CYBER LAWS

NALSAR PROXIMATE EDUCATION

NALSAR UNIVERSITY OF LAW, HYDERABAD

I N DI AN C ON TR AC T AC T A N D I TS
A PP LI C A BI LI TY OF IN TER N ET
TR AN S A C TI ON S -A C R I TI C A L R EV I EW

M ODULE- I

Submitted by

©A R U N TEJA DOPPALAPUDI

CLH15_09
INDIAN CONTRACT ACT AND ITS APPLICABILITY INTERNET 2
TRANSACTIONS

INTRODUCTION

SL. PAGE
TABLE OF CONTENTS
NO NO

1 Introduction

2 Objective

3 Methodology

Important concepts under Indian Contract

4
Act 1872

Overview of the Information Technology

5
Act 2000

Validity of Authentication and the Digital

6
signatures in the Contracts

Jurisdiction and place of suing for Breach

7
of Internet contracts
8 Conclusion
9
Bibliography
INDIAN CONTRACT ACT AND ITS APPLICABILITY INTERNET 3
TRANSACTIONS

The Indian Contract Act came into force on the first day of September, 1872, prior to the
enactment, the law relating to contracts as applied in India was wanting in uniformity and
certainty.

The English Law so far as it was suitable to local circumstances, was introduced into the
Presidency towns of Madras, Bombay and Calcutta by the charter granted in 1726 by King
George I to the East India Company. In 1781 the Act of settlement passed by the British
Parliament provided the questions of inheritance and succession, and matters of contracts and
dealing with the parties should be determined in the case of Mohammedans and Hindus by
their respective laws, and where only one of the parties should be a Mohammad an or a
Hindu .the rule in the presidency Towns. In the moffusil, that is, outside the presidency
Towns, there was no law of contracts as such and suits involving questions of contract where
to be decided according to justice, equity and good conscience.

The Contract Act dealt with .Sale of goods, indemnity and guarantee, Law of bailment,
Agency and Partnership Act.

To understand the contracts in the internet transactions and the electronic contracts one has
to have a basic knowledge of the Indian contracts Act , and also the brief knowledge of the
various procedures to enter in to the contracts for the software’s and the internet transactions.

The overview of the IT act 2000 is explained in the coming pages and the IT Act 2000 has
opened the doors for the people to have transaction in the Internet as faster pace and the
punishments for the violations of the contracts and the breach and the restitution for the
damages and this can be explained by the and the Indian Penal code also gives some
guidelines for the penal actions under the violations of the Contracts under the economic
offences

Objective
The objective of this submission is get the insight of various aspects of the
INDIAN CONTRACT ACT AND ITS APPLICABILITY INTERNET 4
TRANSACTIONS

1) Indian contract Act 1872

2) Internet transactions

3) Information Technology Act 2000

4) Validity of the Digital Signatures in the internet transaction

Methodology
INDIAN CONTRACT ACT AND ITS APPLICABILITY INTERNET 5
TRANSACTIONS

This Paper is a step towards the understanding of the Indian contract Act 1872 and various aspects of

the internet transactions and the relation of the Indian contract Act to the internet transactions

Complex legal issues arising in the internet are leading to the development of the Cyber Law. An in

India the concepts of the Indian Contract are taken to curb the frauds done in the internet transactions

, Internet per se raises various important legal issues, which require specific regulation by countries

before the process of e-commerce can really become a success, there have been many countries

which have enacted cyber laws for promoting e-commerce, however a majority of the countries still

are in the dark in this area and have not started legislating Cyber laws, Countries must provide legal

recognition of the electronic format, In addition, there has to be general recognition that wherever any

law prevailing in the country requires anything to be in writing or hand written or printed or type

written form, then not withstanding anything contained in any such law for the time being in force,

such requirement of law shall be deemed to be satisfied if the concerned information or matter is

rendered or made available in the electronic format or remains accessible so as to capable of being

used for subsequent references.

Developing countries need to take lesson from the fact that when they enact a legislation concerning

authentication of electronic records, they should not become technology specific but should adopt a

technology neutral legislation. It would be prudent for the countries to use the words “electronic

signature” as contrasted with the words “digital signature” in order to demonstrate technology

neutrality.

In this project we are going to learn about the internet contracts and its relation to the Indian contract

and its remedies relating to the breach of the contracts.

Important concepts under the Indian Contract Act 1872

Contract which is enforceable by law – Indian Contract Act.1872.
 INDIAN CONTRACT ACT AND ITS APPLICABILITY INTERNET 6
TRANSACTIONS

The Indian Contract Act 1872-s 10 states;

S10.what agreements are contracts; All agreements are contracts if they are made by the free consent
of parties competent to the contract, for a lawful consideration and what a lawful object, and are not
hereby expressly declared to be void.

