With COVID-19, the silver lining for the legal community will be a greater adoption of e-contracts, write Puneet Gupta and Amit Wadhwa
The attitudes towards the rule of law in any society can be understood by the enforceability of agreements entered into by its members, whether it is by the erstwhile barter system or today’s complex agreements. With the requirement of codified law to govern and promote orderly growth of business, the Indian Contract Act, 1872, was enacted. This act is one of the few legislations in India that has witnessed two pandemics, the first one being the outbreak of Spanish Flu, in 1918, and now, COVID-19.
The Indian Contract Act, which is a code in itself, covers almost all aspects of a contract, including the very fundamental concepts such as offer, consideration and acceptance, to more complex ones such as pledge, bail and agency. The ever-evolving socio-economic conditions also find resonance in the legislative framework.
With technology taking big strides and a push towards a paperless future, electronic data, electronic records, e-bills and e-contracts also find a place in Indian legislation. The first and foremost reference needs to be made to the Information Technology Act, 2000 (IT Act), which was enacted to regulate the high-tech virtual world. The IT Act also led to amendments in other statutes, notably the Indian Penal Code, the Banker’s Book Evidence Act and the Indian Evidence Act.
After almost two decades since the IT Act came into force, the business fraternity is now looking to it as a panacea in the tumultuous times of COVID-19. Different countries have been forced to announce lockdowns and implement social distancing measures. The new norm is to work from home, and the only reprieve to alleviating the situation are digital solutions including the push for e-contracts, digital signatures and e-stamping.
Every coin has two sides. In this case, one side is COVID-19 and the lockdown, restricted movements, and an inability to carry out business as usual. On the other side, there is an emerging need for a new supply chain for healthcare, protective equipment, and essential items from within the country as well as abroad.
Current business needs can only be fulfilled if the final execution is possible by digital means, which not only fulfills legal requirements, but also provides the flexibility and convenience of operating, from dining tables turned into office desks and living rooms turned into
Section 10A of the IT Act enables e-contracts by the following provision:
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 grounds that such electronic form or means was used for that purpose.
The only essential requirement to validate an electronic contract is compliance with necessary prerequisites provided under the Indian Contract Act, and the same are taken care of by section 10A, which specifically covers aspects of proposals such as acceptance and even their revocation, the bedrock of any contract.
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Puneet Gupta is head of contract and Amit Wadhwa is head of litigation at Max Life Insurance.