MODULE 3

The Internet has revolutionized people’s way of communicating. In addition, the way people are
doing business has also changed the Internet and electronic data exchange. It created a new kind
of trade and trade called e-commerce. E-commerce is booming with a high level of internet
penetration worldwide and the rise of internet users. High speed and a geographic absence have
contributed greatly to the growth of e-commerce, which is the key advantage of the Internet. For
instance, a buyer in India can buy goods from a vendor in the United States with just a few clicks
of the mouse, without having to leave their home or office. In an electronic world called
electronic contract or simply e-contract or on-line contracts, e-commerce brought about a new
form of contracting. Electronic contracts are commonly known to many of us. The most common
contracts are “End User License Agreement” or the EULA where the installation of software or
terms/conditions/ user agreement on the Website requires a click on the ” I agree ” button.

Section 10A was inserted into ITA 2000 through an amendment made in 2008. This
amendment reflects section 11 of the UNCTRAL Model Law on Electronic Commerce
1996.

Under the provisions of the Information Technology Act, 2000 particularly Section 10-A, an
electronic contract is valid and enforceable. The only essential requirement to validate an
electronic contract is compliance with the necessary pre-requisites provided under the Indian
Contract Act, 1872. Also, the courts in India give due regard to electronic contracts under the
provisions of the Indian Evidence Act, 1872.

The provisions of the Information Technology Act, 2000 (IT Act) give legal recognition to an
electronic (E -Contract) particularly section 10-A of the IT Act which states:

"Section 10-A: Validity of contracts formed through electronic means. -

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."
The above provision was introduced by the Information Technology (Amendment Act), 2008
after recognizing the growing dependence on electronic means to reach commercial agreements.
This applies where contract formation, communication of the proposal and acceptance is carried
out electronically.

How E - Contracts Can Be Entered Into: E-Contracts can be entered into through modes of
communication such as e-mail, internet and fax. The only essential requirement to validate an E-
Contract is compliance with the necessary pre- requisites provided under the Indian Contract
Act, 1872. Which are:

 Offer and Unconditional Acceptance - Which may be made online or by e-mail

communication.
 Lawful Purpose and Consideration - A contract is enforceable by law only when it is
made for a lawful purpose and for some consideration. It must not defeat any provision of
law and must not be fraudulent in nature.
 Capacity of Parties and Free Consent - Parties to a contract are capable of entering into
a contract, if they satisfy the requirements of Section 11 and 12 of the Indian Contract
Act, 1872 (capacity to contract), and consent of the parties must be free as per Section 13
of the Indian Contract Act, 1872.

The simplicity of the execution of an E-Contract being confounding, many sometimes wonder
about its validity, especially when compared to a traditional written contract. The simple truth
lies in the fact that the Indian Contract Act, 1872 has not specifically laid out any specific way of
communicating an offer and what constitute its acceptance. The same can be achieved verbally,
in writing or even through conduct. This shows that even in its simplicity, an E-Contract is as
valid as a traditional written contract; the only condition/ requirement being that an E-Contract
should possess all the essentials of a valid contract as mentioned above.

Evidentiary Value of Electronic Records: 

As per Section 65-B of the Indian Evidence Act, 1872 any information contained in an electronic
record produced by a computer in printed, stored or copied form shall be deemed to be a
document and it can be admissible as evidence in any proceeding without further proof of the
original.

72A. Punishment for disclosure of information in breach of lawful contract.–Save as

otherwise provided in this Act or any other law for the time being in force, any person including
an intermediary who, while providing services under the terms of lawful contract, has secured
access to any material containing personal information about another person, with the intent to
cause or knowing that he is likely to cause wrongful loss or wrongful gain discloses, without the
consent of the person concerned, or in breach of a lawful contract, such material to any other
person, shall be punished with imprisonment for a term which may extend to three years, or with
fine which may extend to five lakh rupees, or with both.]

Types of Online Contract

Online contracts can be of three types as underneath:

1.    Shrink-wrap agreements

Shrink wrap contracts are usually a licensing agreement for software purchases. In the case of
shrink-wrap agreements, the terms and conditions for access to such software products shall be
enforced by the person buying it, with the initiation of the packaging of the software product.
Tightening-up agreements are simply the agreements that are accepted by users, for instance,
Nokia pc-suite, at time of installing the software on a CD-ROM. Sometimes, after loading the
product onto your computer, additional conditions may only be observed and then, if the buyer
disagrees, he has an opportunity to return the software product. The shrink-wrap Agreement
provides protection by exonerating the product manufacturer of any violation of copyright or
intellectual property rights as soon as the purchaser tears the product or the coverage for
accessing the product. However, the validity of shrink-wrap agreements does not exist in India
with a stable judgment or precedent.