Nothing herein contained shall affect any law in force in India, and not hereby expressly
repealed, by which a contract is to be made in writing or in presence of witnesses, or any law relating
to the registration of documents.

Let us consider the various aspects of the contract to become the valid contract.

1. Free and conscious consent of the parties to the contract: In other words there should not be any
coercion, undue influence, fraud misrepresentation or mistake which will not be considered as free
consent and will be considered as free consent and will be considered as void.

2. Persons entering to the contract should be competent: In other words persons who are minors
by law, persons with unsound mind are not competent and any contract entered with them is non-
enforceable.

3. Lawful consideration: In other words any contract which is violative of any other law or
considerations which not legal will not be valid and will be void

4. Lawful Object: The purpose of any such contract has to be lawful in its object or else will be
rendered as void.

From this one can infer that a contract enforceable law is a process, which has a vital
significance in any transaction whether it is manufacturing trading or service. The significance of the
contract assumes importance in the cyber world where anonymity and speed of transactions are key
elements.

The Indian Contract Act section1 deals with the proper law of contract to create legally binding
contract based on the agreement and such agreement and such agreement and proper law takes its
validity on the following:

The place of contracting

The place of performance

The place of residence

 INDIAN CONTRACT ACT AND ITS APPLICABILITY INTERNET 7
TRANSACTIONS

The subject matter of Contract

An Agreement, Sec 2(h) of ICA enforceable at Law is a Contract.

Agreement –‘Every promise and every set of promises forming the consideration of each other’.

Every contract is an agreement. But not all agreements become contracts

For an agreement to become a Contract, the following Conditions must be satisfied.

a) There is some consideration for it

b) The parties are competent to consent
c) Their consent is free.
d) Their Object is lawful.
e) Parties intend entering into legally binding obligations.
The next step for a contract is the

Proposal or an offer – When one person signifies to another his willingness to do anything with a
view to obtain the assent of that other to such act or abstinence, he is said to make proposal

General Offers:-

Offers must be to the ascertained persons but on the case of the general offers in the internet or the
advertisements given in the public need not be to ascertained persons in one of the case law the offer
is merely states that it is acceptance when the product is brought

Case law 1

Carlill V.Carbolic Smoke Ball & co

Facts of the case

1. The company gave an advertisement in the newspaper that anyone who uses the pills produced by
the company will get out of the influenza and other ailments.
2. The defendant also stated that if the product is used by the patients and if they follow the procedure
accordingly to the instructions given in the back of the wrap they will definitely get relived from
the ailments.
3. The defendant also gave an offer that if the patients use these products according to the instructions
and if they don’t get relieved by the diseases they will pay the amount 200 pounds as the
compensation in order to prove their confidence.
 INDIAN CONTRACT ACT AND ITS APPLICABILITY INTERNET 8
TRANSACTIONS

4. The Applicant A used the medicine for the purpose of preventing the ailments caused to her and
strictly followed the instructions given on the wrap
5. But the ailments did not get reduced so she asked for the compensation
6. The Applicant stated that the offer is only to create the confidence in the patients who use it.

Judgement
The Court gave a judgement in favour of the applicant stating that the offer can be made to any of the
unascertained persons, who merely accept the offer by performing the conditions; no matter he did not
actually communicate it. And asked the company to pay the amount of offer made by them.

The cross offers do not give rise to the contract as they are considered as void,

The next important step is:-

Communication and Acceptance in Contract:-

Section 2(h) –When the person to whom the proposal is made, signifies his as thereto, the proposal is
said to be accepted,

A proposal, when accepted, becomes a promise,

Section 4 of the act pertains to the communication in the contract and is as follows;

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 acceptance must be absolute and unconditional (section 7) if the acceptance is conditional offer
may be withdrawn and if the conditions are performed it is the acceptance

There are various classifications of the terms

Each term of a contract must be either:

- An express term of the contract (that is, expressly agreed by the parties); or

-an implied term (one which is implied by law),

 INDIAN CONTRACT ACT AND ITS APPLICABILITY INTERNET 9
TRANSACTIONS

Whichever it is, it will be either a condition or some other term of the contract, the division is
important because the rights of the other party may depend on whether the term is a condition.

Therefore, acceptance with a condition, is only a counter offer, and does not make the first offer a
promise, when a counter proposal is accepted; a contract arises in terms of the counter proposal and
not in terms of the original proposal.

Lapse of the offer –Acceptance should be made before the offer lapses. But

‘An acceptance to an offer is like lightened match stick to a train of gun powder’-Anson.

