This presentation provides an insight to the types of the electronic contracts in India and the law associated with the same - by Vijay Pal Dalmia

1. ELECTRONIC
CONTRACTS
VIJAY PAL DALMIA
VAISH ASSOCIATES ADVOCATES

2. NATURE OF INTERNET
 No physical boundaries.No physical boundaries.
 No writing.No writing.
 No handwritten signature, seals, thumbNo handwritten signature, seals, thumb
impression.impression.
 Lack of Security, risk factor high.Lack of Security, risk factor high.
 Taxes, rules, regulations, betweenTaxes, rules, regulations, between
countries not clearly defined.countries not clearly defined.
 Technology fast changing.Technology fast changing.
 Ignorance of Common man aboutIgnorance of Common man about
technology.technology.
 No single authority over Internet whoNo single authority over Internet who
can decide.can decide.

3. ELECTRONIC CONTRACT
 There are three main methods of contractingThere are three main methods of contracting
electronically:electronically:
 Electronic mail, or e-mailElectronic mail, or e-mail
 Website ContractsWebsite Contracts
 Online/Click to Agree ContractsOnline/Click to Agree Contracts

4. CLASSIFICATION AS TO
SUBJECT MATTER
 Sale of physical goodsSale of physical goods - goods are- goods are
ordered over the Internet with paymentordered over the Internet with payment
via the Internet but delivery occurs in thevia the Internet but delivery occurs in the
usual way;usual way;
 Sale of digitised productsSale of digitised products - goods such- goods such
as software can be ordered, paid foras software can be ordered, paid for
and delivered on-line;and delivered on-line;
 Supply of servicesSupply of services - examples include- examples include
electronic banking, sale of shares,electronic banking, sale of shares,
financial advice, or consumer advice.financial advice, or consumer advice.

5. ESSENTIALS OF AN ELECTRONIC
CONTRACT
 Offer and Acceptance, throughOffer and Acceptance, through
 EmailEmail
 Website FormsWebsite Forms
 Online AgreementsOnline Agreements
 Lawful ConsiderationLawful Consideration
 Selling a pornographic movieSelling a pornographic movie
 Intention to create legal relationshipIntention to create legal relationship
 Website providing Cultural informationWebsite providing Cultural information

6. ESSENTIALS OF AN ELECTRONIC
CONTRACT
 Competent to ContractCompetent to Contract
 How to ascertain the age online???How to ascertain the age online???
 Free ConsentFree Consent
 No Real-Time InteractionNo Real-Time Interaction
 Lawful ObjectLawful Object
 Possibility of performancePossibility of performance

7. ISSUES IN ELECTRONIC
CONTRACTS
 AuthenticityAuthenticity
 As to source or origin of the communicationAs to source or origin of the communication
 IntegrityIntegrity
 As to accuracy and totality of the communicationAs to accuracy and totality of the communication
 Non repudiationNon repudiation
 As not being able to deny the communicationAs not being able to deny the communication
 Writing and signatureWriting and signature
 ConfidentialityConfidentiality
 As to control the disclosure of information duringAs to control the disclosure of information during
transmissiontransmission

8. ISSUES IN ELECTRONIC
CONTRACTS
 Use of Electronic SignaturesUse of Electronic Signatures
 Digital SignatureDigital Signature
 Bio-metric MeasuresBio-metric Measures

9. INFORMATION TECHNOLOGY
ACT, 2000
 Concept of Originator and AddresseeConcept of Originator and Addressee
 Acknowledgement of receipt ofAcknowledgement of receipt of
Record/data/imformationRecord/data/imformation
 Time of Dispatch and ReceiptTime of Dispatch and Receipt
 ““Instantaneous” CommunicationsInstantaneous” Communications
 POSTAL RULEPOSTAL RULE
 Applicable to email contracts??Applicable to email contracts??
 Applicable to transaction over world wide webApplicable to transaction over world wide web
(www)???(www)???

