependent upon the information supplied by the other party on the basis of which alone the
willingness to contract is expressed54 (by the consumer). The chances of a flawed consent due
to misrepresentation, false and misleading information in the form of advertisements,
ingenuine products, internal defects in the products etc. are increased manifold in case of e-
transactions. Such flawed consent may be a result of mistake or misrepresentation, or in some
cases, fraud, and there being no meeting of minds, and thus, the contract, should be allowed
to be avoided under the ICA.
The difficulty in online transactions is that the competence of one party entering into
the contract is almost unknown to the other party.55 In online contracts, chances of
misrepresentation are high. They may be with respect to goods or with respect to identity of
parties.56 Often in online trading, the identity of parties is never certain. An online contract
concluded under the mistake of identity should be void. However, a mistake as to identity is
not addressed under the ICA or under the Consumer Protection Act, 1986.57 Further, the
attribution and deeming clauses of the Information Technology Act, 2000 call for further
confusion in the matter. Although the Consumer Protection Act, 1986 caters to the welfare of
the ordinary consumer, in cases of conflict, its provisions may not come in much use for the
consumers, in case of e-contracts, since the IT Act has an overriding effect.58
E. JURISDICTION
The substantive provisions of the ICA and the Code of Civil Procedure, 190859 lay
down the rules to determine the jurisdiction and choice of law questions. Once the place of
formation is ascertained the question of jurisdiction is simple to answer, however, the parties
may still have the freedom to choose jurisdiction, as well the law that shall govern their
contract. It may however, be unworkable if an innocent consumer is required to sue for his
claims in a foreign jurisdiction and in accordance with foreign law merely because the
website owner‘s place of business is situated outside India. With the CPC providing only for
two possible places of jurisdictions to institute a claim60, and the ICA for only the place of
formation of contract, the average Indian consumer is most likely not to sue once wronged by
any website in case of an electronic contract.
III. E-CONTRACT VIS-À-VIS THE INFORMATION TECHNOLOGY ACT,

