INTRODUCTION

An E-contract is also known as a digital contract that is written and signed electronically. A contract agreement between two or more parties that is legally enforceable. Commercial contracts with e-businesses can be exchanged with the use of e-contracts. An e-contract can be created on a computer and emailed to a business counsel. The digital signature of the business advocate specifies that he accepts the contract. An electronic contract is an agreement between two parties for the sale or supply of digital items and services. On an electronic contract, traditional ink signatures are not feasible; instead, a computer executes and enacts them in electronic form. The main aim of e-contracts is to negotiate and draft successful contracts for business purposes.

ESSENTIAL ELEMENTS OF ONLINE CONTRACT

  • Offer– The offer should be made by one party to another and should have a lawful purpose.
  • Acceptance– When the person to whom the offer was made accepts it, it becomes a promise.
  • Intention to create a legal relationship A contract that does not establish a legal relationship is not a legitimate contract; a contract that does not establish a legal relationship is not valid.
  • Lawful object– Parties entering into a contract should do so with a legal purpose in mind. To be legally enforceable, a contract must be made for a legal purpose.
  • Lawful consideration Consideration is one of the most important features of any contract. The basic concept of consideration is that if a party to a contract keeps his word, he will receive something in return. The form of consideration has to benefit, right, or profit.
  • The capacity of Parties– Parties who enter into a contract must be capable of doing so. It is necessary to be of sound mind and to have reached the age of majority.
  • Consent– Consent should be unrestricted, and the parties’ minds should meet. Consent must be genuine and unrestricted, and it cannot be obtained through deception, misrepresentation, or undue influence.
  • The Contract’s terms and conditions must be specific and not ambiguous.

E-CONTRACTS RECOGNITION

The Validity of E-contracts is emphasized in Section 10 of the Information Technology Act. To be valid, a contract must include the offeror offering for the proposal another person accepting the proposal, denial of the proposal, and acceptance, as valid, stated in electronic form via electronic channels. Such contracts cannot be declared void because electronic forms were working or for that purpose.

  • When electronic records are recognized and official to a contract when the electronic contract has been presented, conveyed, and acceptance has been received then Information Technology Act recognizes E-contracts as legal.
  • A Digital Signature Certificate is likewise legally legitimate and enforceable, according to the IT Act.
  • Indian Evidence Act of 1872- According to the Indian Evidence Act of 1872, a contract is legitimate if it contains any information in the form of an electronic record written on paper, stored and recorded in an optical created by computer.

EVIDENTIARY VALUE UNDER THE INDIAN EVIDENCE ACT

Electronic papers are recognized by Indian courts. The Indian Evidence Act of 1872, Section 65-A. The process for presenting evidence of electronic documents is governed by section 65-B of the Indian Evidence Act, 1872. Section 65B of the Indian Evidence Act states that any information that is contained in electronic records which are printed on paper, or a copy of that record which is created on magnetic media, is considered to be secondary evidence document if it meets the conditions in section 65B.

  • Section 85A– The assumption of electronic agreements includes this part. It says that once a digital signature is attached to an electronic record that represents the nature of an agreement, the document is regarded as finished. To ensure that e-contracts are authentic, Section 85A was enacted. The assumed value, however, has many limits. The presumption only applies to electronic recordings, electronic records older than five years, and electro records.
  • Section 85B– In the lack of evidence to the divergent, Section 85B provides that the court must assume that the record in question has not been tampered with in any way. The secure status of a record can be requested for a specific amount of time. 
  • Section 88B Any electronic message carried by the maker over an electronic media to the addressee to whom the message is to be sent is assumed to have been loaded into the computer for transmission.
  • Section 90A The court may assume that a digital signature was used to attest to the agreement’s legality if an electronic record is 5 years old and in proper care. A digital signature can be added to a document by anyone who has been permitted to do so. An exception can be made if the facts of a given instance indicate that the origin is likely.
  • Section 85 C– The court will assume that the information contained in a digital signature certificate is correct and true. The phrase “must suppose” relates to the court’s discretionary jurisdiction being expressly excluded.
  • Section 65B specifies that any information contained in an electronic record that is printed on paper and generated by a computer is considered a document.