Revocation of proposals and Acceptance.

A proposal may be revoked at any time before the communication of its acceptance is complete as
against the acceptor, but not afterwards.”

An acceptance may be revoked at any time before the communication of the acceptance is complete as
against the acceptor, but not afterwards.”

Revocation of the proposals.

- A proposal may be revoked at any time before communication of its acceptance is complete as
against the proposer, but not afterwards.
 INDIAN CONTRACT ACT AND ITS APPLICABILITY INTERNET 10
TRANSACTIONS

- Acceptance may be revoked at any time before the communication of acceptance is complete as
against the acceptor, but not afterwards.

Indian contract Act 1872 does not specify the contracts in the writing but section 25(3) specifies that
the certain contracts require being in writing

1) Promise to pay the time barred debt

2) Creation of Trust
3) Reference to the arbitration
Consideration

Sec 2(d) when it desires of the promisor, the promisee or any other person has done or abstained from
doing, or promises or to do or to abstain from doing something such act or abstinence, or promise is
called “Consideration”

Ex nudo pacto non orbitor – Our of nude pact no cause of action arises

According to the section 25 the agreement without the consideration is void but there are some
exceptions for some agreements where the consideration of the contracts is considered as void .for the
quad pro quo which means something in return.

1) Gift

2) Promise to compensate for something done voluntarily

3) Promise to pay the time barred debt

For a contract to be valid there should be consensus ad idem i.e. the Identity of the mind parties
should agree about the same thing in the same sense.

CAPACITY TO CONTRACT

Person having Incapacity

a) Minors
b) Lunatics
c) Undischarged insolvent

All the other persons have capacity to contract until the contrary is proved.
 INDIAN CONTRACT ACT AND ITS APPLICABILITY INTERNET 11
TRANSACTIONS

S 11:- It states that every person is competent to the contract that is 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

S 12:- a person, who is usually of unsound mind, but occasionally sound mind, make a contract when
he is of sound mind. A person, who is usually of unsound mind, may not make contract.

According to the S 13 two or more persons are said to be consent when they agree upon something in
the same sense. The mutual understanding is based on a) subject matter of the agreement b) the nature
of transaction c) the language or expression used in the recording the understanding, S-14 –free
consent is defined as one, which is not done through, S-15 coercion ,S-16 undue influence, S-17
fraud, S-18 misrepresentation, S 20 mistake

Aggregatio mentum= Means the meeting of the minds, the minds of the persons must meet in order to
make a contract and it should not be under the undue influence or coercion.

Infants can make contracts for necessaries

There are different things the contract of an Infant is voidable they are Positive Voidable and the
Negative Voidable

DISCHARGE OF CONTRACTS

A contract may be discharged in the following ways:-

1) By performance of the contract

2) By impossibility of performance
3) By Agreement
4) Breach
Measure of Damages

Damages are compensatory and not penal under not penal under law of Contract, normally in a
contract damages for the mental pain & suffering are not allowed in a claim based on contracts. And
there is duty of every contract to be mitigated duly.

In estimating loss or damage arising from a breach of Contract, the means which existed of remedying
the inconvenience caused by non-performance of the contract must be taken into account thus ,
injured party has to take reasonable steps to see that his loss is kept at minimum, the most frequent
application of this rule takes place in contracts for sale or purchase of goods, On the buyer’s refusal to
INDIAN CONTRACT ACT AND ITS APPLICABILITY INTERNET 12
TRANSACTIONS

take delivery the seller should re-sell the goods at the prevailing market price and he may then recover
the enhanced loss, The well known authority for this preposition is the decision of the Privy Council
in

Case Law 2

Jamal A.K.S v, Moola Dawood Sons & co.

Facts of the Case

1. The plaintiff contracted to sell the defendants’ 23,500 shares to be delivered and paid on
December 30th 1911, the shares were tendered on this date, but the defendants’ declined to
take delivery or to pay for them. At the market price for sales upon that day, the shares would
have realized only Rs 72,862/- less than the price under the contract.
2. The dependents contended that they should be held liable for Rs ,1,09,218 /-
Liquidated Damages and Penalty

Section 74 of the ICA

Compensation for breach of contract where penalty is stipulated for, when a contract has been
broken, if the sum is name in the contract contains any other stipulations by way of penalty, the
party complaining of the breach is entitled, whether or not actual damage or loss as to be 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,

Illustrations:-

1) A gives a bond for repayment of Rs Rs.1, 000/- with interest at 12% at the end of 6 months
with a stipulation that, in case of default, interest shall be payable at the rate of 75% from the
date of default this is a stipulation by way of penalty, and B is only to recover from A such
compensation as the court considers reasonable.
2) Who owes money to B, a money lender undertakes to pay him money by delivering to him 10
mounds of grain on a certain date, and stipulates that, in the event of not delivering the
stipulated amount by the stipulated date, he shall be liable to deliver 20 mounds, This is a
stipulation by the way of penalty and b is only entitled to reasonable compensation in case of
breach.
INDIAN CONTRACT ACT AND ITS APPLICABILITY INTERNET 13
TRANSACTIONS

Tortuous Liability

- A party may escape by providing the exemption but cannot escape the liability for tort of
negligence.

