Monday, 13 July 2015

The Conundrum of Clicking Commerce –Implementation of “Click-Wrap” Contracts in E-Commerce

Soon after internet creeping its way into being a daily necessity, its birth-child E-commerce became the next big-thing.The toil of travelling miles to get that one desired good, has reduced to a click on an e-commerce website. In such a situation, the free and quick shipment and wider choice of products, along with the ease of shopping online as compared to in-store shopping, is also helping E-Commerce gather momentum.[1]

Despite the popularity, these e-commerce websites have attracted additional lime-light as manufacturers deter purchases through e-commerce websites by denying the manufacturer’s warranty. Consumer electronics manufacturers like Sony, LG, HP, Nikon, Lenovo, Dell, etc. have clearly mentioned on their websites that they cannot vouch for the genuineness of products sold on these e-marketplaces, as they do not consider the e-marketplaces like Flipkart, Amazon India, Snapdeal, eBay India as 'authorised resellers". On the other side of the story, it is the contention of the e-commerce website owners that when the products are original, and is backed by an official invoice with all taxes paid, warranties cannot be denied to the consumer.

1.   “Click-Wrap” Agreements:-

In e-commerce, the sale and purchase of the goods takes place through an e-contract which is equivalent to the form of a “click-wrap” agreement, wherein the consumers are made to click "I Accept" before downloading any software, registration of an online service or purchasing certain goods. In such a situation, as one of the parties making the contract of sale is an inanimate website, the choice of negotiating or modulating the terms such as warranty, policy of return is in-exercisable. This backed situations such as denial of manufacturer’s warranty, service etc., eventually lead to consumer disputes.
There are basically two types of click-wrap agreements:

i.Type and Click.: wherein, a party must type "I accept" or other specified words in an on-screen box and then click a "send" or similar button to signal acceptance of contractual terms.
ii. Icon Clicking: wherein, a party simply has to click an "I accept," "I agree," or similar icon to signal acceptance of the terms in the click-wrap agreement. Users not wishing to enter click a "No" or "I do not agree" icon.

2.   The existing legal framework:-

The essence of e-commerce law is based on the validity and the formation of contracts. The Indian Contract Act, 1872 gives a statutory effect to the basic common law contractual rule that a contract will be considered valid if it is made by free consent of the parties who are competent to contract, for a lawful consideration and object.[2] Taking into consideration the provisions, it is clear that the Act does not prescribe any particular way of communicating the offer and acceptance. It may be done by writing, verbal, or even by conduct.[3] Thus, there is no requisite of writing for the validity of contracts except specifically mentioned by law.[4]Apart from certain limited provisions in the Information Technology Act, 2000, India does not have a separate legislation governing e-contracts.Therefore, it can be construed that the IT Act avoids incorporating any specific provision giving validity or otherwise to online contracts.[5] In light of this, even in the absence of any specific legislation governing online contracts, its validity cannot be challenged solely on such technical grounds.[6]

3.   Loop-Holes in the Law:-

The Delhi High Court in the case of Societe Des Products Nestle S.A. And Anr.vs.Essar Industries AndOrs.[7]noted that “Rapid rise in the field of information and technology in the last decade of 20th Century and the increasing reliance placed upon electronic record by the world at large necessitated the laying down of a law relating to admissibility and proof of electronic record.” Despite the increasing technological awareness in the legal framework, the existing laws are far from being amended.
          i.       Identification of parties: In case of Click-wrap agreements, unlike traditional agreements where the individuals or the company meet and negotiate the terms of the contract, the parties are not able to meet and hence lack the sense of security.

        ii.        Jurisdiction: The Information Technology Act, 2000 states that the in case of electronic contracts such as click-wrap agreements, the place of dispatch and the place of receipt will be the place where the originator and the acceptor have their respective offices.[8] This has led to a great controversy as it is contradictory to the provisions of the Civil Procedure Code states[9] that a suit may be brought up where the defendant has his place of business or where the cause of action arises. Owing to the nature of the internet the laws of contract governing the transaction may have certain variations in cases where an international element is present in the transaction, like the procedural formalities etc. may be different in separate jurisdictions. Therefore, ascertaining the correct jurisdiction is of great consequence to the outcome of the case.

      iii.        Legal recognition of transaction:As the Indian law does not explicitly lays down provisions regarding Click-wrap agreements; refuge can be taken in few section of the Indian Evidence Act. Presumptions as to electronic records are vividly covered under section 85A, 85B, 85C, 88A, 90A of the Act, whereas its admissibility is dealt under section 65B of the same act. However, the evidentiary value of such contracts is still disputed as there is always a possibility that such contracts may have been subjected to tampering thus forcing the legal machinery to disregard the same.

