Contracting on the internet

Contract formation

Is it possible to form and conclude contracts digitally? If so, how are digital contracts formed and are there any exceptions for certain types of contract?

Yes, it is possible to form and conclude contracts electronically in terms of section 10-A of the Information Technology Act 2000 (the IT Act). Further, click wrap contracts are enforceable in India. As long as the essentials of a valid contract under the Indian Contract Act 1872 are met, an online contract is valid and enforceable under Indian law. The IT Act provides validity to a contract where the contract has been accepted in electronic form. However, in the absence of a digital signature, the burden of proof in respect of authenticity of such electronic contract is on the party claiming such contract to be a valid contract.

The usage of digital signatures for execution of contracts in India is not as common as its usage for filing the relevant filings with the authorities such as the Registrar of Companies.

Applicable laws

Are there any particular laws that limit the choice of governing law, language of the contract or forum for disputes when entering into digital contracts? Do these distinguish between business-to-consumer and business-to-business contracts?

In India, the provisions of the IT Act and the Indian Contract Act 1872 govern digital contracts. Additionally, the Indian Evidence Act 1872 governs admissibility of electronic records and contracts, and states that any information contained in an electronic record which is printed on paper, stored, recorded or copied in optical or magnetic media produced by a computer will be deemed a document of proof and will be admissible in any proceedings, without further proof or production of the original; provided certain prescribed conditions are satisfied.

Further, the following rules under the IT Act govern the digital execution of a contract:

  • the Information Technology (Certifying Authorities) Rules 2000;
  • the Digital Signature (End Entity) Rules 2015; and
  • the Information Technology (Use of Electronic Records and Digital Signature) Rules 2004.
Electronic signatures

How does the law recognise or define digital or e-signatures? Must digital or e-signature providers be registered or licensed in your jurisdiction?

The IT Act provides legal recognition to 'electronic signatures' and lays down the framework that governs their use. It expressly includes 'digital signature' as a form of 'electronic signature', subject to its adherence to the authentication requirements prescribed under the IT Act. An electronic signature may be used at any place where any law provides for the use of a signature for authentication. Usage of digital signature is very common for e-filing with the Ministry of Corporate Affairs, and goods and services tax authorities. An ‘electronic signature’ refers to authentication of an electronic record by a subscriber by means of the prescribed electronic technique, and includes digital signatures.

As per the IT Act read with the Information Technology (Certifying Authorities) Rules 2000, an entity proposing to issue digital signatures (as recognised under the law) requires a licence, namely, a digital signature certificate from the Controller of Certifying Authorities. While the IT Act recognises electronic signatures, only an electronic contract with a digital signature certified in terms of the IT Act and the rules thereunder can be admissible as evidence in the court proceedings (akin to a physically signed contract), without the necessity to prove the integrity and authenticity of such electronic contract.

Breach

Are any special forums for dispute resolution or remedies available for the breach of digital contracts?

The remedies available under the Indian Contract Act 1872 for breach of a contract may also be availed of for electronic contracts. There are no specific remedies prescribed for the breach of an electronic contract in India.

Financial services

Data retention

Are there any data retention or software legacy requirements in relation to the formation of electronic contracts?

In terms of section 7 of the IT Act, where any law requires documents, records or information to be retained for any specific period, this requirement may be satisfied if these documents, records or information are retained in electronic form if:

  • the information contained therein remains accessible so as to be usable for a subsequent reference;
  • the electronic record is retained in the format in which it was originally generated, sent or received, or in a format that can be demonstrated to accurately represent the information originally generated, sent or received; and
  • the details that will facilitate the identification of the origin, destination, date and time of despatch or receipt of such electronic record are available in the electronic record.

 

For the purposes of electronic contracts, if such contracts are relevant to the books of accounts of a company, these contracts should be retained for a period of eight years (as required by the (Indian) Companies Act 2013). Further, other laws as applicable to retention of data in physical form are applicable for maintaining data in electronic form as well.