2.    Click or web-wrap agreements

Click-wrap contracts are web-based contracts that require the user’s consent or consent through
the “I Accept,” or “OK” button. The user must accept the terms of use of the particular software
with the clickwrap agreements. Users who disagree with the terms and conditions cannot use or
purchase the product after cancellation or refusal. Someone almost regularly observes web-wrap
agreements. The terms of use shall be set down before acceptance by the users. For instance,
online shopping agreement, etc.

3.    Browse-wrap agreements

A browsing wrap agreement can be called an agreement which is to be binding on two or more
parties through the use of the website. In case of an agreement on browsing, an ordinary user of a
given Website is to accept the terms and conditions of use and other website policies for
continuous use. We usually witness such kinds of online contracts in our daily lives. Although
this online agreement is becoming common in all of our businesses, there is no precise judicial
precedent regarding its validity and enforceability. Other countries, such as courts in the USA,
have dealt with those online agreements and held that both Shrink-wrap Agreements and Click-
Wrap Agreements are enforceable as far as the general principles of the contract are not violated.

Other types of online agreements include contracts for employment, contractors, contracts for
consultants, sales and resale agreements, distributors, non-disclosure agreements, software
developer and licensing agreements and contracts for source-code escrow.

Jurisdiction and Place of Execution of a Contract

Jurisdiction is a territory or sphere of activity within which a court or other institution’s legal
authority is extended. In the broader sense, it refers to the country or country whose legislation
applies during the period of interpretation of any contractual terms or in the event of a dispute.
The pace of execution of the contract normally determines this. A traditional contract shall be
concluded when contracting parties meet and execute the contract, usually at a predetermined
place and time, by placing the signatures on the document. This is not the case in e-contracts in
which the parties meet online and can be located at different places. Consequently, a strict
determination of the jurisdiction is lacking in the “place of execution”. The parties may however
voluntarily submit themselves to a particular jurisdiction which might be the location for the
business of one of the contracting parties, or a completely different jurisdiction agreed by all of
the contracting parties.

E- commerce

Electronic commerce, commonly known as e-commerce or eCommerce, refers to the Internet

based industry of buying and selling products or services via electronic means. E-Commerce
uses a combination of Internet technology, mobile commerce, electronic funds transfers,
escrowing services, electronic data interchange, supply chain management, inventory
management systems, Internet marketing, data collection systems, and many other technologies
and innovative business systems. Most, if not all, e-commerce transactions use the Internet for at
least one point of the transaction. 

There is no universally accepted definition of e-commerce. Yet various definitions have been
drawn by different organizations. Few of such definition of e-commerce are as below:
Department for Promotion of Industry and Internal Trade (DPIIT), FDI Policy,
2017:“eCommerce” means buying and selling of goods and services, including digital products
over digital and electronic network. Ministry of Electronics and Information Technology
(MeitY):“e-Commerce” is a type of business model, or segment of a larger business model, that
enables a firm or individual to conduct business over an electronic network, typically the
internet. Electronic commerce operates in all four of the major market segments: business to
business, business to consumer, consumer to consumer and consumer to business. Consumer
Protection Act, 2019: e-Commerce” means buying or selling of goods or services including
digital products over digital or electronic network.

Central GST Act, 2017: “electronic commerce” means the supply of goods or services or both,
including digital products over digital or electronic network . World Trade Organisation(WTO):
The term "electronic commerce" is understood to mean the production, distribution, marketing,
sale or delivery of goods and services by electronic means. (Work Programme on Electronic
Commerce, 1998)

Types of Electronic commerce

A number of classifications of electronic commerce exist. Academics determined a number of

outlines for classifying electronic commerc; each illustrated from a unique viewpoint. As a
result, e-commerce can be classified as follows (Clarke, 1999).