In a country with a low literacy rate, such as India, the concept of ‘Digital India’ remains a long way off. People are still wary of making online purchases since the terms and conditions of such agreements are unclear. The type of law that governs electronic contracts is also vital to examine. Even though the Information Technology Act of 2000 legalized electronic contracts, it lacks particular rules. As a result, in terms of evidentiary value, we can claim that those electronic contracts are comparable to hard copy contracts. Because electronic contracts are legalized by the Information Technology Act, they are all valid contracts, and anyone who interrupts the terms and conditions may be held liable. Since then, many changes have been made in an attempt to gain conceptual clarity. The evidentiary value of an electronic record is determined by its quality. 

CASE LAWS

TRIMEX INTERNATIONALA FZE LTD. DUBAI VS VEDANTA ALUMINIUM LTD.

In this example, the parties communicated their offer and subsequent acceptance via email. The Supreme Court of India recognized the legitimacy of an electronic transaction and declared that if a contract is reached, a formal contract signed and initialled by the parties will not influence the contract’s implementation.

ARJUN PANDIT RAO VS KAILASH KUSHANRAO(JULY 2020)

The Supreme Court has ruled that when one enters into an electronic document as evidence, it is required compliance with Section 65B of the Indian Evidence Act. The certificate filed underneath this clause contains information on the electronic records as well as the identification and authorized signature of the person with official responsibility for the management and operation of the relevant device.

CONCLUSION

It can be concluded that electronic contracts are as similar as hard copy contracts if we consider the evidentiary value of the contract. All e-contracts are valid contracts as they are governed by the Information Technology Act and can be made liable if there arises a case of infringement with the terms and conditions

ENDNOTES

  1. https://www.legalserviceindia.com/article/l127-E-Contracts.html
  2. https://blog.ipleaders.in/admissibility-evidentiary-value-electronic-records/
  3. https://www.mylawman.co.in/2012/10/evidenciary-value-of-e-contracts-now.html

This article is written by Vidushi Joshi student at UPES, Dehradun.

ABSTRACT

The article is written by Naman Jain pursuing BBA-LLB from Bennett University, Greater Noida. This article endeavours to demystify the key concepts of force majeure and the repercussions of Covid-19 on contractual obligations. This article insights into the legal permissibility of this clause in the current scenario and highlights the elements to be considered before the invocation or while defending a force majeure claim.

ā€œLAW AND ORDER ARE THE MEDICINE OF THE BODY POLITIC AND WHEN THE BODY POLITIC GETS SICK, MEDICINE MUST BE ADMINISTEREDā€
~ DR. B.R. AMBEDKAR

INTRODUCTION

The continuous spread of COVID-19 has forced the country into a conspicuous uncertainty. Global disruptions are evident in the business and commercial sector. A significant population of the world has been put under lockdown. Due to this, operations carried by various businesses have been hindered and fulfilment of contractual obligations has been greatly impacted. The disruptions in the supply chain will lead to delay, interruption, or even cancellation of many contracts. As businesses are making plans to address this international emergency, this article provides guidance to inform strategic decision making in accordance with the contractual relationships. To escape from the contractual penalties arising due to missing project deadlines, non-payment, etc as a result of the pandemic, parties to contracts are bringing word like ā€œForce Majeureā€ in use.

WHAT IS ‘FORCE MAJEURE’ ?

The French phrase means a ā€œsuperior forceā€, is a law U/S 32 and 56 of Indian Contract Act, 1872. Black Law Dictionary defines it as ā€œIn the law of insurance, superior or irresistible force. Such clause is common in construction contracts to protect the parties in the event that a part of the contract cannot be performed due to causes which are outside the control of the parties and could not be avoided by the exercise of due careā€. It is a provision that protects a party in contractual agreement from liability for its failure to function the contractual obligations. It is an expressed provision in contract law which describes an extraordinary event involving circumstances beyond human control as an act of god or a superior force. Further, this clause frees both the parties from a contractual liability when some specified or uncertain events beyond human control obstruct the carrying of obligations under the contract.

