Contract

formation on the
Internet
Section 13 of the IT Act, 2000 – Time and Place
of Dispatch and Receipt of Electronic Records
• Section 13 explains when and where an
electronic message (like an email or e-
contract) is considered sent (dispatched) and
received, which is critical in determining legal
timelines and jurisdiction.
Sub-Section (1): Dispatch
• An electronic record is dispatched when it enters a computer system
outside the control of the sender.
• This marks the official time of sending.
• You send an email. It is considered "dispatched" when it leaves your email
server and enters the recipient’s mail server.

Sub-Section (2): Receipt

• If the recipient has specified a system, the record is received when it
enters that system.
• If no system is specified, it is received when it’s accessed by the recipient.
• These rules help determine when a message is legally received.
• A company’s customer care email ID is designated. If you send it there, it is
received when it hits that inbox. If you send it to an employee’s personal
email, it’s received when they actually check it.

Sub-Section (3): Party Agreement

• If the sender and recipient agree on a particular place of dispatch or
receipt, that agreement is valid.
• Law respects parties’ choice regarding location of contract formation.
Sub-Section (4): Place of Dispatch
• Default rule: Dispatch is deemed to occur at the sender’s place of
business.
•
Sub-Section (5): Place of Receipt
• Default rule: Receipt is deemed to occur at the recipient’s place of
business.

If a sender is in Delhi and the recipient is in Goa, the dispatch

happened in Delhi, and receipt happened in Goa, even if the email
passed through servers abroad.

Purpose of Sub-sections (3) to (5)

• Designed for the convenience of netizens and online businesses.
• Help resolve conflicts related to jurisdiction, timing, and proof in
online communication.
Section 12 – Acknowledgement of Receipt
of Electronic Record
Sub-section (1):
• Where the originator (sender of an electronic record) has not
specified that the record is valid only upon acknowledgement, the
record is considered sent once it enters the receiver's system (even if
no acknowledgement is received).
• Example: You send a job application email. You haven’t asked for a
reply. Even if the employer doesn’t respond, it is still considered
“sent” once it reaches their system.

Sub-section (2):
• If the originator has required an acknowledgement and states that the
record is effective only upon acknowledgement, then the message is
not considered sent until the acknowledgement is received.
• Example: If a company says "We will process your application only
after you confirm receipt," your confirmation is needed for the
process to begin.
Sub-section (3):
• The acknowledgement can be given by:
•Any communication (email, message, etc.), or
•Any conduct (action taken that implies receipt), sufficient to indicate
the receiver received the record.
• Example: Clicking a confirmation button, replying to an email, or
uploading a signed form can be considered acknowledgement.

Sub-section (4):
• If the sender doesn’t receive the acknowledgement within a
reasonable time, they may:
•Assume the message was not received, or
•Cancel the message or transaction, after giving notice to the receiver.
• Example: A contract emailed to a vendor with a request for
confirmation—if no reply is received, the sender can cancel the
offer after notifying the vendor.
 Terms & Conditions of Contract
–(Indian Contract Act, 1872)
• Void agreements are contracts that cannot be enforced by law. The Act clearly defines
the conditions under which an agreement becomes void.

1. Unlawful Consideration or Object (Section 23)

• An agreement becomes void if its object or consideration (purpose or value exchanged)
is unlawful. This includes:
• Forbidden by law: For example, a contract to sell banned drugs.
• Fraudulent or against legal provisions: If allowed, it would defeat the purpose of the
law.
• Causes injury to a person or their property: E.g., hiring someone to damage someone’s
property.
• Immoral or against public policy: E.g., a contract to promote prostitution.
• Such agreements are void and unenforceable.

• 2. Restraint of Marriage (Section 26)

• Any agreement that prevents someone (except a minor) from marrying is void.
• Marriage is considered a personal freedom, so any restraint on it is against public policy.
Example: A contract stating “X will not marry for 10 years in return for ₹50,000” is void.
3. Restraint of Trade or Profession (Section 27)
• If a contract stops a person from doing a lawful job, trade, or business, it is void.
• Everyone has the right to earn a living, so restricting this freedom makes the
agreement unenforceable.
Example: An agreement where a software developer agrees never to work for a tech
firm again is void.

