Essential Elements of Online Contract || Legal Issues || BCIS Notes

Essential Elements of Online Contract || Legal Issues || BCIS Notes


The essential elements of an online contract are discussed below:

  • Offer
    Just like paper-made or conventional contracts, one of the most essential elements of an online contract is the requirement of an offer to be made. There must be a lawful proposal or offer made by one party known as the proposer and it is the starting point of a contract. By browsing and choosing the goods and services available on the website of the seller, the consumer makes an offer to purchase such in relation to the invitation to offer made by the seller. A proposal must be distinguished from the invitation to offer or treat and must be made with an intention to create a legal relationship. An offer or proposal is revocable and can be withdrawn at any time before it is accepted because once it is accepted by the other party, it becomes a promise.
  • Acceptance
    When a proposal or offer is made is accepted by the person to whom the offer is made, it becomes a promise. The acceptance of the proposal must be unconditional and absolute and must be communicated to the proposer or the offeror. In case of an online contract, offer and acceptance can be made through e-mails or by filing the requisite form provided on the website. They may also need to take an online agreement by clicking on ‘I Agree’ or ‘I Accept’ for availing of the services offered.
  • Intention to create a legal relationship
    If there is no intention of creating a legal relationship on the part of the parties to contract, there is no contract between them. It is an essential element of a valid contract that parties to the contract must have the intention to create legal relationships. The intention of the parties is to be considered by the Court in each case and must be ascertained from the terms of the agreement and surrounding consequences. Agreement of social or domestic nature do not create a legal relationship, hence they are not contracts and are not enforceable by law. In the case of arrangements regulating social relations, it follows as a matter of course that parties do not intend legal consequences to follow. For example, an invitation for marriage to a friend or family through e-mails or fax or through any means of telecommunication is not a contract.
  • There must be a lawful object
    Parties to the agreement must contract for a legal object. A contract is only enforceable by law only when it is made for a lawful purpose. It must not defeat any provision of law and must not be fraudulent in nature. Thus a contract on a website designed for the purpose of selling illegal substances online is a void contract. If an agreement is made to cause injury to any person or his property, such agreement is not lawful and therefore to be considered void. If any competent Court regards any agreement as opposed to public policy, it is a void contract.
  • There must be a legal or lawful consideration
    Consideration is one of the most important elements of a contract. The basic rule is that when a party to a contract promises to perform his promise he must get something in return for the performance of his promise. Consideration is something of some value in the eyes of law. It may be of some benefit, right, interest, or profit given to the party as inducement of promise. An act constituting consideration must be moved at the desire of the promisor and must be legal, real, and not imaginary. Promises that are physically impossible to perform cannot have real consideration. For eg. an online site that offers the purchase of land on the moon.  
  • The capacity of parties
    Parties to a contract must be capable of entering into a contract. He must attain the age of majority and must be of sound mind. He must not be disqualified from contracting by any law for the time being in force. In our country, an agreement where either party is a minor has no significance. It is considered as void ab-initio. As per Section 12 of the Indian Contract Act, 1872, any person who is in a position to judge and safeguard his own interest is of sound mind and capable enough to enter into a contract. When a person is declared insolvent by any competent Court, he cannot enter into a contract relating to his property.
  • There must be free and unaffected consent
    It is basically the meeting of the minds of the parties. When both agree upon the same thing, in the same manner, they are said to consent. In case consent is caused by coercion, it is voidable at the option of the party whose consent was so caused. Coercion includes physical compulsion, threat, and violence. Consent has to be free and genuine and not induced by misrepresentation, undue influence i.e a case where one person is in a position to dominate the will of another. But in the case of an online contract, there is a narrow scope of physical communication between the website and the customer availing their service, they just give consent by clicking the option that ensures free and genuine consent.
  • Possibility of performance
    The terms and conditions of agreement must be certain and not vague and must also be such as are capable of performing. It is the general rule that the promisors of the contract perform the promise but there other persons also who may perform under certain circumstances such as an agent is appointed by the promisor for this purpose, legal representative in case of death of a promisor. The time, place, and manner of the performance of the contract are fixed generally at the desire and conveniences of the parties. Various rules regarding the time and place of the contract are laid down under sections 46 to 50 and section 55. When the time is the essence of the contract, a promisor is expected to perform his promise with the stipulated time period and if he fails to do so, the contract becomes voidable at the option of the promise.

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