2000
54
SURINDER KAUR VERMA AND RAMAN MITTAL, LEGAL DIMENSIONS OF CYBERSPACE 81
(2004).
55
Id., 78.
56
Problems relating to electronic B-2-C contracts as faced by e-consumers have been discussed in Part IV of
this paper.
57
Misrepresentation under § 18 of the Indian Contract Act, 1872, deals with misrepresentation with respect to
information supplied by the person making it.
58
The Information Technology Act, 2000, § 81 provides: The provisions of this Act shall have effect
notwithstanding anything consistent therewith contained in any other law for the time being in force.
59
Hereinafter referred to as ‗the CPC‘.
60
The Code of Civil Procedure, 1908, § 19 provides as: ―Where a suit is for compensation for wrong done to the
person or to movable property, if the wrong was done within the local limits of the jurisdiction of one Court and
the defendant resides, or carries on business, or personally works for gain, within the local limits of the
jurisdiction of another Court, the suit may be instituted at the option of the plaintiff in either of the said Courts.‖
One of the objectives of the Information Technology Act, 200061 when it was enacted
in 2000 was to legalize e-commerce.62 This objective is reiterated in the objectives of the IT
(Amendment) Act, 2008.63 Surprisingly, there was no express provision in the original IT Act
validating contracts executed electronically.64 This lapse was in spite of the fact that there
was an express provision to this effect in the UNCITRAL Model Law on Electronic
Commerce, 1996 which forms the basis of the IT Act as claimed in its statement of objects
and reasons. § 10-A was inserted by the 2008 amendment to the IT Act which provides that
where in a contract formation, the communication of proposals and acceptance thereof, the
revocation of proposals and acceptance, as the case may be, are expressed in electronic
form65 or by means of an electronic record, such contract shall not be deemed to be
unenforceable solely on the ground that such electronic form or means was used for that
purpose. The effect of this provision is that electronic contracts are legally valid contracts.
However, the amendment falls short of explaining the principles of online contract formation.
Thus, the courts may be required to fill in the gaps that may remain even after superimposing
the principles of Indian Contract Law (including common law principles of contract) on
electronic contracts.
A. FORMATION OF AN E-CONTRACT
Every e-record66 has an originator. Electronic record is attributed to the originator if it
is sent by the originator himself or by a person duly authorised by the originator or by an
information system programmed by the originator to send a message automatically. 67 Thus, if
‗A‘ uses her yahoo mail account to send an email to ‗B‘, here, ‗A‘ is the originator, while
yahoomail.com is merely an intermediary. The said email will thus, be attributed to ‗A‘, and
not to the email portal. Such rules of attribution may in some circumstances put the originator
at a huge risk especially in cases of time bound or urgent compliances. It is quite possible that
a party may be liable for a breach of contract which can be attributed to him technically but
which was concluded without his knowledge or authority.68 Many of these situations would
arise without any negligence or carelessness on either party‘s part.69
The rule of attribution incorporated in the IT Act is rigid and is bound to cause
inconvenience in many situations such as where an addressee knew or had reason to know
that the message received by him is not that of the originator or where the originator has sent
notice to the addressee before acting upon the message, that the message received by him is
not his, or where error is apparent on the face of the record. Though the principle of
61
Hereinafter referred to as ‗the IT Act‘.
62
FAROOQ AHMAD, CYBER LAW IN INDIA (LAW ON INTERNET) 215 (2011).
63
Farooq A. Mir & M. Tariq Banday, Emerging Legal Issues of E-Commerce 2 (Sprouts: Working Papers on
Information Systems, 10(131), 2010), available at https://www.researchgate.net/publication/227859135 (Last
visited on June 21, 2016).
64
Ibid.
65
The Information Technology Act, 2000, § 2(1)(r) defines ‗electronic form‘ as ―electronic form, with reference
to information, means any information generated, sent, received or stored in media, magnetic, optical, computer
memory, micro film, computer generated micro fiche or similar device‖.
66
E-record or electronic record is defined in the Information Technology Act, 2000, § 2(1)(t) as ‗data, record or
data generated, image or sound stored, received or sent in an electronic form or micro film or computer
generated micro fiche‘.
67
As provided for in the Information Technology Act, 2000, § 11. The provisions of § 11 of the IT Act reflect
the provisions of Article 11(1) of the UNCITRAL Model Law on E-commerce which recognizes that the parties
may convey offer and acceptance through data message.
