Part-A

Short Notes
Ans. No. 1:- Essential features of online contract

Introduction:

Since the last decade, there has been a tremendous technology

revolution. Internet and transactions over the internet have become the sine
qua non of everyday transactions throughout the world. The advent of Internet
has changed the mode of entering into an agreement but the essentials of a
valid contract are one and the same. In India the rules relating to formation of
contracts, its validity and enforcement are regulated by Indian Contract Act
1872.

In recent years, online shopping has become very popular among

masses. As a result consumers are doing more shopping on the internet and
taking advantage of the ease of making purchases online. These E-markets are
technological extensions of physical markets in the cyberspace. Everything
that exists in the physical world now exists in cyberspace.

As new technologies change the way people purchase products, it is

essential that the law adapts to the changing environment by enacting
legislation that both encourages businesses to adopt an e-commerce strategy,
whilst still protecting consumers. E-markets are functioning like physical
markets. E-buyers and E-sellers are fulfilling all the legal pre-requisites to
have binding relationships between them. Online contract is one such
relationship that binds the buyer with the seller. As a result, a uniform
legislative operates, which applies to both electronic and face-to-face
commercial transactions, equally.

The Law which Operates

Indian Contract Act, 1872:-

The ability to form contracts online has revolutionized the way business
is conducted. Nowadays, almost all types of contract can be made online,
there are very few which the law requires are still made 'in writing' or are
physically signed by the parties.
 Contracting online is essentially the same as contracting off-line The
same requirements have to be fulfilled in order to ensure that the contract is
legally binding. These requirements are fairly described in Indian Contract Act,
1872.

According to Section 2(h) of the Act, an agreement enforceable by law

is a contract.

Section 2(e) defines the agreement as every promise and every set of
promises forming the consideration for each other is an agreement.

Promise is a result of an offer (proposal) by one person and its

acceptance by the other. Thus in general terms, for a contract to exist there
has to be a proposal, and an assent to the proposal, which transforms into a
promise. When such promise is supported by the some form of 'consideration'
payment of some kind for the goods or services being provided becomes an
agreement and when this agreement is enforceable by law becomes a
contract.

Essential features of online contract:-

At a basic level an online contract formation requires online offer by one

party and its online acceptance by the other party.

Its important to be aware, that just because a transaction has been

performed online, still does not negate the fact that all of the required
elements of Indian Contract Act are still applicable. i.e. to say all the
requirements mentioned under section 10 of the Act must be satisfied to form
a valid contract, such as:

1. Valid offer and acceptance

2. Lawful consideration
3. Lawful object and,
4. Capacity to enter into a contract.
5. Must not have been expressly declared to be void.
1. Valid offer and acceptance:- An agreement is the result of a
proposal(offer) by one party followed by its acceptance by other. The
concept of offer is simple: a web site offers goods, services, software,
membership in the site etc. etc. and that offer is contained, in some sort
 of agreement posted on the site. For validity of contract, offer must be
proper, unambiguous, supported by consideration and the agreement
must be made by free consent of the parties. So far as acceptance is
concerned, for a valid acceptance offer must be communicate to the
acceptor and must come to the knowledge of the acceptor before the
acceptance.
In Lalman Shukla v. Gauri Dutt,(1913)11 All. L.J. 489 the
defendants nephew absconded from home. The plaintiff, who was the
defendants servant, was sent to search for the missing boy. After the
plaintiff had left in search of the boy, the defendant announced a reward
of Rs. 501 to anyone who might find out the boy. The plaintiff was
successful in searching the boy. Held that since he was ignorant of the
offer of reward, his act of bringing the boy did not amount to acceptance
of the offer and therefore not entitled to reward.
2. Consideration :- Consideration means something of value being
exchanged between the parties. Presence of consideration is one of the
essentials of a valid contract. Subject to certain exceptions, the general
rule in India is that3an agreement without consideration is void.
3. Lawful object:- another essential for the validity of contract is that its
object must be lawful in the eyes of law of the land.
4. Capacity to enter into the Contract:- Moreover, it is important that
the parties must be competent to contract. As per section 11 of the Act,
every person is competent to contract who is of the age of majority
according to the law to which he is subject, and who is of sound mind,
and is not disqualified from contracting by any law to which he is
subject. In Mohari Bibi v. Dharamodas (1903) 30 I.A. 114(P.C.) it
was held that agreement by minor is void.
5. Must not have been expressly declared to be void:- Last condition
which is essential for a valid contract is that it must not has been
expressly declared to be void. Sections 26-30 and section 56 of the
Indian Contract Act specify the agreements which are void agreements
viz. agreement in restraint of marriage, trade, legal proceedings etc.