As mentioned in the clause, this exhaustive list contains events like wars, riots, fire, flood natural calamities, lockouts, famines, and govt. action affecting any party to function or perform the pre-decided obligations under the contract cause its frustration or impossibility. The clause provides relaxations to perform the contractual obligations, but it does not entirely excuse a party from a contract. Moreover, it suspends the contract for the duration of that superior force. However, if this superior force continues to dominate for more than a specified period, the clause gives the power to both the parties to terminate the contract without any financial effects on either party.

Force Majeure principle is ruled by chapter 3 of the Indian Contract Act dealing with the contingent Contract. S. 32 of the act defines this Supreme power whereas S.56 is a rule of positive law which mentions about frustration. ā€˜Impossible’ or ā€˜Frustration’ is only confined to something which is beyond the control of both the parties and not to the literal impossibility to perform i.e. strikes or commercial hardships as held in the case of Satyabrata Ghose V. Mugneeram Bangur.

The Supreme Court in the case of Naihati Jute Mills Ltd. v. Hyaliram Jagannath held that ā€œA contract is not frustrated merely because the circumstances in which it was made are altered. The Courts have no general power to absolve a party from the performance of its part of the contract merely because its performance has become onerous on account of an unforeseen turn of events.ā€ The capacity to invoke the clause depends on the nature of the contract as well as the wordings of the contract. Therefore, with respect to the pandemic situations, implications of the above provisions would be dealt by the adjudicatory bodies on case to case basis.

FORCE MAJEURE AND COVID-19

The Ministry of Finance has clarified the doubt stating that disruption in supply and production chains due to the spread of coronavirus has to be considered as a case of natural calamity and Force Majeure clause may be invoked wherever appropriate according to the circumstance and nature of the contract. Many of the contracts are such in India that do not says explicitly to invoke the benefits of Force Majeure clause. Whether a contract on the account of Covid-19 has the capability to invoke the benefits of this clause is a fact-specific determination that totally depends on the nature of the obligations involved and the specific terms of the contracts. If in case the contract formed by the party does not involve ingredients of Force Majeure, then the party can claim under the ā€œDoctrine of Frustrationā€ U/s 56 of the Indian Contract Act, 1872. This doctrine makes the party excusable if the whole contract becomes impossible to perform. ā€˜Frustration’ and ā€˜impossible’ are often used interchangeably.

Force Majeure is an element of a contract being strict in nature while the doctrine of frustration is a common law concept.

In the light of the current situation, the lockdown has been imposed in India restricting the performance of some contracts. As the lockdown is imposed by the Govt. and is construed as an order of the Govt. Therefore, the party having the obligations to perform can issue a notice saying that such an event has occurred i.e. lockdown which is beyond its control and therefore, the provisions of Majeure clause can be triggered giving relaxation to the party by suspending the party till the supreme force i.e. lockdown gets over.
Further, the contracts made before lockdown between 2 parties involving advance payment and non-performed obligations which is impossible to execute at this time of lockdown in the purview of S. 56 of Indian Contract Act become void and the party who had paid advanced can claim for a refund as the one who received the payment in advance is bound to pay back the amount.

KEY ASPECTS WHILE INVOKING/DEFENDING FORCE MAJEURE

  • Keeping a track of the events that would be in accordance with the ingredients of the clause based on the contractual understanding of the parties and the nature of the contract. The list of the above events can be exhaustive or non-exhaustive in nature.
  • Actions that have to be taken to invoke the Force Majeure clause should be informed prior, with an issuance of notice to the opposite party.
  • Repercussions of the Force Majeure events, mitigation strategies, relaxations to be provided in performance and issues dealing with suspension or delay of standard quality performance should be analysed thoroughly.
  • Mindfulness of businesses in knowing that economic hardships i.e. higher cost of performing the obligations under a contract will not be a strong ground to assert Force Majeure clause or Frustration principle as a defence.

In the English case of Tsakiroglou & Co. Ltd. v. Noble Thorl GmbH, the facts comprise of a ship that needs to perform sale of coconuts by transporting it from one place to another. The contract was made but later at execution, it was found that the canal to be used on the customary route was closed. Despite knowing the fact, it was held that the above contract of sale of coconut cannot be considered impossible to perform and hence there was a way for the ship to travel from another passage being 3 times longer than the usual one. Economic hardship that was faced by the ship hence, failed to become a ground for frustration to contract. Therefore, the party failed to get the defence under this principle. The above view of the law was also stated in ‘Chitty on Contracts’, 31st edition. Further, the view of not to trigger Force Majeure clause unless an alternative way is available was evident in ‘Treitel on Frustration and Force Majeure’.