- Unreasonable of terms Customer not bound by it. Printed terms on the back of the receipt.

One of the major areas impacted by internet has been the commerce, because the market is whole
globe. Paper work reduced, efficiency got enhanced and speed is wonderful. Time log lessened,
expenditure cut short, physical environment is totally changed with online ordering publishing
banking, auction, and investment., all these transactions deal with the Indian Contract Act, sale of
goods Act, Information Technology Act.

After learning about the Indian Contract Act 1872 it will become easy for us to apply these principles
to the internet transactions where the usually the contracts takes place in seconds of time

Before going into the Information Technology Act let us know what the online contracts, electronic
contracts are.

Online contracts

It is a common practise that transactions of many goods and services depend and use standard form
of contract of terms and conditions, which are quite often hidden from the user or not prominently
displayed. As the going is good there is no problem on such practices but in a business where the
volumes are high such fine print or hidden terms may prove too costly when someone decides to act.
Simply ‘I Agree’ button displayed in front without reasonable and adequate display of terms and
conditions displayed to the buyer or user may lead to the costly litigations in online transactions
where there is no place of business. This necessities effective and clear drafting of the terms of
contract where drafting of the terms of contract where the drafting language has to be clear
transparent, to place across the business proposition or offer without jeopardising the interest of the
business where the language could lead to multiple interpretations and running the risk in a court
battle. Such drafting requires the drafter to understand the fundamentals of
INDIAN CONTRACT ACT AND ITS APPLICABILITY INTERNET 14
TRANSACTIONS

1. Relevant law in operation;

2. The practical implications of such law
3. The purpose and goal of the firm intends to achieve by such offer
4. How to use the relevant law and its implications to maximum advantage
5. How to minimize the liability risks in unforeseen circumstances
According to ‘Rodney’ -For an Online contracts there are various terms and conditions

They are

Should display the contracts terms online, the world wide web, Express implied and the
mandatory terms, contract formation terms, contract creation; what constitutes an offer, as passed
to an invitation to treat, whether counter offers when allowed, is there prohibition against
customer change offer terms, where there is automated computer acceptance if the merchant is
making an offer, how long an offer is valid and what constitutes revocation of offer. What
constitutes acceptance and how and by what method and exactly when an acceptance is effective
(postal or receipt rule)

Electronic Contracts

Electronic contracts help the humans to avail the transactions and agreements electronically without
meeting each other. This means that the traditional contract process of offer, acceptance and
agreement to transact through the electronic mode than physical mod of paper. E-Commerce to
succeed such contracts need to be validated legally as alternate mode of transaction through online
using the latest technological developments. This is aimed at:

1. To create a secure atmosphere of transacting online with alternate mode to paper and writing.

2. To create an electronic documentation system this will safeguard the contracting parties on par with
the traditional mode of contracts.

3. To create statutory status and monitoring/verifying authorities for such electronic transaction.

4. To check frauds intentional or unintentional transactions to promote and build confidence and in
genuine online transactions.

5. To create necessary legal structures to oversee such instructions

6. To establish standard rules and regulation for smooth functioning online transactions.
INDIAN CONTRACT ACT AND ITS APPLICABILITY INTERNET 15
TRANSACTIONS

7. To make digital signatures legally valid and incorporating the same with the existing legal regime
of contracts, sale of goods, evidence and consumer acts.

Such electronic transactions will depend on the appropriate legal frame work, which recognizes
‘electronic records’ or ‘writings’ or ‘digital signatures’. It should facilitate for a secure system of such
transactions and should create evidentiary value of such records.

Contract formation in the electronic Contracts

E-contracts are the contracts are the contracts executed by Electronic Data Interchange EDI, EDI
means the electronic transfer from computer to computer of information using an agreed standard to
structure the information(Article 2b of UNCTRAL model law)

The most online transactions that take place by the process of Click Wrap contract where law
provided freedom as to mode and method of communicating offer and acceptance , clicking on the
specified part of the website to signify offer or the acceptance creates the contractual relation. Before
clicking, the party is expected to read terms and conditions posted on the website and on clicking the
send option emerges. To establish the terms for download and use of software over internet set forth a
website’s terms of service (rules by which user may access the website or a portion thereof and
stipulate terms of online sale of goods and for rendering service. Negotiation in most of click wrap
contracts is not available.

