The concept of digital signature is contemporary concept in the world of business agreement. On the other hand, a contract is a document which binds both the parties to an agreement. This particular blog will deal with the relation between digital signature and legal contract. Before the initiation of the internet economy, there was no concept of digital signature due to this often with its introduction the validity of a legal contract is questioned. As per the Indian Contract Act, 1872 (Hereinafter Contract Act) which defines a contract under section 2(h) states that an agreement enforceable by law is considered as contract. For a contract to be valid there has to be an offer, acceptance of that offer, a promise to perform the accepted offer, lawful consideration, lawful object and free consent of the parties.
As per Section 10 of the Contract Act, an agreement will be considered as a contract if it is made by the parties with free consent who are competent to contract, which has lawful object. As per the Information Technology Act, 2000 (Hereinafter IT Act) which protects e-contracts also ensure that contracts which are signed with digital signature will be considered as a valid document in the eyes of law. After the initiation of the IT Act, The Delhi High Court in the case of Societe Des Products Nestle v. Essar Industries, paved a clear road for the immediate introduction of Sec. 65A and Sec. 65B in the Indian Evidence Act, 1872 for admissibility of computer generated evidence. In another case of State of Delhi v. Mohammad Afzal, the court stated that electronic records are admissible in the court of law.
The above case laws demarcate that digital signature are valid legally considering that the requirements of the contract are fulfilled. As there are different forms of e-contracts in the internet currently, which might have disparate procedures for collection of consent by the document. Under the ICA, Sec. 14 of enshrines the situations when free consent is not caused in the situation of coercion, undue influence, fraud, misrepresentation and mistake.
While under the different forms of e-contract such as Click Wrap where the buyer has to ‘click’ on ‘I agree’ to provide consent to enter into the agreement, there are some other forms of e-contracts which are not very acceptable to the world community. As for Shrink Wrap e-contracts, the consumer cannot go through the contents of the contract as the consumer agrees to the terms and conditions of the contract just by the mere usage of the software. The world of internet community considers this often as violation of the concept of ‘free consent’ as neither the consent of the parties has been achieved and nor there is a usage of digital signature which confirms the identity of the consumer.
As for the contracts that are conveyed through digital signature under the IT Act, under Sec. 10A of the IT Act expressly provides for validity of contracts through electronic means “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.” This states that digital signatures which are approved under Sec. 5 of the IT Act are a valid mode of transaction. This certifies that in case of any future disputes, digital signature can be used any a form of evidence of agreement of the parties in a contract.
Apart from the various provisions of the IT Act, Sec. 72A of the act states punishment for disclosure of information in breach of lawful contract. The provision mentions that in case an intermediary which can be a website or any organ while providing services under the terms of lawful contract has secured access to any material which may cause harm to another person in order to achieve a wrongful loss or gain without the consent of the party of whom the information is collected shall be punished with imprisonment or fine. The punishment can be awarded for not more than three years and the fine may extend upto five lakhs. As per the discretion of the court, a person may be awarded with both imprisonment and fine. This provision highlights that under the IT Act, in cases of online e-contracts between the parties that may be an originator or addressor shall not receive signature from the consumer which might be vital personal information.
Apart from separate concepts of legal contract and digital signatures, there is another clubbed concept of electronic contracts which are merely communicated via internet. In these forms of transaction, the entire traditional concept of contract is removed. Though in India, there is an absence of any particular law dealing primarily with electronic contract the IT Act, attempts to describe the subject matter under Sec. 10-A. Electronic contracts are legally enforceable promises or set of promises that are concluded using electronic medium. Through such initiatives it can be derived that electronic contracts are an accepted format of business transaction and commercial laws.
In the case of Trimex Internation Fze Ltd. v. Vedanta Aluminium Ltd, the court recognized the validity of electronic transaction considering e-mails as an exchange between parties regarding mutual obligation constitute a contract. As from the above discussions it can be deciphered that a contract that is enforceable by law can be accompanied by a digital signature is considered a valid document. Thus both with the assistance of legislations and available judgments, digital signatures are valid under contracts enforceable by law.