 B2B (Business to Business) This process takes place as a company sells services to
another company. For instance, a supplier puts in a request with a business organizaitons
website. Upon, receiving goods, the supplier then retails them to the final consumer.
 B2C (Business to Customers)
 C2C (Customer to Customer)
 C2B (Customer to Business)
  B2A (Business to Administration)
 C2A (Customers to Administrations)

Advantages of eCommerce 

There are many obvious and not-so-obvious pros to doing business online. Understanding
exactly what they are can help you leverage them to your advantage:

1. A Larger Market- eCommerce allows you to reach customers all over the country and
around the world. Your customers can make a purchase anywhere and anytime,
especially more people are getting used to shopping on their mobile devices.
2. Customer Insights Through Tracking and Analytics- Whether you're sending visitors
to your eCommerce website through SEO, PPC ads or a good old postcard, there is a way
to track your traffic and customers' entire user journey to get insights into keywords, user
experience, marketing message, pricing strategy, and more.
3. Fast Response To Consumer Trends And Market Demand- The streamlined
logistics, especially for merchants who do "drop ship," allow businesses to respond to
market and eCommerce trends and consumer demands in a nimble manner. Merchants
can also create promotions and deals on the fly to attract customers and generate more
sales.
4. Lower Cost- With the advance in eCommerce platform technologies, it has become very
easy and affordable to set up and maintain an eCommerce store with a low overhead.
Merchants no longer have to spend a large budget on TV ads or billboard, nor worry
about the expense for personnel and real estate.
5. More Opportunities To "Sell"-Merchants can only provide a limited amount of
information on a product in a physical store. On the other hand, eCommerce websites
allow the space to include more information such as demo videos, reviews, and customer
testimonials to help increase conversion.
6. Personalized Messaging- eCommerce platforms give merchants the opportunity to serve
up personalized content and product recommendations to registered customers. These
 targeted communications can help increase conversion by showing the most relevant
content to each visitor
7. Increased Sales with Instant Gratification- For businesses that sell digital goods,
eCommerce allows the delivery of products within seconds of making a purchase. This
satisfies consumers' need for instant gratification and helps increase sales, especially for
low-cost items that are often "impulse buys."
8. Ability to Scale Up (Or Down) Quickly and Unlimited "Shelf Space"- The growth of
an online business is not limited by the availability of physical space. Even though
logistics can become an issue as one grows, it's less of a challenge compared to those for
running a brick-and-mortar store. eCommerce merchants can scale up or down their
operation quickly, and take advantage of the unlimited "shelf space," as a response to
market trend and consumer demands.

Disadvantages of eCommerce

Running an eCommerce business is not all rainbows and unicorns. There are challenges unique
to this business model -- knowing them will help you navigate the choppy waters and avoid
common pitfalls:

1. Lack Of Personal Touch- Some consumers value the personal touch they get from
visiting a physical store and interacting with sales associates. Such personal touch is
particularly important for businesses selling high-end products as customers not only
want to buy the merchandise but also have a great experience during the process.
2. Lack Of Tactile Experience- No matter how well a video is made, consumers still can't
touch and feel a product. Not to mention, it's not an easy feat to deliver a brand
experience, which could often include the sense of touch, smell, taste, and sound, through
the two-dimensionality of a screen.
3. Price And Product Comparison- With online shopping, consumers can compare many
products and find the lowest price. This forces many merchants to compete on price and
reduce their profit margin.
4. Need For Internet Access- This is pretty obvious, but don't forget that your customers
do need Internet access before they can purchase from you! Since many eCommerce
platforms have features and functionalities that require high-speed Internet access for an
 optimal customer experience, there's a chance you're excluding visitors who have slow
connections.
5. Credit Card Fraud- Credit card fraud is a real and growing problem for online
businesses. It can lead to chargebacks that result in the loss of revenue, penalties, and bad
reputation. 
6. IT Security Issues- More and more businesses and organizations have fallen prey to
malicious hackers who have stolen customer information from their database. Not only
could this have legal and financial implications but also lessen the trust customers have in
the company.
7. All the Eggs in One Basket- eCommerce businesses rely heavily (or solely) on their
websites. Even just a few minutes of downtime or technology hiccups can cause a
substantial loss of revenue and customer dissatisfaction.
8. Complexity In Taxation, Regulations, and Compliance- If an online business sells to
customers in different territories, they'll have to adhere to regulations not only in their
own states/countries but also in their customers' place of residence. This could create a lot
of complexities in accounting, compliance, and taxation

GOVERNING RULES & REGULATIONS

E-commerce companies are subject to various extant rules and regulations. Owing to the cross
cutting nature of e-commerce, different laws and regulations across sectors govern the present
ecommerce activities, some of which are Income Tax Act, 1961, Consumer Protection Act,
1986/2019, Information Technology Act, 2000, Foreign Exchange Management Act, 1999,
Payment and Settlement Systems Act 2007, Companies Act, 2013 and laws related to Goods and
Services Tax.

E-COMMERCE UNDER THE CONSUMER PROTECTION ACT, 2019 Section 94 of the

Consumer Protection Act, 2019 deals with measures to prevent unfair trade practices in e-
commerce, direct selling, etc. it states that for the purposes of preventing unfair trade practices in
e-commerce, direct selling and also to protect the interest and rights of consumers, the Central
Government may take such measures in the prescribed manner.