Case Law 3

Hotmail v. Van Money Pie Inc c-98-20064, April 1998.

Hot mail terms of service prohibit use of hotmail accounts to facilitate the transmission of unsolicited
commercial e-mail known as spam. Users required agreeing to it by clicking on ‘I agree’ definition
sent spam advertising a porn material. Falsely indicated that it was sent by hotmail only. Injunction
was issued in this case.

Apart from the goods and services contracts there are varieties of e-contracts now, with online
interviews, and online selections, the employment contracts assumed importance.

Overview of the Information Technology Act, 2000

With reference to, THE INFORMATION TECHNOLOGY ACT, 2000(No. 21 OF 2000 [9th June,
2000]. The Act states as follows:-
INDIAN CONTRACT ACT AND ITS APPLICABILITY INTERNET 16
TRANSACTIONS

An Act to provide legal recognition for transactions carried out by means of

electronic data interchange and other means of electronic data interchange and other means of
electronic communications, commonly referred to as “electronic commerce”, which involve the use
of alternative to paper-based methods of communication and storage of information, to facilitate
electronic filing of documents with the Government agencies and further to amend the Indian Penal
Code, the Indian Evidence Act, 1872, the bankers book

Evidence Act, 1891 and the Reserve Bank of India Act, 1934 and for matters
connected therewith or incidental thereto.

Whereas the General Assembly of the united nations by resolution A/RES/51/162, dated the
th
30 January, 1997 has adopted the Model law on Electronic commerce adopted the Model law of
electronic commerce adopted by the United Nations Commission on International Trade law;

AND whereas the said resolution recommends inter alia that all states give favorable consideration to
said Model law when they enact or revise their laws, in view of the need for uniformity of the law
applicable to alternatives to paper-cased methods of communication and storage of information;

And WHEREAS it is considered necessary to give effect to said resolution and to promote efficient
delivery of Government services by means of reliable electronic records.

The all the disputes arising out of the breach of the electronic contracts can appeal to the Cyber
Regulations Appellate Tribunal established under sub-section (1) of section 48;

According to the IT Act 2000 the contract usually takes place between the proposer and the acceptor

Validity of Authentication, digital signatures in Internet

transactions –

Authentication of electronic Records.

Any subscriber may need to authenticate and electronic record which is received by the consumer and
take all precaution to authenticate to it.

Authentication is usually done by affixing his electronic signature. The concept of electronic
signature as a means of authenticating electronic information needs to be given legal validity by
different legislations of developing countries. However, it is imperative that the retention of such
INDIAN CONTRACT ACT AND ITS APPLICABILITY INTERNET 17
TRANSACTIONS

electronic information must be in the prescribed proper format so that there can be no questions on its
authenticity or veracity.

Recognition of the Cyber Documents

Where any law provides that information or any other matter shall be in writing or in the typewritten
or printed form, then, notwithstanding anything contained in such law, such requirements shall be
deemed to have satisfied if such information or matter is.

- a) rendered made available in the electronic form; and

- b) Accessible so as to be usable for a subsequent reference

There are various excluded documents according Section 1(4)

- a) “Negotiable Instrument” other than cheque.

- b) “Power-of-Attorney”

- c) “Trust”

- d) “will”

- e) “Contract for sale” or “Conveyance” of Immovable property or any interest in such property;

- f) Any such class of documents or transactions as may be notified by the central Government in the
Official Gazette.

According to the Sec-5 of IT Act 2000

Where any law provides that information or any other matter shall be in writing/authenticated by
affixing the signature, notwithstanding anything contained in such law such requirement shall be
deemed to have been satisfied, if such information or matter is,

-rendered available in electronic form.