68
69
Ibid.
attribution has been borrowed from the UNCITRAL Model Law on E-commerce, however,
the mitigating factors incorporated in the Model Law which make attribution principles
inapplicable in certain circumstances. The Model Law has ‗assuming clause‘ that entitles a
person to assume that a data message is that of the originator where: (a) the addressee applied
properly authentication procedure previously agreed to by the originator70, (b) the data
message resulted from the actions of a person who by virtue of its relationship with the
originator had access to the originator‘s authentication procedures.71 However, the addressee
is entitled to act on this assumption only up to the point it received notice from the originator
that the data message was not that of the originator, or up to the point when it knew or should
have known, had it exercised reasonable care or used any agreed procedure, that the data was
not that of the originator.72 Furthermore, where data message is that of the originator, or the
addressee is entitled to act on that assumption, then, as between the originator and the
addressee, the addressee is entitled to regard the data message as received as being what the
originator intended to send, and to act on that assumption.73 The addressee is not so entitled
when it knew or should have known, had it exercised reasonable care or used any agreed
procedure, that the transmission resulted in any error in the data message as received.74
Once an offer or acceptance in the form of an electronic record has been sent, the next
question is of its receipt considering the peculiar nature of electronic communications.
Further, the ICA too mandates communication of an offer and an acceptance for it to be valid
and binding. Such communication issue is resolved by § 12 of the IT Act, which elucidates
the receipt rule and mandates acknowledgement of receipt of each and every message. It
provides that when the originator has not specified that an acknowledgement of receipt is
required in a particular format or method, an acknowledgement can be given through any
communication by the addressee ‗automated or otherwise‘ or by any conduct of the
addressee75 that reasonably indicates to the sender of the message that the electronic record
has been received. In case the originator mandatorily requires a receipt of acknowledgement
then unless such acknowledgement is received, the electronic record shall not be deemed to
be sent by the originator.76 Where the originator has not stipulated that the electronic record
shall be binding only on receipt of such acknowledgment, and the acknowledgment has not
been received by the originator within the time specified or agreed or, if no time has been
specified or agreed to within a reasonable time, then the originator may give notice to the
addressee stating that no acknowledgment has been received by him. The addressee may
further specify a reasonable time by which the acknowledgment must be received by him and
if no acknowledgment is received within the aforesaid time limit he may after giving notice
70
UNCITRAL Model Law on E-commerce (1996), Article 13(3)(a).
71
UNCITRAL Model Law on E-commerce (1996), Article 13(3)(b).
72
UNCITRAL Model Law on E-commerce (1996), Article 13(4).
73
See also Ulrich Magnus, Guide to Enactment of the UNCITRAL Model Law on Electronic Commerce (1996)
in GLOBAL TRADE LAW 10, 38 (2004).
74
This ‗attribution and assuming clause‘ approach of the Model Law has been adopted in many jurisdictions.
Singapore has even gone a step ahead by including § 13(3) in the Singapore Electronic Transactions Act, 1998
that provides that the principles of attribution or assumption shall not operate where in all the circumstances of
the case it is unconscionable for the addressee to regard the e-record as that of the originator or to act on that
assumption.
75
The Information Technology Act, 2000, § 2(1)(b) defines ‗addressee‘ as a person who is intended by the
originator to receive the electronic record but does not include any intermediary. Thus, in case an originator
sends an offer to sell his car for Rs.2,00,000/- mistakenly to an email address wrongly typed instead of the one
of originally intended person, the offer is not valid and hence, not binding on the originator.
76
The Information Technology Act, 2000, § 12(2).
to the addressee, treat the electronic record as though it has never been sent. 77 In case of an
acknowledgement vide an automated response if the auto response by ‗X‘ to ‗Y‘s‘ original
message contains the message of ‗Y‘ in addition to the auto response of ‗X‘, it is sufficient
acknowledgement of receipt of ‗Y‘s‘ message by ‗X‘.78
Next is the question of time and place of formation of an e-contract. According to §
13(1) of the IT Act, the dispatch of an electronic record occurs when it enters a computer
resource outside the control of the originator except as otherwise agreed to between the