Moreover, legal advisors should be contacted by the parties to have a clear view of the sector they are involved in and the specific events and provisions being invoked to avoid any ambiguity later. Some cases where negligence or malfeasance of a party is seen, those are intended to get the benefit of the above clause. Understanding of the loopholes in law enforcing Force Majeure provisions with the guidance of legal practitioners would help in serving the justice better minimising the misuse of such benefit providing provisions of the law.

OTHER FACTORS AFFECTING FORCE MAJEURE CLAUSE

It would be important to note that the burden to proof of special circumstances, the events under the list of Force Majeure or Frustration principle and the mitigation assurance to be provided is on the party asserting Force Majeure defence. The liability is on the asserting party to prove the existence of Force Majeure conditions. Such clauses are construed strictly by Courts. Force Majeure clause is expressly provided and not implied under the Indian Law. Expressly means that courts will apply usual principles of contractual interpretation as per the scope of the clause to make decisions regarding the protection to be provided to the parties of the contract.

Parties can also attempt to invoke other contractual clauses. For instance, Material adverse Change (MAC) clause, price adjustment clauses, limitation and exclusion clauses to limit or minimise the burden of non-performance. Moreover, the companies can also consider the ramification of non-performance clauses to clarify the liquidity of damages and the amount of compensation for non-performance of contract which is pre-determined and agreed between the parties before making a contract.

REMEDIES

Remedies to the clause depends on the nature of contracts. For instance, some contracts may provide immediate cancellation, or some may put the contract on hold. Some may give leniency in time or in standard quality of performance. In the verdict of Alopi Parshad & Sons Ltd. v. Union of India, it was ruled out that the Indian Contract act does not enable a party to a contract to disregard their expressed statements made earlier and to claim compensation for the non-performance of a contractual obligation which was made at rates different from stipulated rates, on an indeterminate plea of equity. Irrespective of any sudden price hikes or market inflation or deflation, the party to a contract does not itself get rid of the bargain they have made and is liable to perform the obligation until proven in the Court that the above performance is ā€˜impossible’ or ā€˜impracticable’.

MITIGATING THE CURRENT CIRCUMSTANCES

With COVID-19 effects all over the globe, Life Insurance companies also have the right to invoke Force Majeure clause and escape the liability of paying the claims to the clients.

TURNING POINT

Insurance companies being private or public, have stated that they will not invoke this clause in cases of COVID-19 related death claims and will process them as fast as possible. This step was taken to assure the premium payers, that the Life Insurance industry is taking every possible measure to mitigate the disruptions and the suffering being caused, due to the lockdown. Further, the company will be providing the clients with maximum digital support to honour COVID-19 death claims in accordance with the ā€œsocial distancingā€ rules. A grace period of 30 days is bring provided by the company to pay their premiums. Relaxations in settlements of policy is being given due care and attention to keep the policyholders at ease. All the other special charges are exempted except the fund management charge. Options like partial withdrawal and switching of accounts will be restricted during the settlement period. Other insurance companies will be providing maximum support to cover the loss arising due to special unsure circumstances in the various businesses. Policyholders are falling largely on ā€˜Force Majeure’ and ā€˜Act of God clause’.

AROUND THE WORLD

COVID-19 virus arising from the Virus ology labs of China has already made the country to work on the problems arising due to non-performance of Contracts. China Council for The Promotion of International Trade (CCPIT) has already provided thousands of Force Majeure certificates to businesses, relaxing the difficulties in performing the specified obligations of their respective contracts. It is right to conclude that the invocation of the Force Majeure clause has been successful in China. If the clause is a failure to some of the businesses, then those companies can go for the provisions governing non-performance of contract due to impossibility or impracticability also known as ā€˜Frustration’ to contract as mentioned in the Uniform Commercial Code (UCC) of China.

