eSignature Legality in India in corporate and commercial contracts

The Information Technology Act of 2000 ("ITA"), the Indian Contract Act of 1872 ("ICA"), and the Electronic Signature or Electronic Authentication Technique and Procedure Rules of 2015 ("ESEATPR") all recognize electronic signatures as valid legal documents in India.

 

The ITA, the ICA, the ESEATPR, the Indian Stamp Act of 1899, and the pertinent state stamp acts are the pertinent legislation and regulations pertaining to the usage of electronic signatures in India. These laws provide the framework for:

 

What "electronic signatures" are accepted by the government of India;

What paperwork or agreements cannot be made electronically;

What requirements all contracts, including those using electronic signatures but not in compliance with the ITA's officially recognized standards, must satisfy; and

Whether stamp duty is required to be paid on a specific electronic transaction.

 

A contract cannot be denied enforceability solely because it was executed electronically, according to the ITA, as long as it satisfies the requirements of a legal contract under the ICA.

Section 10 of the ICA lists the prerequisites for a legal contract. These components are listed below:

 

It is entered into by persons who are legally able to do so; it results from their free will (i.e., a valid offer and acceptance); it provides for reciprocal consideration between the parties; and it does not call for the performance of any illegal acts.

An electronic signature, according to the ITA, is "authentication of any electronic record by a subscriber by means of the electronic technique specified in the Second Schedule and includes a digital signature."

 

According to the ITA, a "digital signature" is the "authentication of any electronic record by a subscriber by means of an electronic method or procedure in accordance with the provisions of section 3 [of the ITA]."

 

An "electronic signature" must meet certain requirements to be lawfully accepted under the ITA.

 

"Reliable" behaviour 

 

Utilise a method of authentication listed in the Second Schedule to the ITA.

 

An electronic signature is considered “reliable” if:

·       The signature creation data or the authentication data are, within the context in which they are used, linked to the signatory or to the authenticator and to no other person;

·       The signature creation data or the authentication data were, at the time of signing, under the control of the signatory or the authenticator and of no other person;

·       Any alteration to the electronic signature made after affixing such signature is detectable;

·       Any alteration to the information made after its authentication by electronic signature is detectable;

·       There is an audit trail of steps taken during the signing process; and

·       The digital signer certificates are issued by a Certifying Authority recognized by the Controller of Certifying Authorities appointed under the IT Act.

·       The Second Schedule provides that an “electronic signature” or electronic record can be authenticated by using either of the following methodologies:

·       Aadhaar e-KYC services, or

·       A third-party service by subscriber's key pair-generation, storing of key pairs on hardware security modules and creation of digital signature provided that the trusted third party providing such services shall be offered by any of the licensed Certifying Authority.

·       To create a digital signature, a user obtains a digital certificate from a licensed Certifying Authority.

Indian Contract Act of 1872: Acceptance and Role of Acceptance

According to Section 2(h) of the Indian Contract Act, of 1872,  the definition of acceptance states that “when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted”. A proposal, when accepted, becomes a promise and creates mutual obligations and rights between the contracting parties.

Types of Acceptance

• Expressed acceptance: If the acceptance is written or oral.
• Implied acceptance: If the acceptance is shown by conduct
• Conditional acceptance: When a person to whom an offer has been made tells the offeror that he or she is ready to accept the offer with certain changes made to the condition of the offer.

Legal rules relating to acceptance

In order to create a valid acceptance, there are some legal rules that must be

followed: 

• Acceptance must be unqualified and unconditional.
• The acceptance must be expressed in some usual and reasonable manner
• Acceptance of an offer is the acceptance of all its terms
• Communication of acceptance must be made by the acceptor or his agent
• Acceptance may be expressed or implied
• Mental acceptance is no acceptance
• Acceptance of the general offer need not be communicated
• A mere answer to a question can neither constitute an offer nor an acceptance

Modes of acceptance 

There are two modes by which acceptance can happen, they are following as

1. Communication of acceptance by an action – This includes verbal or written communication. So, this will also cover texting, emails, and phone calls.

2. Conveying acceptance through conduct – The offeree may do this by acting in a way that suggests acceptance. For instance, you are required to pay the fare with conduct as you board a bus.

Indian Contract Act of 1872: What makes a Contract Legal

According to Section 2(h) of the Indian Contract Act, of 1872, a contract is defined as an agreement between two or more people that is rendered legally enforceable and that establishes and specifies the duties of the parties. The statement “every agreement and promise enforceable by law is a contract” is

attributed to Sir F. Pollock. 

Two essential components:

• An agreement
• Enforceable by law.

The following components make up a contract:

Offer: Section 2(a) of the Indian Contract Act of 1872 states that a proposal is made when one person expresses to another his readiness to perform an act or refrain from performing one in order to get the approval of the other party. Acceptance is defined as the expression of assent to the offer made by the offeror in Section 2(b) of the Indian Contract Act, of 1872. This acknowledgment demonstrates that the proposal is indeed approved.

Promise: A person makes a proposal when he or she indicates their willingness to do or not do something. The proposal turns into a promise after the promisee accepts it.

Agreement: The legal, mutually binding commitment made between private parties is referred to as an agreement.

Contract: According to Section 2(h) of the Indian Contract Act of 1872, a contract is a legally binding agreement.