originator and the addressee. If the addressee has provided a designated address to receive
electronic records, the receipt thereof will be inferred when the electronic record ‗enters the
designated computer resource‘.79 In case the e-record is sent to a computer resource that is
not the designated computer resource, the receipt of such e-record shall occur at the time
when such e-record is ‗retrieved by the addressee‘.80 And if the addressee has not designated
a computer resource along with specified timings, if any, receipt occurs when the electronic
record enters the computer resource of the addressee.81 These rules of time of dispatch may
be understood easily by way of an illustration: If a company claims that it can deliver music
CDs within 48 hours of the time of receipt of email placing order at the designated email
address of the company, the moment the customer ‗B‘s‘ email to the designated email
address of the company placing order of 10 music CDs reaches the server of the company, a
binding contract comes into being. However, if such order by ‗B‘ is placed at the company‘s
general email address which is not the designated one, the order of ‗B‘ shall be deemed to be
received only when it is read by a person of the company authorised to access that email
address. If the same company does not provide a designated email address for the purpose of
placing order, the time of receipt of the order of ‗X‘ shall be when ‗X‘s‘ email at the general
email address of the company reaches the company‘s server.
B. PLACE OF E-CONTRACT
According to § 13(3) of the IT Act, an electronic record is deemed to be dispatched at
the place where the originator has his place of business, and is deemed to be received at the
place where the addressee has his place of business except as otherwise agreed to between the
originator and the addressee.82 Thus, if amazon‘s server is located in the US, the e-message
sent by a consumer resident in Delhi placing an order of kitchenware on amazon.in, to be
delivered at his residence, from a train while it was running through Hyderabad, the order is
deemed to be dispatched at Delhi. Under the ICA, the place of formation of contract is the
place where acceptance is received, i.e. that place where communication of acceptance is
completed as against the proposer. Thus, in the instant example, the e-contract is formed at
Bangalore since the registered office of Amazon India is at Bangalore. However, as the CPC
offers the plaintiff an option to institute a claim for wrongs with respect to movable goods at
the place where wrong is done, which is the place of performance of contract, i.e. Delhi in the
77
The Information Technology Act, 2000, § 12(3).
78
KARNIKA SETH, COMPUTERS, INTERNET AND NEW TECHNOLOGY LAWS 75 (2013).
79
The Information Technology Act, 2000, § 13(2)(a)(i). A ‗computer resource‘ is defined under the Act as
‗computer, computer system, computer network, data, computer data base or software‘; § 2(1)(k) of the IT Act.
80
The Information Technology Act, 2000, § 13(2)(a)(ii).
81
The Information Technology Act, 2000, § 13(2)(b).
82
If the originator or the addressee has more than one place of business, its principal place of business is
considered to be the place of business. If the originator or the addressee does not have a place of business, his
usual place of residence is deemed to be the place of business. Here, ‗usual place of residence‘, in relation to a
body corporate, is the place where the body corporate is registered; see the Information Technology Act, 2000, §
13(5).
instant example, in case of non-delivery of kitchenware ordered, the consumer may rightfully
choose to sue Amazon India at Delhi. Here it is immaterial that the order was placed while
the consumer was in Hyderabad.83
Similarly, a consumer in case of e-contracts may also sue at the place where part of
cause of action arises.84 The difficulty as to assuming jurisdiction to try a case by reference to
place of cause of action with respect to e-contracts was discussed and resolved by the High
Court of Allahabad in P.R. Transport Agency (PRTA) v. Union of India & Ors.85 The Court
observed that in case of e-mail, the data (in this case acceptance of bid) can be transmitted
from anywhere by the e-mail account holder. It goes to the memory of a 'server' which may
be located anywhere and can be retrieved by the addressee account holder from anywhere in
the world. Therefore, there is no fixed point either of transmission or of receipt. 86 However,
by applying the principle contained in § 13(3) of the IT Act, the Court said that the
acceptance of the tender will be deemed to be received by PRTA at the places where PRTA
(i.e. the petitioner) had its place of business. The Court decided in favour of PRTA by
holding that the acceptance was received by PRTA at Chandauli / Varanasi, Uttar Pradesh,
and the contract was concluded by receipt of such acceptance, and since both these places are