In India, Department of Expenditure, Procurement Policy Division, Ministry of Finance discharged an Office Memorandum on February 19, 2020, with regard to the Government’s ā€˜Manual for Procurement of Goods, 2017, which sets out the direction for procurement by the government. Further, it states that COVID-19 could be brought under Force Majeure clause based on ā€˜Natural calamity’ providing that ā€˜due procedure’ has to be followed.

CONCLUSION

COVID-19 is having an unforeseeable impact on businesses and the companies. It has restricted the parties to perform their contractual obligations, leading to a decline in the economy. As discussed in detail, Force Majeure is an express provision and invoking it for the purpose of invocation or as a defence, depends on the nature of a contract, impossibility to perform, alternativity to perform and various other circumstances that are different in different cases and would be assessed by the Courts on a case by case basis. Contracting parties must go through the language of the contract so formed by them and the various provisions regarding them. This would help in determining the plausibility of their success. Presently, massive challenges are being faced by the society. The hope for everyone is that the wrecks of COVID-19 will go by swiftly.

REFERENCES

  • https://www.bloombergquint.com/opinion/coronavirus-key-legal-issues-for-india-inc-with-covid-19
  • https://www.wsgr.com/en/insights/covid-19-and-force-majeure-clauses.html
  • https://amlegals.com/covid-19-force-majeure/
  • https://www.mondaq.com/india/litigation-contracts-and-force-majeure/918092/time-it-or-time-out–force-majeure
  • https://www.business-standard.com/article/companies/life-insurers-will-not-invoke-force-majeure-clause-for-covid-19-claims-120040601452_1.html
  • https://www.lexology.com/library/detail.aspx?g=d63bbf8d-64ec-4595-ab87-633934115ab0

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This post is written by Anushree Tadge, 3rd year law student of ILS Law College, Pune, she tries to explain briefly what the concept of free consent is and why it is regarded as foundation stone of other Acts like Transfer of Property Act, Company Act, Family Laws etc.

Introduction to ā€˜Free Consent’

  • ā€˜Consent’ as a word is heard very often by individuals around the globe, as the feeling of ā€˜individuality’ is given importance more and more, consent as a provision is also evolving.   Derived from the Merriam Webster dictionary, ā€˜Consent’ is explained as ā€˜compliance in or approval of what is done or proposed by another.’
  • In simple words a voluntary agreement of one party to the proposal of others in order to reach or not reach the desired motive. Now even consents are of different types, these include implied, expressed, informed consent and unanimous consent. But, again for a person to provide consent, he/she should not be diagnosed with a mental disorder, age more than 18 years etc along with the major factor being the consent should be voluntary and not affected by any form of coercion. Fraud, undue influence.

ā€˜Free Consent in the Indian Contract Act, 1872’

  • Section 13 of the Indian Contract Act, 1872 (hereinafter referred to as Act) defines the term ‘Consent’ as Two or more persons are said to consent when they agree upon the same thing in the same sense.
  • For example, suppose there are two parties in a contract, A and B. It was seen that there was some land and ā€œAā€ put a proposal to sell. ā€œBā€ after being made aware of this proposal, analysed that it was the perfect opportunity, agreed to it. In this case, both parties showed their consent.
  • The principle of consensus-ad-idem is to be followed in contractual agreements.
  • Section 14 of the Act states that Consent is said to be free if the following factors are satisfied:
  • If the consent is free from coercion.
  • If the contract is not done under any undue influence.
  • If a contract is performed without any fraud.
  • The contract should not complete with any misrepresentation.
  • The contract should not be agreed to by mistake.
  • If there is no consensus, moreover free consensus between parties is very vital for the contact to be binding and legitimate. In case there is no free consent, the voidability of the contract depends if the aggrieved party wishes to challenge the legality of the contract leading them to be ā€˜voidable’ in nature.

