Clickwrap Agreements and its Viability in India

Clickwrap agreements are an everyday part of our lives and often we barely pay much heed to it. The terms and conditions that you accept before entering a website or the procedures while setting up your phone, all amount to clickwrap agreements. In India, these are typically referred to as standard form agreements. The famous case of Feldman v. Google, Inc.[1] citing the case Baer v. Chase[2] "Contracts are ‘express’ when the parties state their terms and ‘implied’ when the parties do not state their terms. The distinction is based not on the contracts' legal effect but on the way the parties manifest their mutual assent” and hence this judgement upheld the clickwrap agreement because Feldman had a reasonable notice of the terms as well. It was stated as follows, ‘the user here had to take affirmative action and click the "Yes, I agree to the above terms and conditions" button in order to proceed to the next step. Clicking "Continue" without clicking the "Yes" button would have returned the user to the same web-page. If the user did not agree to all of the terms, he could not have activated his account, placed ads, or incurred charges”. This is the US position.

In India however, case law has not evolved to this level of online agreements and with the clauses of unconscionability under Section 16 and 23 have been drafted to reduce the inequality in bargaining power. In D.C.M. Ltd. and another v Assistant Engineer (HMT Sub-Division), Rajasthan State Electricity Board, Kota and another[3], a contract was held to be unconscionable because the terms were unfair despite the plaintiff having signed and agreed to it. Additionally, in the Supreme Court case, LIC of India and Ors. vs. Consumer Education and Research Center and Ors., it was held that the contract should be totally reasonable, not arbitrary and unopposed to public policy. These are instances to show that with India’s socialist links, the approach is with the intent to protect the weaker party and those who are unaware of such possibilities.

However, in the US in ProCD Inc. v. Zeidenberg[4], when a customer overlooked the terms and conditions that were plastered on the screen in a shrink-wrap licence, the Court held that “had no choice, because the software splashed the license on the screen and would not let him proceed without indicating acceptance” and held it to be valid. In India, a standard form contract is often called a take it or leave it [5]contract as the person accepting seldom has the option to ask and hence the adhesion holds the contracting party in place.

The doctrine of consensus ad idem plays a crucial role in understanding contract law in India. The lack of negotiation in a situation of a clickwrap agreement is often a reason cited for why it ought not to be legal. These contracts are fixed and go against the basic tenets of placing both parties on equal footing in order to decide the best possible agreement. This is technically an example of an adhesion contract too wherein the bargaining power is not vested in both parties.

Another interesting approach is that of the legality of e-contracts of this form in the Information Technology Act under Section 10A, especially with an increased use of digital signatures. Under Section 65B of the Indian Evidence Act too, e-contracts with digital signature are admissible in Courts. Of course, when a digital signature is absent, the questions of enforceability arises which is also something that the Courts have not yet delved into.

At this juncture, the question of stamp duty arises. For a document to be valid, it has to be signed and the stamp duty paid as of the Indian Stamp Act. For this too, a valid signature (digital signatures are valid) is necessary. Section 2(12) enumerates upon important definitions such as execution, executed and in reference to instruments as something that has a signature or is signed. This, when analysed, portrays the limited scope for clickwrap agreements. As of Section 3 the ‘instrument’ needs to be ‘executed’ for the duty to be paid and merely clicking ‘I Agree’ in a clickwrap agreement does not amount to the definition of execution and neither can be held to be legitimate under the IT Act as it is not a valid electronic signature. On a much more basic note, what if a minor clicks, ‘I Agree’, what would be the outcome of that? What about jurisdiction of the contractual agreement? These are the hurdles that clickwrap agreements have to conquer before gaining justifiability.

In the interesting case of Trimex International FZE Ltd, Dubai v Vedanta Aluminium Ltd[6], an unconditional contract that was established via exchanging emails was held to be valid on account that the intent to enter into the contract was visible through the various emails, letter, telex, telegrams and other means of telecommunication. This has set the foundation for further adjudication, especially in times where e-commerce is not a luxury but a way of life. The question in India arises as to the feasibility of rendering these contracts binding. Does it make such contracts unfair or is the acceptance a valid one, especially with the large number of online transactions is yet for the courts to litigate.

Especially in a post-pandemic world where digital transactions have become the norm in India, it is imperative that we fill this vacuum in the law or device a more suitable policy for the Indian context. Most of us, using the many tools that the internet provides have clicked ‘I Agree’ without reading the fine print and these are the consequences of those actions.

[1] 513 F.Supp.2d 229 (E.D.Pa. 2007). [2] 392 F.3d 609, 616 (3d Cir. 2006) [3] AIR 1988 Raj 64 [4] 86 F.3d 1447 (7th. Cir. 1996) [5] Black's Law Dictionary (4th edn, 1968) page 38 [6] (2010) 3 SCC 1