Emails and contracts - communication and validity
Many people consider email to be an informal form of communication. As a result, offers, counter-offers and terms of proposed agreements are frequently exchanged via email with the hope and expectation that they are for negotiation purposes only.
As it is clear that the chosen topic revolves not only around Indian Contracts Act 1872 but also Information Technology Act 2000. So therefore question of validity is to be also considered in Electronic Contract as email falls under this category.
Though the Sec 10A of the Information Technology Act states the validity of electronic contracts but still digging further is required. The Sec 10A of IT Act provides the legislative authority to electronic contract. It was inserted through an amendment in 2008.
“Where in a contract formation, the communication of proposals, the acceptance of proposals, the revocation of proposals and acceptances, as the case may be, are expressed in electronic form or by means of an electronic record, such contract shall not be deemed to be unenforceable solely on the ground that such electronic form or means was used for that purpose.”
In business, e-mail are increasingly becoming the methods used to negotiate and agree on the terms of a transaction. For online businesses, these are virtually the only methods of communicating and carrying out transactions.
On broad a valid contract requires four elements-
1. Agreement – To have an enforceable contract, there must be an agreement between the parties. This requires an offer and an acceptance of that offer.
2. Consideration – The agreement must be supported by something of legal value given in exchange for the promise.
3. Contractual capacity – The parties to a contract must be able to legally enter into a contract. For example, minors are not legally capable of entering into a contract, so they lack contractual capacity.
4. Lawful object – The goal of a contract must be lawful. Contracts to commit a crime or contracts against public policy are void.
The question for these businesses is, “Are electronic contracts legally enforceable?” Assuming all of the elements to establish a traditional contract are present, an email or web contract can be a valid and enforceable agreement.
The courts have not clearly decided whether an acceptance by e-mail becomes valid when sent or when received. Instantaneous forms of communication such as faxes and telex communications do not fall under the mailbox rule, so acceptance by these methods is only valid when received.
Contracts which expressly permit the giving of notices by email typically deem the notice to have been received at:
(a) The time the email is sent by the sender;
(b) A specific period after the time it is sent by the sender; or
(c) The time shown on a "delivery receipt" received by the sender.
There are potential issues with all of these methods and no easy solutions.
For option (a), any delay between when the email is sent and when it is received is not accounted for, so what happens when the email is not received the instant it is sent? For option (b), what if the email is received after the specified period or not received at all? In both cases, it would be unfair on the recipient to deem the email to have been received before the recipient could have received it.
Again the big issue raised is also that do these emails result in binding contracts. So to sum up, a binding contract would take place once the acceptor dispatches the electronic record such that it enters a computer resource outside the control of the acceptor.
However, the above proposition may not hold well in all types of electronic contracts. The Supreme Court in Bhagwandas v. Girdharlal following the English decision in Entores Ltd. v. Miles Far East Corpn. has held that Section 4 of the Contract Act is only applicable in cases of non-instantaneous forms of communication and would not apply when instantaneous forms of communication are used. The Court observed that the draftsman of the Contract Act did not contemplate the use of instantaneous means of communications. Hence, where proposal and acceptance are made by instantaneous means of communications like the telephone, telex etc., and the postal rule does not apply and the contract is made where the acceptance is received. Therefore, the default rules elucidated above may have a relevance only in non-instantaneous forms of contract formation.
Though e-mail communication has some of the trappings of instantaneous communication, nevertheless, it is a fragmented process involving many stages. The e-mail message is split into various packets and sent via different routes. Further, unlike in instantaneous forms of communication, the sender does not know if the transmission of the e-mail is successful, for even though he gets a delivery receipt, it only signals delivery to the mailbox and does not indicate that the other party has the knowledge of the receipt. Thus, e-mail messages would come under the category of non-instantaneous form of communication. The default rules enunciated above would apply to e-mail contracts.
 Sec 10A of IT Act
 Section 10, Indian Contracts act 1972
 AIR 1966 SC 543
 (1955) 2 QBD 327 : (1955) 2 All ER 493