The World Trade Organization (WTO) and e-commerce

As the key policy player in modern global trade, the World Trade Organization (WTO) has
established a system of agreements regulating international trade, namely: The General
Agreement on Tariffs and Trade (GATT) dealing with the trade in goods; the General Agreement
on Trade in Services (GATS); and the Agreement on Trade-related Aspects of Intellectual
Property Rights (TRIPS). Other important agreements developed at the WTO include: The
Information Technology Agreement (ITA) in 1996, with an impact on the price of hardware and
connectivity; the ITA-II in 2015; and the agreements and reference documents that guided the
global opening of telecommunications services such as the GATS Annex on
Telecommunications, the Fourth Protocol on Basic Telecommunications, and the WTO
Reference Paper on Basic Telecommunications.

Specific work on e-commerce has been conducted under the WTO’s Work Programme on
Electronic Commerce, established in 1998. The programme instructed four councils of the WTO
to examine and report on the treatment of e-commerce to the general council. Over these last two
decades, digital regulation has been a significant component of trade talks. Discussions on e-
commerce have traditionally touched on online consumer protection, privacy, and authentication.
However, the explicit connection between trade and digital issues has only been established
recently, for which important topics include: cross-border data flows, data localisation,
intermediary liability, provisions on access to the source code of computer programs, and spam
control measures.

In that context, opinions have been divided between members of the WTO who show willingness
to develop binding frameworks in the field of e-commerce and members who believe that the
WTO should focus on other priorities (such as access to infrastructure and digital skills) before
discussing regulatory frameworks. Due to the lack of a general consensus, in March 2019, over
70 WTO members decided to start plurilateral negotiations on an e-commerce treaty.

The goals of the group have been expressed in two documents: the Joint Statement on Electronic
Commerce (WT/MIN(17)/60) released at the 11th Ministerial Conference in Buenos Aires in
2017 and the second Joint Statement (WT/L/1056) released during the 2019 World Economic
Forum Annual Meeting in Davos, These documents establish the intention to begin e-commerce
negotiations at the WTO, based on existing WTO agreements and frameworks. The work of the
JSI is led by negotiating rounds that revolve around 15 categories of issues, clustered in focus
groups. The outcome of JSI discussions was supposed to be discussed at the 12th WTO
Ministerial Conference (MC12), originally scheduled to take place in Kazakhstan in June
2020, but has been postponed due to the COVID-19 outbreak.

INTERNET PAYMENTS

Internet banking fraud can be defined as a mala fide illegal act by any individual to illegally
obtain sensitive data or finances from banks/financial institutions via the internet. The IT Act
primarily governs the process of net banking. Cyber frauds include phishing, malware attacks,
identity theft, debit/credit card frauds, embezzlement, frauds relating to loans, fraud by forgery,
etc. The substantive and procedural laws and rules governing the areas of banking, internet
information technology are effective mechanisms to prevent such internet banking frauds. To
counter such crimes, the IT Act has incorporated certain legal provisions creating legal rights and
their corresponding duties to the bankers and the customer. Failure to adhere to such provisions
would result in penal provisions under the Act. Apart from the relevant provisions of the IPC, the
IT Act also provides punitive provisions for identity theft and cheating through technology under
Section 66C and 66D of the IT Act along with a remedial right by way of compensation and
penalty for breach of data under Section 43A and 72 of the same Act.

1. Hacking and Data Theft: 

Sections 43 and Section 66 of the IT Act penalizes activities such as data theft, hacking into a
computer network, introducing and spreading viruses through computer networks, damaging
computers or computer networks or computer programs, disrupting any computer or network,
damaging or destroying information in a computer, etc. The maximum punishment for these
offenses is imprisonment of up to 3 (three) years or a fine of Rs. 5,00,000/- (Rupees Five Lakh
only) or both.

 Umashankar Sivasubramaniian v. ICICI Bank (Civil Petition No. 2462/2008,

Adjudicating Officer of Judicature of Chennai) – The complainant, Mr. Umashankar,
alleged that his bank account was wrongfully debited on account of negligence on the
part of the bank. The Bank contended that the case refers to phishing and blamed
negligence on part of the complainant and was of the opinion that the matter cannot be
brought under the purview of the IT Act and that the complainant must lodge an FIR.
 The Adjudicating Authority vide its order held that the ICICI bank had failed to
establish that due diligence was exercised to prevent the breach, found that the Bank
was guilty of the offenses made out in Section 85 read with relevant clauses of Section
43 of the IT Act and directed ICICI Bank to pay to the complainant a total sum of Rs.
12,85,000/- (Rupees Twelve Lakh Eighty-Five Thousand only). The bank had
obtained a stay and an appeal was filed before the Cyber Appellate Authority.