10. ORGINATOR
 AnAn OriginatorOriginator is a person who:is a person who:
 sends, generates, stores or transmits any electronicsends, generates, stores or transmits any electronic
message ormessage or
 causes any electronic message to be sent, generated,causes any electronic message to be sent, generated,
stored or transmitted to any other person.stored or transmitted to any other person.
 An electronic record shall be attributed to theAn electronic record shall be attributed to the
originator—originator—
 if it was sent by the originator himself;if it was sent by the originator himself;
 by a person who had the authority to act on behalf ofby a person who had the authority to act on behalf of
the originator in respect of that electronic record; orthe originator in respect of that electronic record; or
 by an information system programmed by or on behalf ofby an information system programmed by or on behalf of
the originator to operate automatically.the originator to operate automatically.
 Does not include an intermediary like ISP etc.Does not include an intermediary like ISP etc.

11. ACKNOWLEDGEMENT OF
RECEIPT
 AnAn AddresseeAddressee means a person who ismeans a person who is
intended by the originator to receive theintended by the originator to receive the
electronic recordelectronic record
 but does not include any intermediarybut does not include any intermediary
 Where the originator has not agreed withWhere the originator has not agreed with
the addressee that the acknowledgment ofthe addressee that the acknowledgment of
receipt of electronic record be given in areceipt of electronic record be given in a
particular form or by a particular method,particular form or by a particular method,
an acknowledgment may be given by:an acknowledgment may be given by:
 any communication by the addressee, automatedany communication by the addressee, automated
or otherwise; oror otherwise; or
 any conduct of the addressee, sufficient toany conduct of the addressee, sufficient to
indicate to the originator that the electronicindicate to the originator that the electronic
record has been received.record has been received.

12. TIME AND PLACE OF DISPATCH
AND RECEIPT
 Time of Dispatch:Time of Dispatch: Dispatch of an electronic recordDispatch of an electronic record
occurs, "when it enters a computer resource outsideoccurs, "when it enters a computer resource outside
the control of the originator", unless agreed to thethe control of the originator", unless agreed to the
contrary between the originator and the addressee.contrary between the originator and the addressee.

13. TIME AND PLACE OF DISPATCH
AND RECEIPT
Time of Receipt:Time of Receipt:
 If the addressee has designated a computerIf the addressee has designated a computer
resource for the purpose of receiving electronicresource for the purpose of receiving electronic
records:records:
 receipt occurs at the time when the electronicreceipt occurs at the time when the electronic
record enters the designated computerrecord enters the designated computer
resource; orresource; or
 if the electronic record is sent to a computerif the electronic record is sent to a computer
resource of the addressee that is not theresource of the addressee that is not the
designated computer resource, receipt occursdesignated computer resource, receipt occurs
at the time when the electronic record isat the time when the electronic record is
retrieved by the addressee;retrieved by the addressee;
 If the addressee has not designated a computerIf the addressee has not designated a computer
resource along with specified timings, if any, receiptresource along with specified timings, if any, receipt
occurs when the electronic record enters theoccurs when the electronic record enters the
computer resource of the addressee.computer resource of the addressee.
 Unless agreed to the contraryUnless agreed to the contrary

14. TIME AND PLACE OF DISPATCH
AND RECEIPT
Place of Dispatch and Receipt:
 an electronic record is deemed to be despatched atan electronic record is deemed to be despatched at
the place where the originator has his place ofthe place where the originator has his place of
business,business,
 An electronic record is deemed to be received at theAn electronic record is deemed to be received at the
place where the addressee has his place of businessplace where the addressee has his place of business..

