This post addresses the question of : Validity of a contract entered into through E-mail (E-Contract) and how territorial jurisdiction is to be determined in such cases.

There is no dispute as to the validity of a contract, entered-into electronically and the same is made express by Section 10-A of the IT Act, 2000, which reads as under :

10-A. 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 ground that such electronic form or means was used for that purpose.

The question of territorial jurisdiction is slightly more complex and can be explained by way of this case :

P.R. Transport Agency vs. Union of India & others – 2005 SCC OnLine All 880 (Hon’ble High Court of Allahabad)

The facts are pretty straightforward :

In this case, BCC held an e-auction for the allocation of coal. PRTA’s (based in UP) bid was accepted. The acceptance letter was dispatched on 19th July 2005 by e-mail to PRTA’s e-mail address. Upon reciept of acceptance, PRTA deposited full amount, in terms of the ‘Terms of Allocation’.  BCC, inspite of encashing the cheque deposited by PRTA, did not deliver the coal. Instead, an email was sent to PRTA stating that e-auction stood cancelled on account of “some technical and unavoidable reasons”. However, the real reason for the cancellation was allocation of the Coal-mine to a higher bidder than PRTA. The higher bid could not be considered earlier due to a computational fault. Aggrevieved by this letter, PRTA approached the Hon’ble High Court of Allahabad. A jurisdictional objection was raised by BCC on the premise that courts in UP have no territorial jurisdiction.

PRTA’s answer to this was that : since communication of acceptance was recieved by PRTA at UP, the contract can be stated to have been entered-into at UP. In an action based on breach of contract, the ‘place of contract’ is one of the determinative factors for deciding territorial jurisdiction.

The Hon’ble High Court held that the law with respect to contracts entered into via telephone is pretty clear(In this regard one may refer to : Bhagwan Dass v. Girdhari Lal, 1966 AIR 543 SC) and the contract in such cases is complete as soon as the acceptance is communicated and at the place where the same is recieved.

This principle, however, cannot be imported in case of e-mails as an email can be accessed at any place in the world by the addresse. This absence of a static place of receipt or transmission is taken-care of by Section 13(3) of the IT Act, 2000, which states“…an electronic record is deemed to be received at the place where the addressee has his place of business”. Applying this categorical provision, Hon’ble High Court ruled that since the email acceptance is deemed to have been received at UP, it had the requisite territorial jurisdiction to decide the case. 

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Appendix :

Section 13 of the IT Act – reads as under :-

13. Time and place of despatch and receipt of electronic record.—(1) Save as otherwise agreed to between the originator and the addressee, the despatch of an electronic record occurs when it enters a computer resource outside the control of the originator.

(2) Save as otherwise agreed between the originator and the addressee, the time of receipt of an electronic record shall be determined as follows, namely:—

(a) if the addressee has designated a computer resource for the purpose of receiving electronic records,—

(i) receipt occurs at the time when the electronic record enters the designated computer resource; or

(ii) if the electronic record is sent to a computer resource of the addressee that is not the designated computer resource, receipt occurs at the time when the electronic record is retrieved by the addressee;

(b) if the addressee has not designated a computer resource along with specified timings, if any, receipt occurs when the electronic record enters the computer resources of the addressee.

(3) Save as otherwise agreed to between the originator and the addressee, an electronic record is deemed to be despatched at the place where the originator has his place of business, and is deemed to be received at the place where the addressee has his place of business.

(4) The provisions of sub-section (2) shall apply notwithstanding that the place where the computer resource is located may be different from the place where the electronic record is deemed to have been received under sub-section (3).

(5) For the purposes of this section,—

(a) if the originator or the addressee has more than one place of business, the principal place of business, shall be the place of business;

(b) if the originator or the addressee does not have a place of business, his usual place of residence shall be deemed to be the place of business;

(c) “usual place of residence”, in relation to a body corporate, means the place where it is registered.

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