E-commerce’s Impact on Contractual Relationships: Arbitration clause in the “terms and conditions” as mentioned in the website is sufficient to constitute an arbitral tribunal

  1. Home
  2. »
  3. Arbitration Updates
  4. »
  5. E-commerce’s Impact on Contractual Relationships: Arbitration clause in the “terms and conditions” as mentioned in…

An arbitral clause or arbitration agreement is sine qua non to initiate arbitration proceedings. As per Section 7(2) of The Arbitration and Conciliation Act, an Arbitration agreement may be either in form of arbitration agreement or arbitration clause in a contract. Such agreement must be in writing and shall be signed by both parties according to Section 7(4) of the Arbitration and Conciliation Act, 1996. With the advancement of e-commerce and the internet, online contracts have acquired significant importance. An online contract is conceptually and procedurally identical to a regular paper contract. In the year 2016, amendment was made by inserting section 7(4)b in The Arbitration and Conciliation Act it included “communication through electronic means” which implies that an arbitration agreement/clause will be valid even if it is made in electronic form. Under the Indian Contract Act of 1872, the prerequisites for e-contracts are the same as the one for oral or written contract. Furthermore, another essential requirement of an e-contracts is that it has to be accepted by the required electronic modes of acceptance.

Section 10-A of the Information Technology Act, 2000 allows for creating electronic contracts and such contracts are legally binding in India. An E- contracts are legitimate and enforceable by law if the fundamentals of a valid contract under the Indian Contract Act, 1872 are satisfied. The IT Act recognises the legality of a contract when acceptance is made in electronic form.’

Integrity of an Agreement entered through an electronic medium was challenged in famous case, Rudder v. Microsoft Corp., 1999 CanLII 14923. The Ontario Superior Court of Justice decided the matter based on two issues. One, whether clickwrap contracts are valid. Two, whether a clause will bind an individual be upheld even if that clause is not seen. The court in this case held that before offering access to the services, an online “click-wrap” agreement was reached without reading down through all pages of its terms and conditions. The court ruled that the Membership Agreement was enforceable, finding that scrolling through multiple pages was akin to having to flick through several pages of a physical contract, and that failure to do so would result in chaos.

Similarly, Indian judiciary has repeatedly recognised the validity, enforceability, legality of arbitration clause in E-contract with interpretations with an intention to realise the purpose and object of the statute.

In the case of Inox Wind Limited vs. Thermocables Ltd (2018) 2 SCC 519, the Supreme Court of India delivered a landmark judgment regarding incorporation of arbitration clauses in standard form contracts. The dispute between the parties arose in the context of a purchase order where the supply was to be as per the terms and conditions mentioned therein, which were contained in the standard terms and conditions of the applicant, Inox Wind Limited.