4. Restricting Legal Proceedings (Section 28)

• An agreement is void if:
• It completely prevents someone from going to court or using the normal legal
process.
• It limits the time a person can file a case (if it’s less than the legal limitation
period).
• It removes someone’s rights or legal remedies after a fixed period.
Example: “You cannot sue me for any issue related to this contract” = Void
But “Disputes will be settled through arbitration” = Valid

5. Uncertain Agreements (Section 29)

• If the meaning of the agreement is unclear, or it cannot be made certain, it is void.
Example: “I’ll pay you a reasonable amount later” → Too vague → Void

6. Wagering Agreements (Section 30)

• A wagering (betting/gambling) agreement is void under Indian law.
Example: A bet on the outcome of a cricket match is a void agreement.
 Essential Contractual Clauses in Tech
Agreements
1. Governing Law & Jurisdiction Clause
• Definition: Specifies which country’s or state’s laws will
govern the contract and which courts have authority in
case of disputes.
Example:
• “This Agreement shall be governed by the laws of India,
and courts in Mumbai shall have exclusive jurisdiction.”
2. Proper Law of Contract
• Refers to the legal system the parties choose to
interpret the contract (this can be the same or different
from jurisdiction).
• Helps decide: Validity of terms, Interpretation of
clauses
3. Limitation of Liability Clause
• Purpose: Caps the amount or type of damages one party
must pay the other in case of breach or failure.
Example:
• “The liability of the service provider shall not exceed the
total fees paid in the last 3 months.”

4. Warranties & Conditions (Under Sale of Goods Act, 1930)

• Condition: A term essential to the contract. Breach allows
contract to be terminated.
• Warranty: A term collateral to the contract. Breach allows
for damages, not termination.
Example:
• Condition: “Software shall be fully functional for banking
transactions.”
• Warranty: “Technical support shall be provided within 48
hours.”
5. Non-Disclosure / Confidentiality Clause
• Protects intellectual property, source code, designs, customer data, etc.
• Common in software development, outsourcing, and employment agreements.
Example:
• “The employee agrees not to disclose any source code or technical information to
third parties for a period of 5 years post-employment.”

6. Arbitration Clause
1. For alternative dispute resolution outside traditional courts.
2. Governed by the Arbitration and Conciliation Act, 1996.
3. Ensures faster, cost-effective resolution of disputes.

Dispute Type Description Example

Violates fair hearing or due Party not given notice before
Procedural
process arbitration hearings
Outside the scope of Dispute about IP rights when
Jurisdictional
arbitration agreement contract only covers payments
Attempting arbitration for a criminal
Substantive Legally non-arbitrable matters
offense like hacking or defamation
 7. Entire Agreement Clause
Ensures that the written contract overrides any prior
discussions or informal agreements.
Example:
• “This Agreement constitutes the entire understanding
between the parties and supersedes any prior oral or
written communications.”
• Meaning:
• This clause means that:
• The written agreement is the final and complete contract
between the parties.
• No prior discussions, emails, calls, advertisements, or even
oral promises will have any legal value once this agreement
is signed.
• It overrides all previous agreements or understandings,
whether written or spoken
 Software Product License
1. Grant of License
• The legal permission given by the software creator (licensor) to the user
(licensee) to use the software. Not ownership, just usage rights under
conditions.
Example: You buy Microsoft Office; you don’t own it, but you’re licensed to use it
under specific terms.

2. Application Software
• Software designed for end-users to perform specific tasks.
• Licensed for installation on a limited number of devices.
Example: MS Word, Photoshop.

3. Storage / Network Use

• License defines if software can be stored on a server and accessed over a
network.

4. License Pack
• A license covering multiple users or devices, often sold in bulk (e.g., 5-user
pack).
 Other Rights and Limitations
Academic Edition Software
• Licensed for educational institutions or students only. Example: MATLAB – Student
Version.

Not for Resale Software

• Provided for testing, trial, or promotion, cannot be sold or transferred.

Limitations and Restrictions

• Reverse Engineering, Decompilation, Disassembly
• License prohibits tampering or breaking down the source code or logic of the software.

Separation of Components
• Software may not be split into parts and installed across multiple devices unless
explicitly allowed. Example: You cannot use just Excel from Office Suite on one
computer and Word on another using a single license.

Rental
• Software cannot be rented or leased unless license permits.

Support Services
• Some licenses include customer support, updates, or patches during the term.
Software Transfer
• Conditions under which the software can be transferred to another user
(often restricted or one-time only).

Termination
• License can be terminated if terms are violated (e.g., unauthorized copying).

Upgrade
• Using a newer version of software; license may allow or restrict it.
Example: Upgrading from Windows 10 to Windows 11 under an active license.

Copyright
• All software is protected under copyright law.
Example: Pirating Adobe Photoshop is a copyright violation.

Dual Media Software

• Software distributed on more than one media format (e.g., CD and USB), but
license allows installation on one system only.
• Note: It’s for user convenience—not multiple installations.