15. JURISDICTIONAL ISSUES
 Depends onDepends on where the contract haswhere the contract has
been formed (place of contract)been formed (place of contract)
 Difficult and Uncertain to determineDifficult and Uncertain to determine
 Cross-Border TransactionsCross-Border Transactions
 Different National RulesDifferent National Rules
 EmailEmail
 Websites having multiple servers inWebsites having multiple servers in
different jurisdictionsdifferent jurisdictions
 Mirror WebsitesMirror Websites

16. INCOPORATING
CONTRACTUAL TERMS
 Incorporating Express TermsIncorporating Express Terms
 Incorporating Terms by ReferenceIncorporating Terms by Reference
 Implied TermsImplied Terms

17. TYPES OF ELECTRONIC
CONTRACT
There are several types of contracts that personsThere are several types of contracts that persons
engaged in the business of manufacture ofengaged in the business of manufacture of
software or hardware would, in course of theirsoftware or hardware would, in course of their
business, be required to enter into. These are:business, be required to enter into. These are:
 Click Wrap ContractClick Wrap Contract
 Source Code Escrow AgreementsSource Code Escrow Agreements
 Software Development & Licensing AgreementsSoftware Development & Licensing Agreements
 Shrink Wrap ContractShrink Wrap Contract
 Employment ContractsEmployment Contracts
 Consultant AgreementsConsultant Agreements
 Contractor AgreementsContractor Agreements
 Sales, Re-Seller & Distributor AgreementsSales, Re-Seller & Distributor Agreements
 Non-disclosure AgreementsNon-disclosure Agreements

18. CLICK WRAP CONTRACT
 A "click-wrap agreement" is a Web version of theA "click-wrap agreement" is a Web version of the
shrink-wrap licensing agreement. It comes intoshrink-wrap licensing agreement. It comes into
force when an online buyer or user clicks on theforce when an online buyer or user clicks on the
'I Agree' button on the webpage to purchase or'I Agree' button on the webpage to purchase or
download a program. The term "click-wrap" isdownload a program. The term "click-wrap" is
derived from the fact that such onlinederived from the fact that such online
agreements often require clicking with a mouseagreements often require clicking with a mouse
on an on-screen icon or button to signal a party'son an on-screen icon or button to signal a party's
acceptance of the contract. Among otheracceptance of the contract. Among other
things, click-wrap agreements are used to:things, click-wrap agreements are used to:
 establish the terms for the download and use ofestablish the terms for the download and use of
software over the Internet;software over the Internet;
 set forth a Web site's Terms of Service,set forth a Web site's Terms of Service, i.e.,i.e., the rules bythe rules by
which users may access the Web site or a portion ofwhich users may access the Web site or a portion of
the Web site such as a chat or message service; andthe Web site such as a chat or message service; and
 establish the terms for the sale of goods and servicesestablish the terms for the sale of goods and services
online.online.

19. CLICK WRAP CONTRACT
 Type and ClickType and Click where the user must typewhere the user must type
"I accept" or other specified words in an"I accept" or other specified words in an
on-screen box and then click a "Submit"on-screen box and then click a "Submit"
or similar button. This displaysor similar button. This displays
acceptance of the terms of theacceptance of the terms of the
contract. A user cannot proceed tocontract. A user cannot proceed to
download or view the target informationdownload or view the target information
without following these steps.without following these steps.
 Icon ClickingIcon Clicking where the user must clickwhere the user must click
on an "OK" or "I agree“ button on aon an "OK" or "I agree“ button on a
dialog box or pop-up window. A userdialog box or pop-up window. A user
indicates rejection by clicking “Cancel”indicates rejection by clicking “Cancel”
or closing the window.or closing the window.

20. SOURCE CODE ESCROW
AGREEMENTS
 A Source Code Escrow Agreement is anA Source Code Escrow Agreement is an
agreement betweenagreement between
 the software owner,the software owner,
 the party receiving the license andthe party receiving the license and
 the escrow agent.the escrow agent.
 It is for the deposit of the source code of aIt is for the deposit of the source code of a
software with a third party escrow agent.software with a third party escrow agent.
 Escrow is typically requested by a party licensingEscrow is typically requested by a party licensing
software (the licensee), to ensure maintenancesoftware (the licensee), to ensure maintenance
of the software.of the software.
 The software source code is released to theThe software source code is released to the
licensee if the licensor files for bankruptcy orlicensee if the licensor files for bankruptcy or
otherwise fails to maintain and update theotherwise fails to maintain and update the
software as promised in the software licensesoftware as promised in the software license
agreement.agreement.