within the local limits of the jurisdiction, hence a part of cause of action had arisen in Uttar
Pradesh and thus, the Court had territorial jurisdiction.87
Mere making of an offer however, would not constitute ‗cause of action‘. Hence, the
place where the offer is deemed to be made is irrelevant for the purposes of instituting a suit.
This was held by the Supreme Court of India in A.B.C. Laminant Pvt. Ltd. v. A.P. Agencies,
Salem.88 The Court laid down that making of an offer at a particular place does not form part
cause of action in a suit for damages for breach of contract.89 Information available on a
website may be offer or invitation to treat depending upon the intention conferred by the
statements therein. Considering that invitation to treat is much less than an actual offer, mere
access to a website shall thus, not give rise to any cause for action in respect of breach.
The opening words of § 13(1), (2) and (3) are ―save as otherwise agreed between the
originator and the addressee‖, indicating that parties are free to agree otherwise and agree to
different terms as to time, manner and place of dispatch of e-records and make themselves
binding to the same. Thus, similar to the ICA, the IT Act too recognises freedom to contract
83
See the Information Technology Act, 2000, § 13(4) which provides that the provisions of § 13(2) (that lays
down rules as to time of receipt of an e-record) shall apply notwithstanding that the place where the computer
resource is located may be different from the place where the electronic record is deemed to have been received
under § 13(3) (that lays down rules for place of dispatch and receipt of e-record).
84
The Code of Civil Procedure, 1908, § 20(c) gives this right to the plaintiff.
85
AIR 2006 All 23. Briefly, the facts of the case were: Bharat Coking Coal Ltd. (BCC) held an e-auction for
coal in different lots. Petitioner‘s bid was accepted for 4000 metric tons of coal. The acceptance letter was
issued vide e-mail to PRTA‘s e-mail address which email was received by the petitioner at Chandauli, Uttar
Pradesh. Acting upon this acceptance, PRTA deposited the full amount through a cheque in favour of BCC
which cheque was accepted and encashed by BCC. However, BCC did not deliver the coal to PRTA. Instead it
e-mailed PRTA saying that the sale as well as the e-auction in favour of PRTA stood cancelled ‗due to some
technical and unavoidable reasons‘. The reason for this cancellation was another bid for same coal that was
slightly higher than that of PRTA. This higher bid could not be considered earlier due to some flaw in the
computer or feeding of data. The respondent raised challenge to jurisdiction of the High Court of Allahabad on
the ground that no part of cause of action arose within Uttar Pradesh.
86
Ibid.
87
Ibid.
88
AIR 1989 SC 1239.
89
The consumer can also not institute a consumer complaint at the place where offer was made.
and lays down guiding principles for contract formation in case of vacuum or otherwise like
differences as to interpretation of terms of contract.
Most B-2-C electronic contracts are standard contracts. While offering goods for sale
on a website a disclaimer is generally out stating that the sale shall be subject to terms and
conditions. For example, flipkart.com endorses a separate section called ‗help‘ on its website
that incorporates all terms relating to payments, cancellation, returns, shipping etc. On
placing an order the website provides for some hyperlinks which direct the consumer to the
web-pages containing these terms. Though it is not specifically stated on the website, these
terms are part of the contract by reference. Thus, a consumer is bound by them. It is not
expected that every consumer shall read all these terms before placing the order, however, as
per the general international rules of practice, these terms can be upheld in a court of law if
they are surprising or inequitable.90 The IT Act does not contain any express provision
affording legal status to terms which are not in the main message but are only referred to in
that message.91 There was also no provision for the same in the original UNCITRAL Model
Law on E-Commerce. However, realizing the frequency with which hyperlinks were used for
incorporating terms by reference, UNCITRAL made an express provision in the Model Law
in 1998.92 Thus, Article 5 bis read as: ‗Information shall not be denied legal effect, validity or
enforceability solely on the grounds that it is not contained in the data message purporting to
give rise to such legal effect, but is merely referred to in that data message.‘ Owing to the
convenience that reference brings in e-contracts, incorporation by this manner can be given
recognition under the IT Act. However, the e-consumer must be facilitated by specific and
certain notice to such referred terms before the conclusion of electronic contract; i.e, before
the order is placed.
IV. ISSUES IN ELECTRONIC CONTRACTS FOR B-2-C MODEL

