The essential part for formation of a contract in India is the existence of an agreement with lawful object and lawful consideration, and this is possible only by communication of offer and acceptance. The issue to be observed here is regarding the formation of a contract via an electronic medium. This post examines the sheds light on such contracts and their validity in India.
Through this post I will answer a series of questions relating to the issue of formation of electronic contracts.
A question that requires an answer is, whether the messages sent or received on WhatsApp are electronic evidence or not?
Under Section 65B of Indian Evidence Act, which was introduced by amendment in year 2000, making the electronic records admissible. A harmonious reading of Information Technology Act (“IT Act”) and Indian Evidence Act clarifies that under Section 2(i) of IT Act which defines ‘computer’, mobile phones will also be included and so the messages transmitted through WhatsApp also fall under electronic evidence and therefore they can be admissible in a court of law. Furthermore, Section 10A of the IT Act which was introduced by the 2008 amendment, further states as under:
“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.”
Also, Article 11 of UNCITRAL Model Law on Electronic Commerce, 1996 also states as under:
“Article 11. Formation and validity of contracts: In the context of contract formation, unless otherwise agreed by the parties, an offer and the acceptance of an offer may be expressed by means of data messages. Where a data message is used in the formation of a contract, that contract shall not be denied validity or enforceability on the sole ground that a data message was used for that purpose….”
Once this dispute is clarified, another question which arises is, whether ‘postal rule’ will be applicable to messages transmitted via WhatsApp?
The time and place when the contract is formed are essential to make the contract admissible. For the postal rule to apply the communication should be non- instantaneous. Although e-mail communication has some of the trappings of instantaneous communication, nevertheless, it is a fragmented process involving many stages.
There is a major conflict in determining whether emails should be considered instantaneous or not. Even the cases – Entores Ltd. v. Miles Far East Corp [2 QB 327] and Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas & Co. [1966 AIR 543] – fails to explain the applicability of postal rule to electronic form of communication.
Although such a debate is ongoing, at present in India the conclusion is that emails are virtually instantaneous and therefore the postal rule does not apply to the formation of such electronic contracts and thereby concluding that the acceptance should be received by the offeror.
Another question that arises is that when is an e-mail acceptance said to be received by the offeror?
If the rules applicable to emails are analysed it shows that once the email enters the server it is said to be received by the offeree but if a particular email address was provided by the offeree and the email was sent to some other email address then the acceptance will be complete only when the offeree reads the mail.
To sum up, a binding contract would take place once the acceptor dispatches the electronic record such that it enters a computer resource outside the control of the acceptor. A ‘computer’ resource as explained above also include mobile phones and therefore have the possibility of extending even to Whats app messages. If similar situations are applied to the contracts and communications on Whats app it can be said that they also resemble ‘virtual instantaneous’ messages and postal rule, therefore, cannot be applied to messages transmitted via WhatsApp. The Supreme Court of India also recognized the formation of contract through exchange of emails in the case of Trimex v. Vendata [2010 (1) SCALE 574].
Although there is a lack of a plethora of judgments to establish the validity of the contracts formed on WhatsApp, few courts have adopted different approaches to reach a conclusion. In Singapore, this mechanism of admitting Whats app messages as evidence is used a number of times but it has to fulfill certain conditions such as:
- it should be admissible under Evidence Act;
- it should be authentic;
- it should be relevant to the Court proceedings at hand.
In commercial cases, WhatsApp messages are used as evidence to show negotiations or contract formation. In determining the formation of contract the intent of the parties to create a contractual relationship is also important. Thus, the formation of contract through electronic medium is valid and the rules applicable to emails can to some extent be applied to contract formation through WhatsApp.
Image from here.