 Mphasis BPO Fraud (2005): In December 2004, four employees of Mphasis,

working at an outsourcing facility in India, obtained PINs from four customers of the
company’s clients based in the U.S. They were not authorized to do so; but they
impersonated that to have the authority and with details obtained, they opened new
bank accounts using false identities. Within a couple of months, they used the
credentials and transferred all the money from the bank accounts of the clients (in the
U.S.) to their new accounts at Indian banks. By April 2005, the Indian police had been
informed by the U.S. bank of the scam, and post-investigation, the individuals
involved in the scam were arrested. It was informed that an amount of $426,000 was
stolen, out of which $230,000 was recovered. The arrests were made successfully
when these fraudsters tried withdrawing the cash from the Indian bank account. The
Court held that the nature of the crime was that of unauthorized access to commit
fraudulent transactions and hence, Section 43(a) was applicable.
2. Identity theft and cheating by personation: 

Section 66C of the IT Act prescribes punishment for identity theft and provides that anyone who
fraudulently or dishonestly makes use of the electronic signature, password, or any other unique
identification feature of any other person shall be punished with imprisonment of either
description for a term which may extend to 3 (three) years and shall also be liable to fine which
may extend to Rs. 1,00,000/- (Rupees One Lakh only.) 

3. Section 66D of the IT Act prescribes punishment for cheating by personation by using
computer resources and provides that any person who by means of any communication device or
computer resource cheats by personation, shall be punished with imprisonment of either
description for a term which may extend to 3 (three) years and shall also be liable to fine which
may extend to Rs. 1,00,000/- (Rupees One Lakh only)

4. Section 43(h) of the IT Act- Section 43(h) read with section 66 of the IT Act penalizes an
individual who charges the services availed of by a person to the account of another person by
tampering with or manipulating any computer, computer system, or computer network.

5. Section 65 of the IT Act- Section 65 of the IT Act prescribes punishment for tampering with
computer source documents and provides that any person who knowingly or intentionally
conceals, destroys or alters or intentionally or knowingly causes another to conceal, destroy, or
alter any computer source code used for a computer, program or network, computer system,
when the computer source code is required to be kept or maintained by law for the time being in
force, shall be punishable with imprisonment for up to 3 (three) years or with a fine which may
extend to Rs. 2,00,000/- (Rupees Two Lakh only) or with both.

6. Section 67C of the IT Act- Section 67C of the IT Act requires an intermediary to preserve
and retain such information as may be specified for such duration and in such manner and format
as the Central Government may prescribe. The section further provides that any intermediary
who intentionally or knowingly contravenes this requirement shall be punished with
imprisonment for a term which may extend to 3 (three) years and also be liable to a fine. An
intermediary concerning any particular electronic record has been defined in the IT Act to mean
any person who on behalf of another person receives or stores or transmits that record or
provides any service concerning that record.

7. Section 73 of IT Act- Read along with Section 3 that defines and explains electronic signature
(the word electronic signature was earlier defined as digital signature, and was amended
vide Information Technology Amendment Act, 2008), this Section states that no person shall
publish an Electronic Signature Certificate or otherwise make it available with the knowledge
that the certifying authority has not authorized it and/or the license has been revoked/suspended.
In these circumstances, the person may be imprisoned for a term that may extend to 2 (two) years
and shall also be liable to a fine which may extend to Rs. 1,00,000/- (Rupees One Lakh only) or
both.

8. Section 75 of the IT Act- This section grants universal jurisdiction for offenses committed by
a person not authorized to do so, who attacks the computer system under operations in banks in
India by hacking either by operating within India or outside India. The Internet has no
boundaries; but as undertaken in Mphasis, banking frauds are usually committed not only within
India but also outside India. Therefore, it becomes difficult for the prosecuting agencies to
initiate actions concerning jurisdictional issues. The IT Act by this Section, has eased and have
provided relaxation to the adjudicating agencies to prosecute criminals that are not within their
jurisdiction (subject to one of these factors being present; the criminal in the citizen or the victim
is the citizen, the computer source tampered is in India or the funds transferred was Indian
currency, etc)

Spamming most commonly relates to Electronic spamming. It is the use of electronic messaging
systems to send unsolicited messages, especially advertising as well as sending messages
repeatedly on the same site. The most widely recognized form of spam is email spam. However,
the term is applied to similar abuses in other media such as instant messaging spam, Usenet
newsgroup spam, Web search engine spam, spam in blogs, wiki spam, online classified ads
spam, etc. unsolicited messages are ‘advertisements for products and services.