The necessary elements for creating an e-commerce contract:-

 Besides the above mentioned essential features, if a small business
owner wishes to create an enforceable contract, there are certain general
requirements which must be present in creating an agreement with a
customer:

unambiguous notice to the customer that the online transaction is governed

by the terms of contract law

an opportunity for the customer to review the terms and conditions of the
agreement before being bound by the contract

a clear statement of what constitutes acceptance of the agreement.

Online Contract/Agreements Overview

1. A contract is no less a contract simply because it is entered into via a

computer.
2. Courts generally apply traditional contract law principles to online contracts.
3. As with any contract, a users failure to read a click-wrap agreement prior
to accepting its terms, will not excuse compliance with its terms.

Conclusion:-
A contract is no less a contract simply because it is entered into via a
computer. Courts generally apply traditional contract law principles to online
contracts. As with any contract, a users failure to read a click-wrap
agreement prior to accepting its terms, will not excuse compliance with its
terms

Its important to be aware, that businesses that conduct transactions

online are still bound by the relevant industry codes of practice, along with
India and international laws that govern internet transactions.

Both businesses and consumers should always keep in mind, that just
because a transaction has been initiated electronically, it does not mean that
the agreement is not enforceable, and Indian case laws as well as IT Act have
upheld the legitimacy of e-commerce agreements via numerous decisions.

Ans. No. 3:- Click Wrap-Contracts and Web-wrap Contracts

Introduction

Since the last decade, there has been a tremendous technology

revolution. Internet and transactions over the internet have become the sine
qua non of everyday transactions throughout the world.

E-commerce, an important result of information technology revolution, is

the purchasing, selling, and exchanging of goods and services over computer
networks (such as the Internet) through which transactions or terms of sale
are performed electronically. A result of e-commerce is the emergence of click
wrap agreements whereby agreements are entered into by a mere click in the
computer.

Meaning of click wrap contract:

Click wrap contracts are commonly used in connection with e-business

transactions. It is being used to bind the user to terms of use contract
facilitating online sale or purchase of goods and services.

In an off-line contract, both parties typically indicate their agreement to

the terms and conditions thereof by signing. On-line, only one of the parties
(usually, the surfer or person using the computer), signifies acceptance by
signing in the following ways:

1. Type and Click the user must type I accept or other words in a
specified area and then click send;

2. Clicking an Icon the user simply clicks an I accept icon to go to

the requested page;

3. Scroll and Click the user must scroll down the terms of the click-
wrap contract and then click an icon marked I accept or I agree.

One of the unique features of a click-wrap contract is that it is a one-

sided, take- it-or-leave-it proposition. Buyer or user may also click on I
decline or no after going through the terms of use.

The typical click wrap contract will state: by clicking the accept button,
you are consenting to be bound by and are becoming the party to this
agreement. If you do not agree to all of the terms of this agreement, click the
do not accept button and the installation process will not continue.

For the enforceability of click wrap contract it is critical that the users
must have an opportunity to review the terms of use applicable to the site. If
they are buried deep inside the site or otherwise inconspicuous, they will be
more difficult to enforce.

Web-Wrap Contracts

Web-wrap Contract, as distinct from click-wrap contract, do not

require the active consent of the user, means it does not require the reader to
click to indicate agreement. It is also sometimes called as Browse-wrap
contract.

Acceptance of a browse-wrap is implied from the users browsing or

other activity on the web site, even if the user has not reviewed the electronic
contract. Browse-wrap agreements are typically found at the bottom of a
webpage in the form of a link to another page on which the terms and
conditions are posted. The user is not required to review the contract, much
less access the page where its located, in order to proceed.

It is typically structured as a license agreement. Website visitors are

given a license to use material on the given website. This license, for example
may restrict the visitor from distributing, copying, or preparing derivative
works from the posted material. The license spells out permitted and restricted
uses by the visitors.

