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Electronic Contracts


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Lectures by Dr. Tabrez Ahmad

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Electronic Contracts

  1. 1. Electronic Contracts By Dr. Tabrez Ahmad Professor of Law Online Contract Shrink wrap contract Click wrap contract Dr. Tabrez Ahmad, 1
  2. 2. Essentials of a General Contract The underlying postulate in any legal regime governing contractual relations is, that the contracting parties must adhere to the terms of the contract and also get adequate redressal in the event of breach thereof. The basic issues involved in any contract are:1. Intention to enter into legal relation;2. Proposal;3. Acceptance;4. Communication;5. Consideration;6. Competency of parties;7. Remedies for breach of contract Dr. Tabrez Ahmad, 2
  3. 3. Application of the essential features of the general contracts in cyberspace. In commercial contracts, the requisite intent is normally presumed to exist and this presumption may equally apply to online contracts/cyber contracts/electronic contracts etc. All the essential features of the general contracts should be examined in cyberspace Some of the essential are well applied but some features are difficult to be applied because of the unique nature of the Cyberspace and Internet. Dr. Tabrez Ahmad, 3
  4. 4. Definition of Electronic contract orInternet Contract or Cyber Contract An internet contract, is typically a contract that is entered into through the medium of the internet either by suing and of the various constructs of the world wide web (such as click wrap contracts) or through the exchange of e-mail stating offer and acceptance of the term and condition of a particular transaction. Dr. Tabrez Ahmad, 4
  5. 5. Cont… It is similar to traditional contracts in that it sets out the right and duties, obligations and liabilities of the contracting parties, as well as the services to be rendered and the consideration to be received by the parties. At the same time it is distinct from the traditional concept of contracts in that our understanding of the concepts of offer and acceptance must necessarily undergo a change consistent with the nature of the medium while an understanding will have to be arrived at with regard to the scope of Jurisdiction of courts in respect of Internet contacts. Dr. Tabrez Ahmad, 5
  6. 6. Cont… The legal issues and problems arising from cyber contracts have not so for been addressed or adjudicated by our courts and so for the scepticism of the contracting parties regarding the legal principles to be applied is well founded despite the fact that the Information Technology Act 2000 and the allied amendments to Indian Penal Code, 1860;The Indian Evidence Act, 1872; The Bankers Book Evidence Act, 1891 and The Reserve Bank of India Act, 1934 is a timely legislative attempt to tackle some of the complicated legal issues and problems. Dr. Tabrez Ahmad, 6
  7. 7. Kinds There may be two major kinds of electronic contracts Click wrap contract Shrink wrap contract Dr. Tabrez Ahmad, 7
  8. 8. Shrink wrap ContractTrial judge in ProCD v Ziedenberg 980 F spp. 640 (W.D Wis 1996)Held that a shrink wrap license violates a basic notion of contract law that both parties have to know what they are agreeing to. This decision was overturned on its appeal to the U.S. 7th Circuit Court of Appeals ( 86 F. 3rd 1447) 1996. According to 7th Circuit, Shrink wrap licenses to be enforceable because they have the beneficial effect of reducing the cost of software for consumers. Dr. Tabrez Ahmad, 8
  9. 9.  The court of Appeal’s decision also upheld the validity of the shrink wrap license in the question in the ProCD case, because the license allowed the purchaser to return the software if the terms of license were un acceptable. Indian courts however emphasise reasonable notice of the terms of the contract for the terms to be binding. Dr. Tabrez Ahmad, 9
  10. 10. Click wrap license In the case of Caspi v The Microsoft network L.L.C Supreme Court of New Jersey Appellate Division 1999 N.J. Super. Lexis 254 (July 2 1998).Validity of Click wrap license was examined.Before becoming an MSN member; a prospective subscriber is prompted by MSN software to view multiple computer screens of information, including a membership agreement which contains the above clause. MSN’s membership agreement appears on the computer screen in a scrollable window next to the block providing the choice “ I Agree” and I Don’t Agree”. Dr. Tabrez Ahmad, 10
  11. 11. Cont…Prospective members assent to the terms of the agreement by clicking on “ I Agree” using a computer mouse. Prospective members have the option to click “ I Agree or I Don’t Agree” at any point while scrolling through the agreement. Registration may proceed only after the potential subscriber had the opportunity to view and have assented to the membership agreement, including the MSN’s forum selection clause. No charges are incurred until after the membership agreement review is completed and a subscriber has clicked on “I Agree”. Dr. Tabrez Ahmad, 11
  12. 12.  Thanks and wish you all the best for your End Semester Examinations 2008 Dr. Tabrez Ahmad, 12