An irrelevant or unsolicited messages sent over the internet, typically to a large number of users,
for the purposes of advertising, phishing, spreading malware, etc.

The history of spamming dates back to the late 19th century when the Central Western Union
allowed telegraphic messages on its network to be sent to multiple destinations. However, the
first recorded instance of a mass unsolicited commercial telegram is in May 1864 when some
British politicians received an unsolicited telegram relating to the advertising of a dentistry shop.

The first known history of email spam dates back to 1978 when a message advertising the
availability of a new model of Digital Equipment Corporation was sent to 393 recipients on
ARPANET. A single mass email was sent rather than a separate message to each person. Though
the reaction from the net community was negative, the spam did manage to generate some sales.
Laws against Spamming in India

Presently, the Indian Government is yet to legislate a law that directly addresses the issue of
spam. The existing law in the form of the Information Technology Act 2000 does not contain
any provision concerning regulation of spamming, though it does regulate obscenity which
covers publishing, transmitting or causing to be published in electronic form any material which
is lascivious or appeals to the prurient interest.

There are many reasons for having a comprehensive legislation on curbing, controlling and
penalizing spammers –

1. The Honourable Delhi High Court acknowledged the absence of appropriate

legislation concerning spam wherein it was held that in the absence of statutory
provisions to check spam emails, the traditional principles of tort, trespass and
nuisance would have to be used.

2. The ever increasing number of Internet users in combination with the increasing
proportion of junk email makes it necessary to curb spam before it assumes huge
proportions like in the United States.
The Ministry of Information Technology has initiated discussions to incorporate provisions
against spammers. However, the Ministry is yet to decide whether the punishment against
spammers should be meted out after verifying the nature of the spam, that is, whether the act of
spamming was done inadvertently or on purpose.

he Government is looking to set up a Centre for Communication Security Research and

Monitoring to monitor the activities of criminal elements online. The Nodal implementation
agency for the same would be Centre for the Development of Telematics. The Research, wing of
the Centre, would focus on multiple communication technologies and would monitor all traffic
types such as satellite, wireline, wireless, the Internet, email, VoIP, encrypted communication for
de-encryption of net-based encryption methods, regulatory standards to be adopted by telecom
operators and system design.

Critical analysis of the Shreya Singhal judgment

In the estimation of the author, while freedom of speech and expression/each establishment’s
right to advertise ought be given primacy, like the Supreme Court has held in a catena of
judgments, the Court ought to have realised that Section 66-A(c) of the IT Act was enacted to
prevent misusers and spammers from sending out UBE’s and UCE’s and hence striking it down
would imply that the companies/establishments could send spam mails, with or without viruses,
without (a) there being any regulation to stop them and/or (b) there being any legal
consequences. The Supreme Court also probably erred since Section 66-A(c) of the IT Act was
enacted so that a national security is not compromised with spam mails in the manner that it was
with the Bhabha Atomic Research Centre. Since preventing spamming also included safety and
security of the State and national security, Section 66-A(c) of the IT Act should not have been
struck down

PROCD, INC. V. ZEIDENBERG

Facts - Plaintiff compiled telephone directory information from more than 3000 directories into
a database, available on CD-ROM. The court found that the database was costly to compile and
was expensive to keep current. Plaintiff planned to charge one price for limited use to consumers
and a higher price to commercial users which ordinarily would pay intermediaries expensive fees
for such information. The Shrink wrap license to consumer product, sold at a lower cost than the
commercial version, stated that use was limited to non-commercial purposes. Every box declared
that the software comes with restrictions stated in an enclosed license, which is available on the
disk and also which appears on the screen every time the software runs. Defendant ignored the
license and resold the information on the CD database.

Issue - Does the buyer have to comply with the terms of a shrinkwrap license because they have
become part of the contract?

Held - The buyer must comply with the license terms. The UCC permits parties to structure their
relations so that the buyer has a chance to make final decision after a detailed review. The
customer inspected the package, tried out the software, learned of the license and did not reject
the goods, which the customer could if the license was unsatisfactory. A buyer accepts, under 2-
206 when after an opportunity to inspect the goods, he fails to make an effective rejection. Thus,
the buyer had accepted and was bound to abide by the license.
Discussion - The Decision seemed to turn on the opportunity to reject if license seems unfair. If
a buyer concludes that terms of the license make the software worth less than the purchase price
than the buyer can return them. As the court points out, it’s not the seller’s job to maximize their
gain

Synopsis of Rule of Law - If a buyer is presented with additional terms and offered the
opportunity to reject and return the goods and subsequently does not reject the goods, then the
buyer will have accepted those terms.

