Technology has advanced, and so have the approaches used to execute, store, and manage documents. In recent years, electronic agreements and e-signatures have increased due to the need for simple, up-to-date ways to create binding legal contracts. To save costs on paper and better manage contract workflows, physical contracts gradually became obsolete. The idea of a paperless economy supported e-signatures and electronic agreements. And it makes sense – paperless processes are more straightforward, efficient, and secure.The Government of India has introduced various initiatives to ensure a paperless economy. The Department of Legal Affairs in India amended the law to allow for the execution of digital agreements such as powers of attorney, trust deeds, wills, and other negotiable instruments other than checks. It also allowed for the execution of contracts for the sale of real estate or interests in real estate, among different types of testamentary dispositions. Let’s discuss the important Indian legislation that recognizes electronic contracts and signature usage.
Indian Contract Act, 1872
Under Section 2(h) of the Indian Contract Act of 1872, the word “Contract” has been defined as a legally binding agreement establishing duties between two or more parties. Their primary activity is the trade of commodities, services, cash, or even actual money. Contracts are made orally, on paper, and occasionally through physical actions. Any broken contract provision gives rise to legal remedies, such as compensatory damages for the injured party or contract cancellation.
The requirements that an agreement must meet to be deemed a contract and subject to legal enforcement are outlined in Section 10 of the Indian Contract Act, 1872.
It reads as follows:
“All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.”
The Indian Contract Act of 1872 allows for the electronic contract’s execution. An agreement is deemed legitimate when two competent parties sign it with their consent and for legal consideration.
Information Technology Act, 2000
Section 10A of the Information Technology Act of 2000 establishes that contracts made via electronic methods are legitimate. The following is stated in the clause: “Where in the formation of a contract, the communication of proposals, the acceptance of proposals, and 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.”
Under the Information Technology Act of 2000, an e-agreement saved or documented electronically with the contracting parties is regarded as an electronic record. Section 2(1)(t) of the Information Technology Act, 2000 defines an electronic record as any data, record, or data created, picture or sound saved, received, or communicated in an electronic form, or microfilm or computer-generated microfiche.
Digital signatures are defined by Section 2(1)(p) of the Information Technology Act, 2000, whereas electronic signatures are under Section 2(1)(ta) of that same law.
The Information Technology Act of 2000’s Section 5 recognises electronic signatures as valid signatures.
“Where any law provides that information or any other matter shall be authenticated by affixing the signature or any document shall be signed or bear the signature of any person, then, notwithstanding anything contained in such law, such requirement shall be deemed to have been satisfied, if such information or matter is authenticated by means of an electronic signature affixed in such manner as may be prescribed by the Central Government.”
Any lawsuit can be started based on the e-signature before a court of law since the Information Technology Act of 2000 makes the e-signature legally binding.
States have different stamp duty regulations governing their usage. The majority of Indian states do not include electronic documents in the scope of their stamp laws. However, under Section 2(l) of the Maharashtra Stamp Act of 1958, several jurisdictions, including Maharashtra, recognise “electronic records” as being under the definition of “instrument.” In order to recognise electronic records legally, it clarifies the phrase “document” included in the description of “instrument.”
“Instrument” refers to any document that creates, transfers, limits, extends, extinguishes, or records a right or responsibility; nevertheless, it excludes bills of exchange, checks, promissory notes, bills of lading, letters of credit, insurance policies, share transfers, debentures, proxies, and receipts.
By mandating an electronic signature or biometric fingerprint, the Maharashtra E-Registration and E-Filing Rules, 2013 recognised the legal validity of e-contracts and e-signature. E-agreements and e-signatures are also covered under the Indian Penal Code, the Banker’s Book of Evidence Act of 1891, and the Reserve Bank of India Act of 1934.
Indian Evidence Act, 1872
According to the Evidence Act of 1872, an electronic agreement has the same legal effect as a physical one. “Evidence” is defined as “all papers, including electronic records, are produced for the scrutiny of the court” under Section 3 of the Evidence Act of 1872.
Any information in an electronic record stored, recorded, or copied on optical or magnetic media created by a computer is admissible in any court of law without additional justification, according to Section 65B(1) of the Evidence Act, 1872. This document will thus be referred to as proof of any original material.
According to Section 47A of the Evidence Act, the Court has selected the Certifying Authority who issues the electronic Signature Certificate for the e-signature of any person, and under Section 85B of the Evidence Act, the Court should logically assume the following:
- The electronic record is safe and unaltered.
- The user secures the digital signature to sign or approve the electronic record.
Both domestic and foreign legal systems recognise e-agreements as being legitimate and capable of being enforced in Court. Additionally, e-signature technology, tools, and platforms are being aggressively used for documentation and contract management. Therefore, e-signatures are safeguarded with the requisite security, such as by sending an OTP to the registered cellphone number to confirm the electronic signature, logging the IP address to verify the electronic signature, or validating through the digital signature certificate.
E-contracts also have the potential to streamline workflows, speed up processes, and improve compliance. For companies with a significant digital presence, e-contracts are an efficient way to manage their contract portfolio.
Digital signatures are particularly beneficial in B2B contracts where multiple stakeholders are involved, and there is a need for quick turnaround times.
To understand how we at ZoopSign can help you streamline your end-to-end contract management process with e-contracts and e-signatures, learn more here.
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