       iv.        Notice: One of the important points considered by courts while deciding the enforceability of contracts in the nature of click-wrap is notice. As held in the case of Specht v. Netscape[10] , it was held that a click-wrap license was unenforceable because to view the terms of the license agreement, the user was required to scroll to the bottom of the webpage.

         v.        Stamping Requirement: Further, it is essential to get the instrument stamped under the stamp duty legislations enacted by different states in India whenever right are created or transferred. The Indian Stamp Act, 1899 does not lay down a procedure for stamping of click wrap and browse wrap contracts, although e-stamps are available but then the use of the same is not prevalent. However, e-contracts may be stamped either by printing the document on a stamp paper or by getting the printed document franked or by procuring a stamp duty certificate by the process of e-stamping.

       vi.        Signature Requirements and Contracts with Minors:It is not necessary for every contract to be signed under the Indian Contract Act, 1872, however certain provisions concerning specific contracts makes it necessary to contain signature as in the case of Copyright Act where it is mandatory for the instrument concerning transfer of rights to be signed. However, until today, no suchnotification regarding electronic signatures has been issued by the Central Government.

In addition to that, it is difficult to ascertain the competency of the party as a major[11], i.e., above 18 years of age, as it is impossible to know of the right age of the person who is actually clicking the "I Agree" button.

4.   Possible Solutions:-

Apart from bringing in amendments to the legislations in order to implement specific laws to deal with such contract, steps can be taken by both the parties to mitigate the adversities.
        Mandatory electronic signatures on every page of such agreements prevents the user from proceeding further or ahead, without going through the content of its respective previous page.

   ii.        The exit option provided to the user should be present on every page of the electronic contract.
              Along with the requirement of having an acceptance option at every page of such contract, it is pertinent that the user has an access to the contract in an entirety before the product can be accessed or purchased.

  iv.        For accountability and documentation of information, the date and time of Acceptance or Rejection should be taken into account. This may be electrically recorded and presented as evidence in adjudicating the enforceability of such a click-wrap agreement.

    v.        The user is required to register him so that the details therein provided may be useful in determining his capacity to contract and thereby validly exercise his right to consent and shall be responsible in providing accurate information while registering.

  vi.        For the authentication of the user and improve the ability of the company to connect to the user with regards to periodic acknowledgements or related communications, a valid email address should be given of an authorised party for the acknowledgement of such information provided.

 vii.        The documents so provided should be at periodic scrutiny by making the user acknowledge the documents on annual basis.

viii.        It is important that the terms and conditions of the click-wrap agreement should not be limited in accessibility by being displayed only during the acceptance or rejection of the agreement. The conditions therein laid should also be conveniently present in the product and be made accessible to user post installation for his future perusal.

5.   Conclusion

Despite the grey area, initiatives such as IRCTC portal are governed by the concept of E-contracts. For interpreting and implementing developing concepts such as shrink-wrap contracts, the terms, conditions and the contract as a whole should be seen based on a commercial background. Countries like USA have not only upheld the validity of such kind of adhesive contracts but also has implemented them by initiatives such as Mass Market Transactions and framing laws such as 

The Uniform Computer Information Transactions Act (UCITA), which was developed to exclusively regulate transactions in computer information.

Thereby to draw a conclusion, it can be said that with effective amendments to the existing laws and intermingling of sectored regulators, a legal framework can be set up wherein novel concepts such as click-wrap agreements may be effectively implemented.

Kathakoli Bose

[1] Outlook 15: What Indian niche e-commerce companies plan to do in 2015, Medianama
[2]Section 10, Indian Contract Act, 1872
[3]Section 3, Indian Contract Act, 1872
[4]See Section 10, Indian Contract Act, 1872
[5] However, the UNCITRAL Model Law has a specific provision regarding validity of contracts: “Article 11. Formation and validity of contracts.—(1) In the context of contract formation, unless otherwise agreed by the parties, an offer and the acceptance of an offer may be expressed by means of data messages. Where a data message is used in the formation of a contract, that contract shall not be denied validity or enforceability on the sole ground that a data message was used for that purpose.”
[6]Some commentators have viewed otherwise. They have opined that e-commerce in India had no legal validity before the enactment of the IT Act. See “India’s cyber law comes into force”, available at: cyber law.htm
[7]2006 (33) PTC 469 Del
[8] See Ahmed, Farooq: “E-commerce: An Indian Perspective”, International Journal of Law and Information Technology, Vol. 9, No. 2 available at: 09/Issue 02/pdf/090133.pdf.
[9]See Section 20 of the Civil Procedure Code, 1908
[10]Case. No. 01-7860 (L) (2d Cir., October 1, 2002)
[11]Section 11 of the Indian Contract Act, 1872

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