HOTMAIL CORPORATION V. VAN MONEY PIE INC., ET AL.

Plaintiff provides free e-mail services to over 10 million customers under its trade name and
service mark "hotmail." To utilize plaintiff's services, one must agree to Hotmail's Terms of
Service, which expressly prohibit the use of Hotmail e-mail accounts to facilitate the
transmission of unsolicited commercial e-mail, otherwise known as spam. Users agree to these
Terms of Service via a click-wrap agreement, in which the customer, after being given the
opportunity to view plaintiff's Terms of Service on his computer, clicks a box indicating his
assent to be bound thereby.

Defendants used the services of third parties to send spam which advertised, among other things,
allegedly pornographic materials. Defendants altered the return addresses of this e-mail to falsely
indicate that it was sent from a Hotmail account. This was accomplished by using plaintiff's
mark in the e-mail's reply address. Numerous recipients of defendants' spam responded with
complaints, which were sent to accounts defendants had set up at Hotmail for the receipt of e-
mail. This utilized much of the finite capacity of plaintiff's computer network.

Plaintiff moved to enjoin defendants both from sending "spam" which falsely stated it came from
plaintiff's service, and from using Hotmail accounts as mail boxes for "spam" reply. Plaintiff
alleged that defendants' conduct infringed and diluted plaintiff's service mark, violated the
Computer Fraud and Abuse Act, and constituted both unfair competition and breach of plaintiff's
Terms of Service. The Court agreed and issued a preliminary injunction, enjoining defendants
from continuing this course of conduct.
Defendants used plaintiff's "Hotmail" mark in the reply address of spam defendants sent. The
court found that this was likely to confuse members of the public by causing them to think that
plaintiff was involved in sending them unwanted spam when, in fact, it was not. As such,
plaintiff had established it was likely to prevail on its claims of false designation of origin and
unfair competition.

The Court also found that defendants' conduct was likely to violate the Computer Fraud and
Abuse Act, and constituted a trespass on chattel. The former act, 18 U.S.C. §1030, prohibits
persons from knowingly causing the transmission of information that intentionally causes
damage to protected computers. Defendants committed the requisite injury to plaintiff's
computers by causing spam e-mail to bounce back to plaintiff's computers by use of a false
return address. This conduct also caused a prohibited trespass on plaintiff's chattels, namely its
computers.

The most interesting facet of the Court's decision was its holding that "the evidence supports a
finding that plaintiff will likely prevail on its breach of contract claim." This contract was
contained in plaintiff's Terms of Service, which prohibited use of plaintiff's service to facilitate
the transmission of spam. This was breached by defendants' use of Hotmail accounts and the
Hotmail mark in their transmission of spam. To reach this conclusion, the Court first had to hold
that the plaintiff and defendants were parties to an enforceable agreement. By so doing, the Court
indicated its willingness to uphold the validity of a click-wrap agreement, as defendants agreed
to be bound by plaintiff's Terms of Service solely by indicating their assent by clicking "I agree"
after being presented with an opportunity to view the Terms of Service.

Lastly, the Court found that plaintiff had been irreparably injured by defendants' conduct
"because of the loss of good will and reputation arising from customer confusion about the
source of defendants' spam e-mails and/or plaintiffs's affiliation or sponsorship of them."

RUDDER V MICROSOFT CORP

The plaintiffs in this case, two Ontario law school graduates, brought a class action law suit
against MSB (Microsoft Network) for breach of contract, breach of fiduciary duty,
misappropriation and punitive damages. The case centred on three issues: Should the 'forum
selection clause' in the Member Agreement be held up in court? Do the parts of the contract
which are not present on the screen at one time (need to scroll to see them) constitute fine print?
And should the fact that the plaintiff (and the rest of the class) did not read the specified clauses
allow for the unenforceability of those clauses? The appeal was dismissed and action brought by
plaintiffs in Ontario was permanently stayed.

In the 1999 decision of Rudder v. Microsoft,9 consumers in Ontario attempted to bring a class
action lawsuit against Microsoft Network on behalf of approximately 89,000 Canadians,
claiming that Microsoft had misappropriated their funds. The Ontario Superior Court dismissed
the case as being out of their jurisdiction by upholding the forum selection and choice of law
clause in the electronically-signed, “click here to agree”-type Microsoft Network account-
opening agreement. The fairly typical clause that Rudder failed notice stated: This Agreement is
governed by the laws of the State of Washington, U.S.A., and you consent to the exclusive
jurisdiction and venue of courts in King County, Washington, in all disputes arising out of or
relating to your use of MSN or your MSN membership.

