Everything is going digital, and the rapid advancement of technology has transformed the way contracts are signed. The conventional contracts were basically in written form and were signed on a physical piece of paper but the modern contracts are in the form of e-contracts or technology contracts. These contracts are now a common aspect of doing business across the globe and the same holds true for Indian contracts as well.
The Indian Contract Act, 1872 is the bedrock of contract law in India. With the advancement of technology it became imperative to bring in changes in the existing framework to encompass the specifications of technology contracts. The following are examples of digital contracts which are now in use like software licensing and online services. This article will explain the various types of technology contracts and how the Indian Contract Act 1872 works on it.
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What Are Technology Contracts?
Technology agreements are contracts that regulate the use, disbursement and licensing of digital products and services. These are often electronically formed and not in need of the documentation in paper form. This is leading technology contracts to encompass digital transactions such as software licensing, website terms and conditions, mobile apps and more, as internet, cloud computing and digital platforms are also becoming increasingly important.
In India, the formation of all contracts, including e-contracts, is governed by the Indian Contract Act, 1872 and it requires that an e-contract be bound by the basic components provided in Section 10, that is of offer, acceptance, consideration and parties involved being competent enough to make a contract.
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Types of Technology Contracts
Let's explore the various types of technology contracts that are commonly used in India and in the global world as well. These contracts cater to the needs of both businesses and consumers in the digital world.
1. Shrink-Wrap Agreements
The shrink-wrap agreement represents one of the earliest forms of technology contract, utilised in sale of software. A shrink-wrap agreement is where the terms and conditions of the software license are enclosed inside the product packaging, sometimes on a paper insert or an electronic medium. The terms of the agreement are implicitly accepted when the consumer opens up the packaging.
For example, you purchased a copy of Microsoft Office and when you read the shrink wrap agreement that comes with the software, you are given the terms by which you will be using the software through its terms of service agreement including licence restrictions. Opening the package and using the software means you’ve accepted these terms.
However, because shrink wrap agreements are common, courts have declared that the terms must be reasonable and must not impose too strong restrictions on the user. As far as Indian Contract Act, 1872 is concerned, the agreement too must adhere with the basic principles of contract formation, for instance, there was a mutual consent.
2. Click-Wrap Agreements
One of the most common e-contracts in use today is clickwrap agreements. To assert these agreements, the user must click on an explicit button of 'I Agree' after taking a look at the terms and conditions. The agreement is legal because it is an explicit form of consent to enter into an agreement.
Let’s say that whenever you register for an online service like Netflix, you’re presented with the terms and conditions of the services and after signing up for them and agreeing to them by clicking “I Agree” means that you agree to such terms and as a matter of clicking a click-wrap agreement.
Indian Contract Act,1872 prescribes that the terms have to be known to both parties and should have been given their free consent. If the contract is not clear on its terms, it may be declared unenforceable.
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3. Browse-Wrap Agreements
A browse wrap agreement does not require the user to agree to the terms. Rather, whenever the user uses a website or online service, it is assumed that he has accepted the terms and conditions prominently posted as a hyperlink at the bottom of the website.
Often, browse-wrap agreements are used by websites like Amazon or Facebook. As long as users visit the website and use the features, the users are deemed to have accepted the terms and conditions of the website, even though they haven’t clicked on “I Agree.”
The big issue with browsing-wrap agreements is proving that the user actually had knowledge of the terms. Under provision of the Indian Contract Act, 1872 parties are supposed to know the terms to which they are agreeing which can be void on the non-existence of these terms becoming visible or easily accessible.
4. End-User License Agreements (EULAs)
In the software industry, End-User Licence Agreements also known as EULAs are the most common form of licence agreements. These terms and conditions govern how the end user can use a product, such as a computer software programme, and generally specify restrictions on usage, redistribution and creation of derivative products.
Let’s take Adobe Photoshop as an example, when you download the software and want to install for Example, a EULA, an End User Licence Agreement, is presented giving details of how you may then use that software. Typically these clauses will lock in the number of devices that the software can be installed on, if it can be redistributed and what use it can be put to.
EULAs must be drafted carefully for enforceability. Typically, the consideration of a EULA consists of a licence granted by the user to use the software, as per the Indian Contract Act. The agreement has to be clear, fair and transparent.
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5. Clickstream Contracts
A clickstream contract is the contract which is formed when the user interacts with the website by clicking on different links or tabs. The site’s terms and conditions are automatically accepted by users when they take action within the site.
Often these online retailers like Flipkart or Myntra form clickstream contracts. Whenever a user navigates from the website and decides to add items to the cart and go through the checkout, they are automatically agreeing to the terms and conditions of the sale and delivery and return policies.
Indian Contract Act, 1872 provisions of offer and acceptance apply to clickstream contracts. The crux of the matter is whether the actions of the user were sufficient to represent acceptance of the terms of the contract.
Learn about void agreements given under Section 19 of Indian Contract Act, 1872
Enforceability of Technology Contracts in India
Just like any other traditional contracts, e-contracts and technology contracts must also meet the legal requirements given in Section 10 of Indian Contract Act, 1872:
Offer and Acceptance: The agreement must involve a clear offer by one party and acceptance by the other party.
Consideration: There must be something of value exchanged between the parties.
Competency: Both parties must be legally competent to contract.
Free Consent: Consent must be given voluntarily and without coercion or misrepresentation.
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Conclusion
With the digital advancements, the technology contracts have evolved and the history of these contracts is based on the enforcement of these contracts under Indian Contract Act, 1872. There are three types of technology contracts that are all subject to different mechanisms for formation and enforcement of electronic contracts: the click wrap and browse wrap as well as shrink wrap. It's important to know the different types of contracts and corresponding legal rules that are applicable today. With e-contracts and other digital agreements, the Indian Contract Act, 1872 can be said to have been modernised to fit the specifications of the 21st century by applying the traditional legal rules and the principles of the Indian Contract Act, 1872.
Also, Get to Know How Right to seek justice cannot be prejudged under Section 28 of Indian Contract Act, 1872
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Types of Technology Contracts: FAQs
Q1. What are technology contracts under the Indian Contract Act, 1872?
Technology contracts involve agreements related to digital technology, software and IT services and follow the same principles as traditional contracts (offer, acceptance, consideration, etc.).
Q2. Are e-contracts legally valid in India?
Yes, e-contracts are valid under the Indian Contract Act, 1872, as long as they meet contract requirements. The Information Technology Act, 2000 supports their enforceability.
Q3. What are click-wrap agreements in technology contracts?
Click-wrap agreements are contracts where the user accepts terms by clicking "I agree." These are enforceable under Indian law if the terms are accessible and the user’s action constitutes acceptance.
Q4. How does the Indian Contract Act apply to software licensing agreements?
Software licensing agreements are valid under the Indian Contract Act, 1872, provided they include mutual consent, consideration and clear intent to create legal relations.
Q5. Can technology contracts be enforced if entered into digitally or online?
Yes, online technology contracts are enforceable in India if they meet basic contract law requirements like mutual consent and consideration.