E-commerce is commerce based on bytes.93 Bussiness-2-Consumer Model or B-2-C
model of e-commerce is a popular model of commercial transaction of goods and services in
electronic format. It refers to a business platform involving a business entity and consumers.
It is a retail version of e-commerce- selling goods or services through Web based shops.94
In case of e-contracts in B-2-C model, a buyer is never given an option to propose his
conditions for the transaction. He has to accept the terms and conditions offered by the
seller/distributor/online shopping portal. Freedom to contract is limited to a large extent since
the buyer can only decide two things: place of delivery of goods and mode of payment.
However breach of an online contract equally affects the consumers, for example when
promised goods are not sold or when a consumer receives incomplete goods or does not
receive them at all.
Some instances of online breach include: the promise by flipkart.com to deliver a
specific model of an electronic item, and later when the increased price is announced by the
manufacturer, the online distributor/intermediary (flipkart) backing out from delivering the
90
Though the principle of ‗buyer beware‘ should be encouraged, yet no website or business entity should be
allowed under law to take unnecessary and unfair advantage of the unequal bargaining position.
91
92
This is a classic example where law has caught up with the changing business practices instead of vice versa.
93
SURINDER KAUR VERMA AND RAMAN MITTAL, LEGAL DIMENSIONS OF CYBERSPACE 51
(2004).
94
Id. at p.53.
ordered good citing reason of ―non-availability‖. Another example includes that of breach by
ferns and petals.com of having not delivered the same product that had been advertised on its
website.
The threshold issue of any discussion of contract law is freedom of contract, because
this issue defines the scope of the subject and marks the boundaries between public and
private law-making.95 It has, however, been argued that there is a fatal error in this simplistic
approach since electronic contracts do not always fit the traditional framework that structures
general contract law.96 Electronic contracts may never appear on a piece of paper, may
involve instantaneous transactions, may involve minimal or no negotiation or interaction, and
may involve no human interaction at all; in that they can be swift, inhuman affairs.97 Almost
all online interactions are governed by standard terms incorporated in standard form of
contracts.98 Examples also include contracts entered into by ordinary average users on e-
commerce portals, online social networking websites etc. It is usually the standard contract of
the party who is in a stronger bargaining position that governs the situation.99
A specific problem in respect of standard online contracts is that of incorporation of
additional terms that may or may not be by way of reference. Where the incorporation of
standard terms have been expressly agreed upon by the parties no problem arises, but quite
often the incorporation of the standard terms takes place by a mere reference in an oral
communication or written communication to the inclusion of such terms.100 Sometimes the
text of the standard terms will accompany the main agreement, for instance being printed on
the back of an order form, but quite often the contract merely contains an incorporation
clause without any accompanying text.101 The question then arises whether there has been a
valid incorporation or not.102
A. INSTANCES OF PROBLEMS OF CONSUMERS IN ELECTRONIC CONTRACTING
The traditional principles of contract law clearly specify as to who is incapacitated
from entering into a contract.103 The difficulty in online transaction is that the competence of
95
Avery Wiener Katz, Is Electronic Contracting Different? Contract Law in the Information Age, 2004,
available at https://law.utexas.edu/wp-content/uploads/sites/25/katz_is_electronic_contracting_different.pdf
(Last visited on June 20, 2016).
96
Donnie L. Kidd, Jr. and William H. Daughtrey, Jr., Adapting Contract Law to Accommodate Electronic
Contracts: Overview and Suggestions, 26 Rutgers Computer & Tech. L.J. 215 (2000).
97
Ibid.
98
Shmuel I. Becher and Tal Z. Zarsky, E-Contract Doctrine 2.0: Standard Form Contracting in the Age of
Online User Participation, 14 Mich. Telecomm. Tech. L. Rev. 303 (2008), available at
http://archive.nyu.edu/bitstream/2451/28033/3/location_reviews2.pdf.txt (Last visited on June 18, 2016).
99
S. Eiselen, The Requirements for the Inclusions of Standard Terms in International Sales Contracts, 14(1)
PER/PELJ 2 (2011).
100
This is especially the case in international sales contracts; see CISG-AC Opinion No. 13, Inclusion of
Standard Terms under the CISG (January 20, 2013).
101
Ibid.
102
Sonja A. Kruisinga, Incorporation of Standard Terms under the CISG and Electronic Communication in
THE 2ND ANNUAL MAA SCHLECHTRIEM CISG CONFERENCE 69 (2011), available at
http://dspace.library.uu.nl/handle/1874/241956 (Last visited on June 19, 2016).
103
As discussed in Part II this paper.
one party entering into the contract is almost unknown to the other party.104 Some instances
of problems faced by the consumers in India over contracts entered online105 are as under106:
1. The online e-commerce portal flipkart.com accepted the orders, and then
cancelled them after an extended period of waiting citing the reason as
―product not in stock‖ despite the website still flashing the product as
available.107 The complainant continues: ―In one particular case, they
cancelled a friend‘s order for the Canon 85mm f/1.8 lens because he placed it
one day before the infamous 30% price hike in Canon lenses. Flipkart
promptly cancelled his order (because the difference between the old and new
price was Rs. 8,000) and told him the lens was out of stock, while their
website continued to advertise the lens as available, at the new price. It was
evident they did not want to honour his order, despite it being placed in timely
fashion before the price hike.‖108
2. In another instance, the author had ordered a ‗rakhsha bandhan set‘ from
fernsandpetals.com. The website clearly and specifically with pictures
mentioned the items that were included in the set. The main attraction was a
traditional storage box that came along with the rakhi. The payment was made
online before the delivery of the product as the website did not offer ‗cash on
delivery‘ option of payment. The received product was non-conforming to the
promised items as the traditional box was missing. The author wrote to the
website and was promised a replacement soon. The product was delivered
again without any further payment and there was no request for return of the
first delivered product. To the surprise of the author, the new product was
again missing the traditional box, and upon writing again, the website emailed
the screenshot showing ‗in transit‘ delivery status for the first product. By this
time, the festival for which the product had been ordered was well over!
3. In yet another instance, websites upon cancelling the order provide the option
to the consumer for keeping the already paid amount in the ‗wallet‘ of the
website, i.e., it is kept as credit in the account of the company from the
consumer. The money is not refunded and the consumer is forced to buy from
the same website again.
V. REMEDIES TO BREACH OF CONTRACT IN INDIAN LAW