- authenticated by means of digital signature

Section 3

Authentication of the electronic records:-

INDIAN CONTRACT ACT AND ITS APPLICABILITY INTERNET 18
TRANSACTIONS

1) Subject to the provisions of this section any subscriber my authenticate and electronic record
by affixing his digital signature.
2) The authentication of the electronic record shall be effected by the use of asymmetric crypto
system and has function which envelops and transform the electronic record into another
electronic record.
There are various kinds of Biometric Authentication Not considered by ITA-2000

They are

-Finger print scanning

- Iris Scanning

- Face scanning

-Signature Analysis

During the early days of Electronic Data Interchange (EDI), there was no way to apply
cryptographically based signatures to electronic documents, so the industries elide heavily upon
“trading partner agreements”. These paper agreements, signed by the parties involved, described the
rules to which the EDI trading partners agreed with respect to honouring purchase order request,
dispute resolution, and so on. Trading partner Agreements have been remarkably successful, with
legal disputes regarding EDI transactions being exceptionally rare, trading partner Agreement still
remain an important part of electronic commerce. The world-wide-reach and extremely dynamic
population of the internet makes establishing Trading partners Agreements with all the possible
participants in electronic transactions practically impossible. The means to provide digital signatures
for computer communications that are roughly equivalent to hand written signatures on paper
documents available with the advent of the Public key technology.

The future of legal signatures in the online contracts

The challenge of enabling large-scale e-commerce in all its guises

requires that a means be found to shift virtually all aspects of Ana log commerce into virtual guise

The means of digitizing most features of everyday commerce is relatively straightforward. Commerce
generally relies quite heavily on paper trails of one variety or another and the nature of the digital
medium is such that digital equivalent of given process will be much richer in terms useful
information content and accessibility. One evident exception to this principle is the common place
signature.
INDIAN CONTRACT ACT AND ITS APPLICABILITY INTERNET 19
TRANSACTIONS

Digital signatures share some interesting features with legal signatures in the sense
that they can be fairly readily and intimately related to an individual and they serve to authenticate
digital content with a high degree of assurance.

It is therefore very tempting to seize digital signature technology and the

public key infrastructure that supports them and presses them into service to support both legal
signatures and broader contractual framework that e-commerce naturally thirsts for. In addition to the
desire to enlist digital signatures have features that surpass the analog signature in many important
aspects. For example, they authenticate the content with which they are associated far more
intrinsically and integrally and, combined with encrypted content, they actually serve to secure the
content against disclosure to unintended readers.

These features of digital signatures have led to a fairly extensive and broadly
based movement in legal circles both in North America and Europe to design a paradigm within
which digital signatures and contracting into the digital medium, but actually go beyond what is
currently done with pen and ink by proposing to venture into the realm of non-repudiable contractual
instruments supported in part by a scheme of virtual notarization.

At the early stage of development of digital networks we are close to a virtual big bang. Thus digital
signatures, contractual paradigms, biometrics, authentication, rules of evidence, network
communication protocols, signatures, packet standards, directories, and other nascent features and
tools are all tightly and closely packed together, The professionals in search of the digital tools,
including telecom network engineers., Lawyers, software designers, e-commerce managers,
cryptographers, law enforcement professionals, social scientists and many others, are all being
crossed.

A digital signatures ‘fixes’ the identity of a party entering into the contract, these digital signatures are
important where the pre-contractual dialogues have been conducted by computer agents or over
distance, and it is valid when there should be a confirmation of the identified individuals acceptance
of terms on offer, The ability to imprint ‘time’ into the signature or ‘stamp’ unlike a physical
signature where the time can be added later.

Secure digital signature

If, by application of a security procedure agreed to by the parties concerned, it can be verified that a
digital signature, at the time it was affixed, was-

a) Unique to the subscriber affixing it:

INDIAN CONTRACT ACT AND ITS APPLICABILITY INTERNET 20
TRANSACTIONS

b) Capable of identifying such subscriber:

c) Created in a manner or using a means under the exclusive control of the subscriber and is
linked to the electronic record to which it relates in such a manner that if the electronic record
was altered the digital signature would be invalidated, then such digital signature would be
invalidated, then such digital signature shall be deemed to be a secure digital signature.

Duties of the subscribers

Generating Key Pair.

Where any digital signature certificate, the public key of which corresponds
to the private Key of that subscriber which is to be listed in the Digital Signature Certificate
has been accepted by a subscriber, then the subscriber shall generate the key pair by applying
the security procedure.
Acceptance of Digital signature Certificate.
A Subscriber shall be deemed to have accepted a digital signature Certificate if he publishes
or authorises the publication of a digital Signature Certificate-
a) To one or more persons:
b) In a repository, or otherwise demonstrates his approval of the Digital Signature
Certificate in any manner.
1. By accepting a digital signature Certificate the subscriber certifies to all reasonably rely on
the information contained in the digital signature Certificate that-
a) The subscriber holds the private key corresponding to the public key listed in the Digital
signature Certificate and is entitled to hold the same:
b) All the representations made by the subscriber to the certifying authority and all material
relevant to the information contained in the digital signature Certificate are true:
c) All information in the digital signature certificate that is within the knowledge of the
subscriber is true.

