Introduction
As we know that selling and purchasing is the indispensable part of a business. In India such sell and purchase of goods are governed by The Sale of Goods Act, 1930. Earlier, the legislation governing the sale of goods was included in The Indian Contract Act, 1872 in part VI from section 76 to 123. Later on, it was repealed, and a separate law was formed which is called The Sale of Goods Act,1930.
In the recent years, business and commerce through electronic medium has become more and more integrated in our everyday life and now, there are billions of dollar worth of transaction taking place through electronic medium. This has helped a lot in conducting the business at a faster rate as compared to the traditional method which involves a lot of paperwork, and this gave rise to e-contracts which are distinct from the traditional form of contract.
To understand how this whole regime of e-contracts functions under the Sale of Goods Act, 1930, it is crucial to understand what this e-contract meant. In this blog, we will discuss such e-contracts with the help of the relevant provisions of The Sale of Goods Act, 1930.
What is an Electronic Contract?
Today in our daily, contracts have become so common that we even don’t realize that we had entered into a contract. With the development in the technology and digital arena, the traditional way of formation of contract has also been changed. Nowadays, there are various digital platforms from where the buyer and the seller can connect directly without even meeting face to face.
As the name suggest, e-contract are the contracts that are formed through digital medium and there is no requirement of paperwork. The formation of contracts has become very simple. Contracts can be formed through email or other digital platforms. At digital platforms there are terms and condition mentioned and buyer have to just accept that and go ahead with the transaction.
Validity of e-Contract
The basic difference between the traditional form of contract and the electronic form of contract is that in the traditional form, the parties to the contract come face to face and execute the contract but the same can be avoided in the electronic form of contract. The only condition that is required for an electronic contract to be a valid contract.
Several laws, such as the Sale of Goods Act of 1930, the Electronic Commerce Act of 1998, and the Information Technology Act of 2004, acknowledge e-contracts as legally binding contracts in India. Furthermore, e-contracts are deemed acceptable under the Indian Evidence Act, 1872, which permits electronic documents to be submitted as evidence.
E-commerce has brought about a new form of business transaction known as e-contracts, which were not prevalent when the Sale of Goods Act, 1930 was initially drafted. Therefore, the act was only designed to apply to conventional business transactions. However, with the increasing adoption of virtual business transactions for the exchange of goods and services, the act is now being enforced in the digital realm to ensure compliance with legal requirements
Essential of a contract of sale with respect to e-commerce platforms
- There has to be two parties
Ownership of the products must be transferred from one party to the other when they are sold under contract. One cannot purchase something for oneself. As a result, since one person cannot be both a seller and a buyer at the same time, both the seller and the buyer must be two separate parties. So, in the e-commerce platforms, there are sellers and buyers who put orders for their purchases and get the products delivered. Section 4 of this Sale of Goods Act identifies two parties, seller and buyer, and section 2(1)[i] defines buyer, and section 2(13) [ii]defines seller.
- Goods
There must be some goods for sale and Goods means every kind of moveable property which includes stock and shares, growing crops, grass. In the case of e-commerce platforms, there are movable goods which are the subject matter of contract of sale.
- Transfer of Property
It is an essential condition that the property in goods must transferred to the buyer from the seller to conclude the contract of sale. “Property means the general property in goods, and not merely a special property”.[iii] General property means ownership of goods in which all the rights are given to the buyer after the conclusion of the sale. In case of e-commerce platforms also once the buyer purchases it, he becomes the owner of the goods.
- Price
Price is another essential element of the sale. There must be a price in return for the goods. “Price means the money consideration for a sale of goods”[iv]. When there is consideration as goods only it becomes barter and not sale and is case there is no consideration, it becomes gift and not sale. The same happens on e-commerce platforms there is a price as a consideration for the purchase of the goods.
Along with these essentials, all the essentials mentioned in Section 10 of the Indian Contract Act, 1872 must be met to form a valid contract.
Performance of Contract
Chapter IV of the Sale of Goods Act, 1930 deals with the ‘Performance of the Contract’ under the Sale of Goods Act, 1930, which begins from Section 31. Before performing the contract, there are certain duties of the seller and the buyer on the e-commerce platform that they need to perform to constitute a valid E-Contract.
Section 31
This section talks about the duties of the seller and buyer with respect to sale. Whether the seller is the owner or not and regardless of whether he or she is in possession at the time of the contract of sale, the seller has a responsibility to deliver the goods. It is the duty of the buyer to accept the goods and accordingly make the payment.[v]
For instance, when we purchase something from an online platform, it provides various modes of payment to the buyer, and he has to choose what method of payment he wants to opt for according to his convenience. [vi]
When the seller has refused to perform his obligation under the contract then the buyer will be absolved from his obligation[vii] and the same is with the seller, when the buyer refuses to perform his part of obligation then the seller is not bound to perform his part of obligation[viii].