The ultimate intention of any contract is its performance as agreed between the
parties. However, non-performance or incomplete performance of a contract results in its
breach. Chapter VI of the ICA, i.e. § 73 to 75, sets down consequences for breach of
104
VERMA & MITTAL, supra note 92, 78.
105
These instances were documented over the web forums of discussion and in the feedback sections of some
websites and were taken notice by the author during research.
106
The websites and instances shared herein are merely for academic purposes. The author does not in any way
intend to harm the reputation of any website or its owner(s) and distributors.
107
Swapnil Mathur, Flipkart screwed me over: Here’s how they could stick it to you as well, available at
http://www.thinkdigit.com/Internet/Flipkart-screwed-me-over-Heres-how-they_17224.html (Last visited on
June 20, 2016).
108
Ibid.
contract.109 Liquidated damages may also be awarded to the other party from the party that
infringed the contract in case the contract provides for a specific amount to be paid upon its
breach.110 The benefit of § 74 is that the party suffering breach is not required to prove any
loss or damage to him as a result of the breach of contract. It is enough if violation of contract
has occurred and the contract specifically provided for a penalty thereto. 111 It is important to
differentiate between the § 73 and 74 to ascertain liability of the party committing breach.
Under § 73, the party suffering loss needs to establish by way of proof that it has suffered
loss or damages as a natural and probable result of breach of contract by the other party and
upon doing so, the court may grant a ‗reasonable compensation‘ to the party that suffered
such loss. The damages, however, cannot include compensation for any remote and indirect
loss or damages sustained by reason of the breach.112 In case of liquidated damages, § 74 of
the ICA comes into play and the only fact required to be established by the party suffering
breach is that the contract provided for a penalty in respect of its violation. The court may
thus, grant compensation as deemed reasonable to it, however, such compensation cannot
exceed the amount specified as penalty in the contract. Further, a party rightfully rescinding a
contract is entitled to compensation suffered at his end from the non-fulfillment of the
contract.113
The law in India with respect to liquidated damages if provided for in the contract
while foreseeing a breach stands clarified by the Supreme Court of India in Oil & Natural
Gas Corporation Ltd. v. SAW Pipes Ltd.114 The Court ruled that when the terms of the
contract were clear in expressing the intention of the parties, such terms were to be given
effect to.115 The Court further held that in case of liquidated damages provided within the
contract, there may not be any necessity of leading evidence for proving damages, unless the
Court arrives at the conclusion that no loss is likely to occur because of such breach.116
109
The Indian Contract Act, 1872, § 73 provides: ―Compensation of loss or damage caused by breach of
contract: When a contract has been broken, the party who suffers by such breach is entitled to receive, form the
party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally
arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to
be likely to result from the breach of it. Such compensation is not to be given for any remote and indirect loss of
damage sustained by reason of the breach.‖
110
Thus, the Indian Contract Act, 1872, § 74 provides as: ―Compensation of breach of contract where penalty
stipulated for: When a contract has been broken, if a sum is named in the contract as the amount to be paid in
case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of
the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive
from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as
the case may be, the penalty stipulated for.‖
111
For an example: If ‗A‘ contracts with ‗B‘ that, if ‗A‘ practises as a surgeon within Calcutta, he will pay ‗B‘
Rs. 5,000. ‗A‘ practises as a surgeon in Calcutta. ‗B‘ is entitled to such compensation; not exceeding Rs. 5,000
as the court considers reasonable; Indian Contract Act, 1872, Illustration (b) to § 74.
112
Hadley & Anr. v. Baxendale & Ors., (1854) EWHC Exch J70. Also see Karsandas H. Thacker v. Saran
Engg. Co. Ltd., AIR 1965 SC 1981, where the Supreme Court held that damages under a contract are to be
awarded as compensation for any loss or damage arising naturally in the usual course of things from the breach
of contract.
113
114
(2003) 5 SCC 705.
115
In this case, the parties incorporated a clause in their agreement that liquidated damages in case of delay shall
not be by way of a penalty but it would be an ―agreed, genuine pre-estimate of damages‖ in case of failure of
delivery by the contractor within the period fixed; T. Ramappa, ‘Proof of Loss or Damage’ under Section 74 of
the Contract Act, 1872, 39(8) Chartered Secretary 1066-69 ( 2009).
116
Under the UNIDROIT Principles of International Commercial Contracts, 2010 any non-performance gives
the aggrieved party a right to damages either exclusively or in conjunction with any other remedies (Article
For the purpose of enforcing individual civil rights, the remedy of specific relief can