The court first noted in their analysis that forum selection clauses are generally treated with
deference in Canadian courts, similar to arbitration clauses, and were thus wary of dismissing it.
Although the plaintiffs contended that the manner in which the clause is presented obscures it,
the court held that having to scroll is similar enough to having to flip a page in a paper document
that this cannot be a valid argument. The terms were also presented uniformly throughout the
contract, the presentation of the terms was in plain English, not 'legalese', and scrolling through
the document prompted you to click "I agree" twice. The court found that plaintiffs were just
trying to avoid consequences of specific terms, while also having others remain in effect, and so
ruled that finding for the plaintiffs would undermine the goal of "commercial certainty" in
contract law.
 Opinion of the Court- Justice Warren Winkler found in favour of Microsoft and held that the
clause was enforceable. Winkler rejected Rudders argument, stating that "Admittedly, the entire
Agreement cannot be displayed at once on the computer screen, but this is not materially
different from a multi-page written document which requires a party to turn the pages." 

Winkler observed that users were required to click on the "I agree" button to accept the terms,
and that the impugned clause was no harder to read than any of the others. The sign-up procedure
itself required users to click "I agree" twice, where the second time the user was told that they
would still be bound to the terms even if they do not read them all. Winkler did not find it
reasonable for Rudder to argue for the enforcement of all the other terms of the contract except
for the forum clause. A finding in favour of the plaintiff, said Winkler, would not advance the
goals of commercial certainty. 
In concluding, Winkler held that "click-wrap" agreements in general should be "afforded the
sanctity that must be given to any agreement in writing."

NILESH MEHTA V J PEREIRA FERNANDES SA [2006]

This case note examines the first judicial recognition that English law will treat a document as
having been signed even if the signature does not appear on any physical document.

The court has recently looked at whether a guarantee by way of email had been signed with a
view to establishing whether it was enforceable.  The court concluded the email had not been
signed just because the sender’s name and email address appeared in the header information. 
The decision will be of interest to creditors who, although they may have formal procedures in
place governing the taking of guarantees, may find themselves in the position of being offered a
guarantee by way of email.

Mr Mehta sent an email offering a personal guarantee of a debt due from his company.  He did
not sign the email either by typing his name at the end of the body of the message or by using a
secure signature verification tool.  The only place where his name was to be found was in the
sent email address line at the top of the email.

The issues before the court were:

 whether the email was  a memorandum or note of an agreement to guarantee and

 whether the email had been signed, so as to satisfy the requirements of s 4 Statute of Frauds.

The purpose of the Statute is to protect people from being held liable on oral or unsigned written
communications.  Where there is an offer in writing made by the party to be bound containing
the essential terms and the party to be bound accepts that his offer has been accepted (even if
only orally), then a memorandum or note has been made to satisfy the Statute.

The court found that:

 the email amounted to a memorandum or note that would be enforceable as a guarantee;

 the email had not been signed by the automatic insertion (by the internet service provider) of Mr
Mehta’s email address.

The court considered the email address to be the equivalent of a fax number and did not consider
that to be enough to show an intention to be bound by the terms of the document.

In working out whether a document has been signed, the court uses a functional test: asking
whether the conduct of the would-be signatory indicates an intention to authenticate the
document.

In this case, it would have been sufficient for the guarantor to have typed his name as a sign-off
to the main body of the email.  Note too, the difference between best practice in requiring a
guarantee to be by way of deed and the position in law that the guarantee will be effective if it is
in writing and signed.

The position could be compared to the case of IRC v Conbeer although the judge in
the Mehta case does not refer to it perhaps because Conbeer limited its consideration of the
meaning of “signed” in relation to Part 8 of the Insolvency Rules 1986 only.  In Conbeer, it was
decided that a faxed proxy form was signed if it bore upon it some distinctive or personal
marking which had been placed there by or with the authority of the would-be signatory.  When
the form was faxed it transmitted two things: the contents of the fax and the signature applied to
it.  What is important is not the form of the signature itself but an intention to authenticate the
document.
The European Commission published a report on 20 March 2006, showing that individuals and
businesses have been slow to make use of electronic signature tools, despite the creation of a
Community framework to support their legal admissibility.  The EC anticipates the growing use
of electronic ID cards will serve to identify the holder and authenticate the signature, as well as
enabling the holder to sign electronic documents.