For example, when we purchase something form an online platform there is duty of the seller to deliver the goods to the consumer and the buyer to pay the price for the same. After placing order if due to certain reason the seller the order than the buyer will not have obligation to pay the price and if the buyer has cancelled the order before reaching to the buyer, then there will not be any obligation on the part of the seller to deliver the goods.
Section 32
This section of the Sale of Goods Act,1930 talks about payment and delivery. The delivery of the goods is essential for the performance of the sale. So, it is crucial to consider the provision of the Sale of Goods Act that addresses the delivery of goods to understand its relation with the formation of e-contract.
The delivery of the goods and the payment of the price are essentials that must be met side by side. This means that the seller must be willing and ready to deliver the goods in exchange for payment, and the buyer must be prepared to pay the price to take possession of the goods.
Application of this section in relation to e-contracts can be explained through an example,
Suppose a buyer intends to buy a washing machine and visits the seller's website. The buyer may choose to make the payment online or select the cash-on-delivery option. In both scenarios, the seller is obliged to deliver the product to the buyer's doorstep, even if they haven't received the payment yet.
Section 32 of the Sale of Goods Act does not specify whether payment must be made before or at the time of delivery, instead, it deals with the "intentions" of the parties involved in the transaction.
Section 33
This section talks about the delivery of the goods. The first part of this section is about the mode of delivery. Delivery can be completed in any manner agreed upon by the parties as being acceptable as delivery. For example, a buyer purchases a laptop from the site of the seller and he has paid the money online directly on the merchant site but due to the non-availability of the buyer in the city at that time, he asks the merchant site to keep his product with them only, this will come under “made by doing anything which the parties agree shall be treated as delivery”. This is known as Constructive Delivery and the responsibility of the seller in such case will be that of bailee.
Section 34
This section talks about the Effect of Part Delivery. This is a form of constructive delivery. When the delivery of a component occurs concurrently with the delivery of the whole. Once the buyer accepts the goods from the seller, it constitutes acknowledgment of constructive possession of the entire transaction. The second part of this section talks about the intention of severing the part of goods from the whole. This section can be understood in reference to E-commerce also. For example, ‘A’ purchased six chairs from the seller’s site. Due to the stock delay and other reasons ‘A’ gets three chairs in the first week and the remaining in the second week. Now in such cases, acceptance of those three chairs initially signifies his approval for delivery of the remaining part. If he does not want delivery of the goods, he has the option to cancel it at any time.
Section 36
This section defines the rules regarding the delivery of the goods, including the place, timing, manner, and costs associated with such a delivery. The subsection of this section can be explained with respect to the e-commerce transaction as follows,
This subsection 1 deals with the question of whether the seller or the buyer is responsible for transferring possession of the goods, which depends on the specifics of each contract. In the case of e-commerce, it is typically the seller who delivers the goods to the buyer once the order is received. The place of delivery is explicitly stated in the contract for e-commerce transactions, and the goods are shipped from the location where they were stored, such as a company warehouse. This section does not guide the method of delivery, so the seller has the flexibility to choose a reasonable delivery method.
These Sections of the Sale of Goods Act are sufficient to establish accountability of e-contracts arises. Without these provisions, it is not possible to give legal sanctity to the world of virtual business.
Conclusion
In today's digital age, the rise of e-commerce demands robust legal frameworks to protect both buyers and sellers. Existing laws like the Information Technology Act of 2000 and the Sale of Goods Act of 1930 provide some protection, but more comprehensive legislation is needed. Specifically, laws must address electronic contracts, including payment methods and essential service standards. For example, Section 41 of the Sale of Goods Act, which allows buyers to inspect goods before purchase, is impractical for e-contracts. A new law regulating online sales would help identify and prevent fraudulent activities while supporting reputable e-commerce platforms.
[i] “Buyer means a person who buys or agrees to buy goods”.
[ii] “Seller means a person who sells or agrees to sell goods”.
[iii] The Sale of Goods Act 1930 (3 of 1930) s 2 (11).
[iv] The Sale of Goods Act 1930 (3 of 1930) s 2 (10).
[v] Mulla, The Sale of Goods Act & The Indian Partnership Act (11th edn LexisNexis 2020).
[vi] Mulla, The Sale of Goods Act & The Indian Partnership Act (11th edn LexisNexis 2020).
[vii] Devi Lal v Govind Lal AIR 1961 Raj. 283.
[viii] Chhunna Mal v Mool Chand AIR 1928 PC 99 : 9 Cal 510 : (1928) 30 Bom LR 837.