Conclusion

The advent of Internet has changed the mode of entering into an

agreement but the essentials of a valid contract are one and the same. In
India the rules relating to formation of e-contracts, its validity and
enforcement are regulated by Indian Contract Act 1872 and IT Act, 2000.

Having many pros there are some cons also associated with these
contracts. For example, unlike a paper contract, where the parties may
vigorously negotiate the terms of the agreement before signing, the user in
the on-line environment has no bargaining power. The user must either accept
the terms of the click-wrap agreement (which will typically be in favour of the
proffering party) or not gain access to the desired webpage, product or
service. The identity of the parties, Jurisdiction, Notice and Meeting of Mind
are some issues which are associated with the enforceability of the e-
contracts.

The lack of negotiation is partly due to the realities of on-line commerce:

it is not logistically possible for the ISP or on-line service provider (OSP) to
negotiate with each and every user.

Ans. No. 4:- Cybersquatting

Introduction:-

A business entity represents itself with the help of trade mark in

the physical market. Similarly with the increase of commercial activity on the
internet, domain names are used as business identifiers. Any business entity
always prefers its own trade mark or trade name to be used as domain name
because people recognize the business entity with its trade mark or trade
name.

Definition:-

First time when the cybersquatting term was used was in USA in early
90'ties. It was the time when Internet babble exploded. It may be defined as:-

Cybersquatting is the act of registering a popular Internet address-

usually a company name--with the intent of selling it to its rightful owner. or

"The registering of a domain name on the Internet in the hope of selling

or licensing it at a profit to a person or entity who wishes to use it.

Trademarks have a significant impact on online brand building,

advertising, search engine optimization, etc. These domain names have
become akin to trade marks.

For example, if Bata wants to carry on business on internet, it would

prefer www.bata .com for the purpose of marketing its product online and
even the consumers would relate www.bata .com with the famous brand Bata
that deals in shoes.

As registration of a domain name is not as stringent as that of

registration of a trademark and the system is based on first-come-first-serve
basis, so if Bata has not registered www.bata .com as its domain name anyone
else could just register that name in his favour.

Cybersquatters does the same thing. They register the domain name of
renowned business house and claim the rights over these internet domain
names. They then offer the domain to the person or company who owns a
trademark contained within the domain name at price far greater than that at
which they have purchased it. Many cybersquatter also register many variants
of a popular trademarked name. such practice is known as typosquatting.

Judicial response:-

Panavision Company, which in 1995 tried to register their trademark as

corporate domain and they found out that Mr. Toeppen is already the owner of
such domain. However he presented the offer to Panavison which state that he
is willing to resale domain for $13, 000. Panavision holds registered
trademarks to two names: Panavision and Panaflex, which promote main
company activity. Panavision decided to take the case to the court (Central
District of California) Meanwhile Network Solutions, Inc. ("NSI") domain
registration organ, putted both domains on hold, waiting for the outcome of
this litigation.

Even though legislation has not been enacted in India, in almost all
cybersquatting court cases decisions are against cybersquatters.

The first case in India with regard to cybersquatting was Yahoo Inc. V.
Aakash Arora & Anr., where the defendant launched a website nearly
identical to the plaintiff's renowned website and also provided similar services.
The trademark Yahoo had been registered or was close to being registered in
69 countries. However, Yahoo Inc had not registered its domain name in India.
The issue in this case was that whether the act of Akash Arora in registering
the domain name Yahoo India is an infringement of the trade mark of Yahoo
Inc and amounts to passing-off under the relevant sections of the Trademark
and Merchandise Act? As the two trade marks/domain names 'Yahoo!' and
'Yahoo India!' were almost similar and the latter offered services similar to
those offered by the former, the court held that Akash is liable for passing off
and restrained him from using the deceptively similar domain name.

Conclusion

Many companies like Fry's Electronics, Panasonic, Avon and Hertz

became victims of cybersquatting, because when these companies realized
that the internet was the next big marketing tool, they went online to find that
their company names had already been taken by these cybersquatters.

Looking at the current situation prevailing in the world, it is certain that

cybersquatting is a menace. It is a menace which has no boundaries. Looking
from the Indian perspective cybersquatting has been prevalent since internet
came to the subcontinent. The courts in India have decided many cases
related to cybersquatting. It is the imperative for the parliament to enact a law
which would deal with this menace.