Jurisdiction and Remedies for Breach of internet

contracts:-
Concept of Jurisdiction
“Jurisdiction” is the concept whereby in any legal system, the power to hear or determine a
case in an appropriate court. The justice delivery system of any legal System operates though
structures called ‘courts’ and the starting point of such functionality is that of jurisdiction by
INDIAN CONTRACT ACT AND ITS APPLICABILITY INTERNET 21
TRANSACTIONS

which the verdict of the court becomes validated as per proper judgement to be carried in
accordance with law.
Within a country the legal system operates through the process of jurisdiction, which is
classified as
a. Pecuniary Jurisdiction
b. Subject matter Jurisdiction
c. Territorial matter jurisdiction

INTERNET JURISDICTION:

Internet being a global phenomenon the jurisdiction issues of those who reside outside India and vice
versa of those reside in India will assume importance in case of adjudication and effectiveness of the
same.

S-13 of the civil procedure code the section deals on foreign judgements

But there are various instances where Indian court has interpreted S-13(d) of the CPC to uphold
natural justice and thus mere procedural loopholes cannot be taken as excuse for violation of
substantial aspects of natural justice to let the offenders to get away and has enforced jurisdiction in
such cases.

Added to this S13 CPC states that a judgement of a foreign court is in violation of the Indian
law it cannot be sustained.

In interpreting the above three components of the section, the first and second components are
much clearer and in case of the internet specially, the third component of the ‘cause of action’ needs
to be analyzed. A cause of action whether wholly or partly will determine the validity of the suit
under s20 (c) of the Code of Civil Procedure.

In the context of internet of cyber transactions, jurisdictions pose a major challenge in

Interpretations in count ions like United States where there is a conflict of law as it is not uniform
throughout the country and states having their own laws. As we already saw internet and transactions
happening through the internet has multiple parties residing in various territories. Let us take an
example of simple transaction in internet of ordering a book. Advertised for a price X in a website is
launched through a server located in country D operated by Z. a finds his credit card statement
showing money paid but did not receive the book and now decides to take action. In this case Y who
operates the site is in a neighbouring country and implicates the server provider Z for faulty
INDIAN CONTRACT ACT AND ITS APPLICABILITY INTERNET 22
TRANSACTIONS

configuration, which has caused the problem to A how does A proceed to sue for his losses or in
another example the police in Hyderabad come across objectionable material in a website which is
launched by someone in Pakistan but hoisted from ltaly through a server under which jurisdiction can
the offence be brought

Those who argue that jurisdiction as a major issue in the cyber space and internet argue that the
traditional method of assessing such jurisdiction is complicated in internet transactions. In a
traditional contract, the jurisdiction is arrived at the place the defendant resides and 2 where the cause
of action arose in illustrations as above they argue it is complex to understand jurisdictions.
Especially for those who run in commerce through internet may land up in different jurisdictions
when sued by the consumers around the world. On the other hand it is also argued that the hapless
consumer will also be left without any defence in cases where the service providers and
intermediaries in cyberspace are spread out in various jurisdictions

Against this argument many jurists and cyber law experts argue that the complications of jurisdictions
are blown out blown out of proportions and can be resolved by simpler yardsticks of existing
principles of jurisdiction they argue that issue of jurisdiction is either mistakenly or mischievously
exaggerated as whatever transactions are taking place it takes place on physical locations with
physical sellers and buyers and only the links are more In such transactions. They argue that firstly
most complications are avoided if there are explicit provisions among the contracting parties on their
choice of law , the court have come to grips with the situation and thus the intent, purpose and factors
of the websites will decide the jurisdiction rather than anywhere or everywhere jurisdiction phobia

Countering this others argue that it is finally left to the pattern of judgments of the court which will
decide the issue of jurisdiction where the private international law cannot play any meaningful and
constructive role in this background the international efforts of jurisdiction assumes significance in
cyberspace, which will be dealt in the subsequent modules.

Jurisdiction and IT Act 2000

On the jurisdiction of the internet or cyberspace IT Act of 2000 section 13 is of relevance the sub-
sections (3), (4) and (5) deal with the cause of action clause, which is of significance in internet
transactions to determine the jurisdiction.

