Laws Relating to Online Transaction

As commerce on the Internet has grown, the inevitable fallout from failed transactions and business relationships has resulted in a developing body of case law. In some cases, the legal issues that govern the analysis of the electronic commercial transaction are no different from those applied in a more traditional commercial setting.

For example, a fraudulent scheme perpetrated through print media is still the same fraudulent scheme when perpetrated on a web-site. Indeed, in the area of consumer fraud, the emerging issues in e-commerce are less related to substantive legal principles, than they are to procedural issues, such as the courts’ jurisdiction over out-of-state defendants and discovering and stopping fraud from taking place online.


United Nations Commission on International Trade Law (UNCITRAL) Model Law on E-Commerce, the Government of India enacted the Information Technology Act in June 2000. The Act facilitates E-commerce in the country.

The United Nations General Assembly adopted the United Nations Commission on International Trade Law (UNCITRAL) Model Law on E-Commerce through a Resolution passed on 30 January 1997.  The UNCITRAL Model Law on E-commerce was drafted in order to serve as a document that the various countries of the world could use and evaluate and amend their own laws and practices and by providing a common legal platform on which all countries could model their domestic legislations allow the countries of the world to move towards a uniform international law on E-commerce.

The main objective of UNCITRAL Model Law of E-commerce is to offer national legislators with a set of internationally acceptable rules as to how the legal obstacles in the communication of legal significant information through paperless messages, may be removed and how a more secure legal environment may be created for E-commerce.

Any legislation pertaining to E-commerce will be a futile exercise unless it fills up the lacunae in the existing law regarding the validity of online contracts. Recognizing this factor, the Model law has incorporated a provision in Article 11 relating to the 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.

Overview of the Indian law

The Information Technology Act, 2000 (“IT Act”) deals with contractual aspects of use of electronic records.

The validity of electronic transactions is established under the IT Act. The act establishes that an ecommerce transaction is legal if the offer and acceptance are made through a ‘reasonable’ mode. The objectives of the Information Technology Act, as outlined in the preamble, are to provide legal recognition for E-commerce transactions. The Act lays down procedures for networking operations and for civil wrongs and offences. The Indian Information Technology Act does not have any express provision regarding the validity or formation of online contracts.

For instance, a communication sent by an offeror to an offeree through indirect means, such as an email that passes multiple servers and spam mails, is not regarded as a reasonable mode under the IT act. Reasonable modes of acceptance in an ecommerce transaction are:

Direct mail from the offeree to the offeror.

Acceptance by conduct, which is pressing an ‘Accept’ button to an offer.

The IT act governs the revocation of an ecommerce offer and acceptance. An ecommerce transaction is said to be complete when the offeror receives acknowledgment of the receipt of the offer. Besides, an offeror has the liberty to terminate an offer, provided its acceptance has not been communicated by the offeree.

The Information Technology (Amended) Act, ITAA, was amended in 2008 to increase security of e-commerce transactions, with special provisions for legal recognition of digital signatures and electronic documents. Section 43A of ITAA holds ecommerce companies accountable for protection of personal data.

When an ecommerce company fails to protect personal data of its customers or is negligent in maintaining and implementing reasonable security practices, and if this results in wrongful loss of an online buyer, the laws are clear that its body corporate is wholly liable to pay the damages by means of monetary compensation.

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