Coercion

  • According to Section 15, it is the committing or threatening to perform, any act that is forbidden by the Indian Penal Code, 1860; or (ii) the unlawful detainment or threatening to do the same of any property, to the prejudice of any particular person, with the intention of leading any individual to enter into an agreement.
  • In the famous case of Ranganayakamma Vs. Alwar Setti (1889), A Hindu Widow of 13 years, was coerced into adopting a boy under the threat of not allowing cremation of her husband’s death. Following which, the widow feared and adopted the boy. Later she even applied for cancellation of the adoption. It was held that the adoption was voidable at her option as her consent was not free it was rather obtained by coercion is an offence under Sec 297 of the Indian Penal Code.
  • Now for cases where coercion is obtained by threats like ā€˜filing a suit’, it will also fall under the same category, because it is explicitly stated as an offence by the Indian Penal Code. In another interesting case of Ammiraju v. Seshamma, the issue was put forth whether ā€˜threat to commit suicide’ was a punishable offence? The Court ruled otherwise and put forth that such kind of coercion was not punishable by the IPC,1860.

Undue Influence

  • The second factor which makes ā€˜consent’ of particular cases to be compromised is Undue Influence. Section 16 (i) of the Act, defines undue influence as to where if the relationship existing between the parties are of such nature that one of the parties is in a superior position or can dominate the will of the other easily and actually uses that position to obtain an unfair benefit over the other person or force him/her to act particularly in a contract is ā€˜Undue Influence’.
  • Section 16 (2) of the Act states that a person is deemed to be in a position to dominate the will of another where:
  • He holds a real or some apparent authority over the other person. For e.g. Master and Servant
  • There exists a fiduciary relationship based on trust and confidence for e.g. guardian and ward
  • Contract with a person experiencing mental distress/ disorder/ weak intelligence/ illiterates etc.
  • The burden of proof lies on the party at whose end the contract seems voidable, there has to be compulsory proving of the fact that there existed a relationship where one party could dominate another and the party actually used such position to obtain an unfair advantage.

Fraud

  • The third way by which consent is unfree can be explained is Fraud. The term ‘fraud’ is defined in Section 17 of the Act as follows:
  • “Fraud includes any of the acts committed by one of the parties in a contract or by anyone of his agents, with an intention to deceive the other party so as to lead him to enter into the contract:

i) the suggestion of a fact, that is not true,

ii) the active concealment i.e. hiding of a fact.

iii) making a promise without any actual intention of performing it;

iv) any other act in order to deceive; any act or omitting the law which especially shows it to be fraudulent.”

  • A very interesting point to note is that the Section 17 says “Mere silence as far as facts are concerned are likely to affect the willingness of an individual to enter into a contract is not really fraud”. Although this rule has an exception to circumstances where there is a duty to speak and if the ā€˜contract is made in good faith.’

Misrepresentation

  • A representation, when performed in a wrong manner, innocently or intentionally, is called ‘misrepresentation’.
  • Misrepresentation should be made innocently, absolutely believing it to be true and without any intention of deceiving the other party.
  • Misrepresentation should be pertinent to the facts of the case. A mere expression of one’s opinion is not stating of a fact. It should also be used in inducing the other party into entering the contract. Like all the other forms explained in this post, even misrepresentation is voidable at the part of the aggrieved party, he can challenge the contract to be null and void or ask for an honest performance of the same.
  • However, under few circumstances the aggrieved party loses the right to rescind the contract, these are-
  • If the truth could be discovered with ordinary diligence.
  • If the consent is not actually induced due to misrepresentation.
  • If the parties cannot be led back in such a way that they acquire their original positions.
  • Even, after coming to know about misrepresentation if the party acts in such a manner that it shows it’s an affirmation to the contract, the party, in such case will automatically lose the right to rescind.

Mistake

  • Mistake is an incorrect assumption turning into a belief concerning anything.
  • Mistakes are of two kinds- Mistake of Law and Mistake of Fact.
  • Mistake of law can be of two types further

(ii) mistake related to foreign laws

(i) mistake related to the law of the land

  • A mistake of fact can also be divided into two –

(a) bilateral mistake.

(b) unilateral mistake.

  • Bilateral mistake may relate to topics like the subject-matter where both parties are combinedly at fault.Ā  Mistake of fact regarding subject-matter may be the existence of, the identity of, the title of, quantity of, quality of the subject-matter, or even its price. Such a mistake makes the Contract void.
  • A unilateral mistake is when only one party is at fault by virtue of the assumption that there is the same sense of subject matters in both parties. For e.g. A wants to sell a horse but B thinks it’s a pony.

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