be claimed.117 Though the Specific Relief Act, 1963118 provides for principles guiding the
relief of specific performance of a contract, this remedy is largely dependent on the discretion
of the courts. Courts are not bound to grant such relief merely because it is lawful to do so.119
However, the discretion of the court is not to be arbitrary but sound and reasonable, guided
by judicial principles and capable of correction by a court of appeal.120
§ 10 provides for cases in which specific performance of contract may be enforceable
in the discretion of the court. These include cases when, (a) there exists no standard for
ascertaining actual damage caused by the non-performance of the act agreed to be done, (b)
the act agreed to be done is such that compensation in money for its non-performance would
not afford adequate relief.121 On the other hand, a contract for the non-performance of which
compensation is adequate relief is not enforceable specifically. Other similar situations are
where contract runs into minor details, or where performance of a contract involves
performance of a continuous duty which the court cannot supervise.122 An important remedy
available under the SR Act is specific performance despite a sum fixed in the contract to be
paid in the event of breach.123 However, this remedy is available only if the court, having
regard to the terms of the contract and other attending circumstances, is satisfied that the sum
was named in the contract only for the purpose of securing performance of the contract and
not for the purpose of giving to the party in default an option of paying money in lieu of
specific performance.124
VI. CONCLUSION
Electronic contracts simplify daily transactions for an e-consumer to a large extent.
However, they also give rise to issues of free consent and freedom to contract. Caution on
part of the consumer cannot be the only remedy for problems faced by e-consumer. Further,
7.4.1). The aggrieved party under these Principles is also entitled to full compensation for harm sustained as a
result of the non-performance. Such harm includes both any loss which it suffered and any gain of which it was
deprived, taking into account any gain to the aggrieved party resulting from its avoidance of cost or harm; it
may even be non-pecuniary and includes, for instance, physical suffering or emotional distress (Article 7.4.2).
The aggrieved party is however, in order for it to be entitled to compensation for harm including future harm,
required to establish such harm with a reasonable degree of certainty (Article 7.4.3). Further, compensation may
also be due for the loss of a chance in proportion to the probability of its occurrence. Also, where the amount of
damages cannot be established with a sufficient degree of certainty, the assessment is at the discretion of the
court.
117
The Specific Relief Act, 1963, § 4.
118
Hereinafter called the SR Act.
119
See Supreme Court ruling in Ramesh Chand (Dead) through L.Rs. & another v. Asruddin (Dead) through
LRs & another, Civil Appeal No. 8427 of 2014 (2015).
120
The Specific Relief Act, § 20(1); ibid.
121
In cases of breach of a contract to transfer movable property it is presumed, unless and until the contrary is
proved, that such breach can be so relieved except in cases where (a) the property is not an ordinary article of
commerce, or is of special value or interest to the plaintiff, or consists of goods which are not easily obtainable
in the market, or (b) the property is held by the defendant as the agent or trustee of the plaintiff; Explanation (ii)
to The Specific Relief Act, § 10.
122
The Specific Relief Act, § 14(1). Contracts giving unfair advantage to the plaintiff, or its performance causes
previously unforeseeable hardship to the defendant but not to the plaintiff, or circumstances render the
enforcement of specific performance of the contract inequitable are cases where no decree of specific
performance can be granted; the Specific Relief Act, § 20(2).
123
The Specific Relief Act, § 23.
124
The Specific Relief Act, § 23(1).
remedies available under the Indian Contract Act may not be feasible for easy solutions. E-
consumers therefore, require creative or at least easily accessible solutions in limited time-
span for daily dishonoured e-contracts. The liability, upon breach of e-contract, of the e-
commerce portals needs to be appropriately located within the legal framework for a
smoother, convenient and better B-2-C model of electronic commerce.

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International Journal of Law and Legal Jurisprudence Studies :ISSN:2348-8212:Volume 3 Issue 4 43

ANALYSIS OF THE LEGAL ISSUES INVOLVED IN

1 Assistant Professor ,Symbiosis Law School, Noida,Constituent of Symbiosis International University.

© Universal Multidisciplinary Research Institute Pvt Ltd

The paper proposes to answer questions relating to liability of service provider/

II. ELECTRONIC CONTRACT AND ITS CONFLICT VIS-À-VIS INDIAN

E-contracts in the form of old shrink-wrap contracts46, or the new click-wrap

III. E-CONTRACT VIS-À-VIS THE INFORMATION TECHNOLOGY ACT,

IV. ISSUES IN ELECTRONIC CONTRACTS FOR B-2-C MODEL

V. REMEDIES TO BREACH OF CONTRACT IN INDIAN LAW

© Universal Multidisciplinary Research Institute Pvt Ltd

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