21. SOFTWARE DEVELOPMENT &
LICENSING AGREEMENTS
 It is also known asIt is also known as End-User LicenseEnd-User License
Agreement.Agreement.
 An End User License Agreement is aAn End User License Agreement is a
legal contract between thelegal contract between the
manufacturer and/or the author and themanufacturer and/or the author and the
end user of an application.end user of an application.
 The End User License Agreement detailsThe End User License Agreement details
how the software can and cannot behow the software can and cannot be
used and any restrictions that theused and any restrictions that the
manufacturer imposesmanufacturer imposes
 For example, most such agreements ofFor example, most such agreements of
proprietary software prohibit the userproprietary software prohibit the user
from sharing the software with anyonefrom sharing the software with anyone
else.else.

22. SHRINK WRAP CONTRACT
 The term "shrink wrap agreement" refers to theThe term "shrink wrap agreement" refers to the
purchase agreements that are attached topurchase agreements that are attached to
shipped products, usually bound by shrink wrapshipped products, usually bound by shrink wrap
(plastic wrapping) that contain terms and(plastic wrapping) that contain terms and
conditions. Shrink wrap agreements can includeconditions. Shrink wrap agreements can include
the following terms:the following terms:
 licenseslicenses
 rights of userights of use
 fees and paymentsfees and payments
 forum clausesforum clauses
 warranties andwarranties and
 limitations of liability.limitations of liability.
 Are Shrink Wrap Agreements Enforceable???Are Shrink Wrap Agreements Enforceable???

23. EMPLOYMENT CONTRACTS
 The employment contracts are made for the purpose
of governing the relationship between the
management and the employees of the company.
There contracts are need to be drafted carefully,
keeping in mind the interest of the company, as well
as the law relating to the enforcement of such
contract.

24. CONSULTANT AGREEMENTS
 There is a fast growing trend, to hire persons asThere is a fast growing trend, to hire persons as
consultants rather than take them on the roll of theconsultants rather than take them on the roll of the
company. In such case it would be necessary tocompany. In such case it would be necessary to
execute a ‘Consultant contract’. It is very similar to theexecute a ‘Consultant contract’. It is very similar to the
employee agreement.employee agreement.

25. CONTRACTOR AGREEMENTS
 Similar to the consultant contract the companiesSimilar to the consultant contract the companies
prefer to enter into contractor agreement in case ofprefer to enter into contractor agreement in case of
the smaller companies. Care must be taken in regardthe smaller companies. Care must be taken in regard
to the maintainance of the confidentiality of theto the maintainance of the confidentiality of the
imformation that such contract employees would beimformation that such contract employees would be
exposed to, as well as standard protection of theexposed to, as well as standard protection of the
proprietary information.proprietary information.

26. SALES, RE-SELLER &
DISTRIBUTOR AGREEMENTS
 In addition to the employees hired forIn addition to the employees hired for
the development of its products,the development of its products,
imformation technology companies alsoimformation technology companies also
engage personnel for the sales andengage personnel for the sales and
marketing of the products developmentmarketing of the products development
in such companies. The company wouldin such companies. The company would
enter into re-seller and distributionenter into re-seller and distribution
agreement with those persons. Careagreement with those persons. Care
must be take to ensure that restrictionsmust be take to ensure that restrictions
on territory, price, classes of persons foron territory, price, classes of persons for
whom goods are bought and sold.whom goods are bought and sold.

27. NON-DISCLOSURE
AGREEMENTS
 Under certain circumstances, software companiesUnder certain circumstances, software companies
working on a specific project, would be requiredworking on a specific project, would be required
to obtain employee non-discloser agreements fromto obtain employee non-discloser agreements from
their employees, in respect of the project upontheir employees, in respect of the project upon
workingworking

28. Vaish Associates Advocates
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email:- vpdalmia@vaishlaw.com
Intellectual Property & Information Technology Laws Division