Enforceability of Online Terms and Conditions
With most transactions and activities taking place online through portals, websites or applications, one does wonder, what is the validity of the terms and conditions (documents) I have entered into. Are they just toothless tigers or are there any actual repercussions? The answer lies in the type of document dealt with in an online transaction.
Types of Online Terms and Conditions
Most policies or documents displayed on a website are statutory requirements in India. Under the Information and Technology Act 2000 (IT Act) read with the Information Technology (Intermediaries Guidelines) Rules, 2011, any person who on behalf of another person receives, stores or transmits any electronic information or data or provides any service including telecom service, internet service, web-hosting service, search engines, online payment sites, online-auction sites, online-market places (collectively intermediaries) are required to have the following:
This agreement would however constitute a valid contract, if it fulfills the basic requirements of a contract under the Indian Contract Act 1872, which are
- free consent
- Lawful consideration for lawful object made between parties competent to enter into a contract.
The Supreme Court in Trimex International FZE Ltd, Dubai v Vedanta Aluminium Ltd has held that that in the absence of signed agreement between the parties, it would be possible to infer that an agreement was entered into from various documents duly approved and signed by the parties in the form of exchange of e-mails, letter, telex, telegrams and other means of tele-communication. Further, the Indian Supreme Court, in Bhagwandas Goverdhandas Kedia vs. Girdharila Parshottomdas and Co held that while the contract act does not deal with telegraph, telephone or wireless separately, it is presumed that such modes of communication are covered under the act.
- User Agreements: Commonly entered into between the user and the intermediary usually through a browse wrap structured agreement. It is often included in applications as an end user license agreement, with the aim to protect the functionalities of the application and related intellectual property. Further, these agreements also have the scope to govern the relation between the parties. The validity of such agreement is based on the similar reasoning as discussed above.
- Other terms and conditions
A lot of websites also have documents relating to their company policies such as code of conduct, insider trading policy, policy for prevention for sexual harassment etc. Such policy disclosures are usually statutory requirements and these policies bind the parties that they govern by virtue of being a requirement under the statute.
ENFORCEABILITY of the online terms and conditions
What is important to note is that while Indian courts have recognized the electronic contracts, the court hasn’t ruled on the validity of browse wrap type of contracts yet.
Under a browse wrap agreement, the user usually clicks on a button while browsing through a website, (like websites ask permission to store cookies on your computer) indicating his consent to be bound by the terms of the agreement. However, such agreements have been held to be binding in foreign courts.
While browse wrap contracts may not be specifically recognized under law, the IT Act does recognize electronic contract. Under section 10A, 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 such contract shall be enforceable provided it meets the requirements of a contract under the Contract Act 1872.
Another interesting point to consider is the enforceability of offers and promotions floated by websites and applications online. Such offers constitute an open offer made to the world. Where anyone who fulfills the conditions attached to the promotional offer can claim its benefits.
One important thing to consider should you be aiming to start a website or develop an application is that the terms of documents, agreements, policies etc, cannot be discriminatory to such an extent that it is against public policy. The Supreme Court considering cases where there is no actual negotiation between the parties and the weaker party (in terms of bargaining power) is required to accept all the terms regardless of how prejudicial it might be in LIC India vs. Consumer Education and Research Centre has held that such prejudicial terms would be likely struck down if enforced.