S 13 (3)- save as otherwise agreed to between the originator and the addressee, an electronic record is
deemed to be dispatched at the place where the originator has his place where the originator has his
place of business, and is deemed to be received at the place where the addressee has place of business.
INDIAN CONTRACT ACT AND ITS APPLICABILITY INTERNET 23
TRANSACTIONS

S13 (4) - The provisions of sub-section (2) shall apply notwithstanding that the place where the
computer resource is located may be different from the place where the electronic is deemed to have
been received under the sub-section (3)

S 13(5) – for the purposes of this section:-

(a) If the originator or the addressee has more than one place of business the principal place of
business shall be the place of business;
(b) If the originator or the addressee does not have a place of business, his usual place of
residence shall be deemed to be the place of business;
(c) ``Usual place of residence `` in relation to a body corporate, means the place where it is
registered
Remedies

Rescission for misrepresentation

Wherever a party is induced to enter into a contract by a material misrepresentation, whether innocent
or fraudulent, he has a prima facie right to rescind ab initio, although the contract will normally
continue to force unless he so elects. Where a person has entered into a contract after a
misrepresentation has been made to him, notwithstanding that the misrepresentation has become a
term of the contract or the contract has been performed, then, if that person would otherwise be
entitled to rescind the contract without alleging fraud, he is entitled to rescind the contract without
alleging fraud he is entitled to rescind the contract without alleging fraud, he is entitled to rescind the
contract. This right is subject, however, to the power of a court or arbitrator to award damages in lieu
of rescission if of the opinion that it would be equitable to do so, having regard to the nature of the
misrepresenting and the loss that would be caused if the contract were upheld as well as to the loss to
the other party if rescission was permitted.

Repudiation

Any unequivocal refusal by a contracting party to perform his contractual obligation (including self
induced frustration, as to the frustration including self induced frustration) may amount to the
repudiation. But repudiation is considered as a serious matter not to be lightly inferred, see Ross T
Smyth & Co ltd. V. T.D.Bailey, sons and Co (1940) 3 A11 ER 60 at 71 HL per Lord Wright).

Claim for the damages

An action for damages may lie at the suit of the buyer for breach of contract, tort or
misrepresentation.
INDIAN CONTRACT ACT AND ITS APPLICABILITY INTERNET 24
TRANSACTIONS

1. Specific enforcement

Two equitable and discretionary remedies may be available. First in an action of the
breach of the contract to deliver unique, specific or ascertained goods the court may,
if it thinks fit, on the plaintiff application, by its judgment direct that the court shall
be performed specifically, without giving the defendant the option of retaining the
goods on payment of damages. Second the buyer may obtain an injunction preventing
the supplier disposing of those goods to a third party.

2. Damages for breach

This paragraph deals with the situation where a buyer has an action in damages for
breach of the sale of contract against his seller, the rules here will differ according to
whether or not the breach by the seller amounts in law to failure to deliver the goods.
3. Damages for non-deliver
This category covers not only the situation where no goods are delivered at all, but
also where the goods are tendered by the seller are lawfully rejected and the contract
discharged on the grounds that they do not conform to the contract in quantity and
quality. The sale of goods Act provide that where the seller wrongfully neglects or
refuses to deliver the goods to the buyer the buyer may maintain the action against
the seller for damages for non-delivery. Subject to the ordinary rule or remoteness,
the Act lays down a prima-facie rule for measuring damages where there is an
available market in which the buyer may obtain a replacement.
4. Damages for other breaches
This category covers not only the situation where the seller is only in breach of
warranty, but also that where the buyer elects, or is completed, to treat a breach of
warranty, the measure of damages is subject to the ordinary rules of remoteness.

Arbitration and Alternative Dispute resolution

INDIAN CONTRACT ACT AND ITS APPLICABILITY INTERNET 25
TRANSACTIONS

Arbitration is a process by which disputes between two or more persons are

determined with final and binding effect by impartial third person acting in a judicial manner, rather
than a court of law, the arbitration is derived from the agreement of the parties concerned. In contrast
to the proceedings in court, arbitration takes place in private

Arbitration clauses are usually found in agreements in which the parties are more or less an equal
footing, and which confirm and formalize their desire to cooperate in a project or transaction, typical
example may be shareholders agreements, joint ventures, research and technical aid agreements,
partnership deeds and certain contracts for services.

Conclusion

.By this discussion we came to know that the Indian contracts Act will play a crucial role in the
various aspects of the internet transactions are sufficiently needed to understand the diverse aspects of
internet litigations, and the encumbrances and the contingencies, the judicial mechanism has created
the Tribunals for the speedy justice various remedies has be mentioned in the project. The arbitration
and the alternative dispute resolution system hence provides for the speedy justice.

Bibliography
INDIAN CONTRACT ACT AND ITS APPLICABILITY INTERNET 26
TRANSACTIONS

Books

Indian Contract Act – S.R.Myneni

Emerging Jurisprudence of the Cyber space – Dr.V.C.Vivekanandan

Rodney Rider- E-contacts

Civil procedure Code- C.K. Takwani

Legal Databases

Manupatra