Ans. No. 5:- Working of Electronic Funds Transfer

Introduction:-
With the advancement of mordent means of communication and
information technology/internet, payment mechanism in cyberspace i.e.
paying for goods or services ordered or consumed has also changed a lot. An
Electronic Funds Transfer is one such mode of payment which has become
widespread with the arrival of personal computers, cheap networks,
improved cryptography and the Internet. Such payment mechanism in order to
be accepted must have all the attributes of a widely accepted physical mode of
payment system.

Meaning of Electronic Funds Transfer:-

An Electronic Funds Transfer (also known as EFT) is a system for
transferring money from one bank account to another in the same (intrabank)
or different bank branches (interbank) without using paper money. Or
 EFT refers to the computer based systems used to perform financial
transactions electronically initiated through the exchange or transfer of money
either within the same financial institution or across multiple institutions using
an electronic terminal (ATM, Point-of-Sale, Credit Card, etc), the telephone or
the computer

In simple words, Electronic Funds Transfer is a system of transferring

money from one bank account directly to another without any banknotes/coins
changing hands. Instead, money is transferred through such electronic
systems as computers (mainly through the Internet) and ATMs.

Working of EFT:-

In India, electronic fund transfer system has got a fillip when the Indian
Government amended the Negotiable Instrument Act, 1881 and brought in
forth the Negotiable Instrument (Amendment and Miscellaneous Provisions)
Act, 2002 and introduced the concept of a Truncated Cheque in section 6(b)
of the Act.

The truncation process involves replacing physical cheques with their

electronic images, which will travel through the stages of the clearing cycle.
During the whole process of truncation the instrument would remain with the
collecting bank.

Another kind of EFT is a cash card. With this type of card you can spend a
prepaid amount of money until the balance is zero. So, if you wish to make a
gift certificate without tying up your beneficiary with one store, you can buy a
cash card from your favorite bank.

Electronic Funds Transfer involves participation of Payer, payee and their

respective banks including an automated clearing house. Working of EFT can
be understood in the following steps:-

Step 1: Payee submits the cheque to his bank.

Step1: payees bank presents the cheque to the automated clearing house.
Step 3: automated clearing house informs the drawers bank.
Step 4: Drawers bank clears the cheque.
Step 5: Payee receives the payment.
 PAYEE DRAW
ER

PAYEES DRAWER
BANK S

AUTOMAT
ED
CELEARIN
G HOUSE
INTERNET

Conclusion:-

The growing popularity of the EFT for online bill payment is paving the
way for a paperless environment where cheques, stamps, envelopes and paper
bills are obsolete. The benefits of the EFT include reduced administrative costs,
increased efficiency, simplified bookkeeping and greater security. It is easy and
convenient.

Besides the above stated pros the system also has some cons. If you
enter the target account number incorrectly, there is no way to reverse the
transaction since the bank would process the transaction under the belief that
the information you provided is accurate. Unauthorized access can result in
lost or stolen information and money. The cost for an EFT may vary among the
commercial banks.

Advantages of using the Electronic Fund Transfer:

It is easy and convenient.

It is fast and secure.

It is efficient and less expensive than paper cheque payments and

collections.

Disadvantages of using the Electronic Fund Transfer:

If you enter the target account number incorrectly, there is no way to

reverse the transaction since the bank would process the transaction
under the belief that the information you provided is accurate.

Once an amount is transferred, the bank cannot reverse a transaction.

EFT advantages and disadvantages:

Advantages:

save money- some banks charge money for checks

easy to use- simple instructions and format

convenient- easy to find places in which to operate EFT processes

not time consuming- some EFT processes are automatic

Disadvantages:

release of private information

no human interaction

few EFT devices in certain areas of the world

EFTs such as an ATM are not fully secure and can be broken into

Issues of EFT:

Reliability- someone can put the wrong numbers into an EFT and
possibly not know it

Integrity- tampered EFT systems can begin to work improperly,

breakdown, and cause other problems

Security- unauthorized access can result in lost or stolen information

and money

Privacy- becomes lessened when giving someone your ABA number for
EFT use

Authenticity- an EFT such as an ATM does not know if the person using
it is truly who they say they are

Equality of Access- EFTs are hard to access in some third world

countries

Control- EFTs improve the rate at which business transactions are done

People and Machines- possible loss of bankers and other jobs because
of EFTs