Legal Aspects of Contract

Can a contract formed through email

exchange considered as a valid
contract?
• Trimex International v. Vedanata (SC)
▫ Trimex submitted a commercial offer through e-
mail for the supply of Bauxite to the Vedanta.

▫ After several exchanges of e-mails and after

agreeing on the material terms of the contract, the
respondent conveyed their acceptance of the offer
through e-mail

▫ Information Technology Act also allows contracts

to be formed over internet
E-Commerce Contract

• Ex. Sharukh bought a mobile phone on

Flipkart

• Is this contract?

• Who are the parties to the contract?

Cont.
• E- commerce transaction are also contracts
• Flipkart is just a platform for transactions
between buyers and sellers (as per Flipkart
terms and condition)
• Contract is between Sharukh and the seller
selling on Flipkart
Flipkart Terms of Use
“Platform for Transaction and Communication
• The Website is a platform that Users utilize to meet
and interact with one another for their
transactions. Flipkart is not and cannot be a party
to or control in any manner any transaction
between the Website's Users.
• All commercial/contractual terms are offered by
and agreed to between Buyers and Sellers alone
• Flipkart is not responsible for any non-
performance or breach of any contract entered into
between Buyers and Sellers.”
• Are all e-commerce website platforms?
• Does it mean that Flipkart have no contractual
obligation?
• New E-Commerce Policy in India is in pipeline could
provide more clarity
• EU E-Commerce Directive requires e-commerce
companies to provide consumers right to return
within 7 days, right to be informed about product
authenticity etc.
Review Exercise
• Hero and Honda company entered into a Joint
Venture agreement- Is it a contract?

• Buying a ticket on the Air India website- Is it a

contract?
Example/Situation
• Y entered into an agreement with X for betting on
a cricket match
• A entered into an agreement with b for
influencing government bodies and in case needed
bribing for business needs
• Are these agreements valid contract?
Contract should be for legal purpose

• Sports betting is not legal in India

• Bribing is illegal
Capacity to contract
• Agreement entered into by a minor (below 18 )is
not a valid contract
▫ What happens if a minor attempts to buy a product
online?
▫ How can e-commerce companies deal with this
issue?
Cont.
• Flipkart Membership Eligibility:
• “Use of the Website is available only to persons
who can form legally binding contracts under
Indian Contract Act, 1872. Persons who are
"incompetent to contract" within the meaning
of the Indian Contract Act, 1872 including
minors, un-discharged insolvents etc. are not
eligible to use the Website.
Cont.
• “If you are a minor i.e. under the age of 18
years, you shall not register as a User of the
Flipkart website and shall not transact on or
use the website. As a minor if you wish to use or
transact on website, such use or transaction
may be made by your legal guardian or parents
on the Website”
Cont.
• “Flipkart reserves the right to terminate your
membership and / or refuse to provide you with
access to the Website if it is brought to
Flipkart's notice or if it is discovered that you
are under the age of 18 years.”
Fraudulent conduct will affect validity
of an agreement

• Example: Mahajan took a policy with the LIC.

Despite his treatment by a doctor for serious
ailments just a year back, he made a false
statement in the policy to the effect that he had
not been treated by any doctor
• Insurance agreement affected by fraud
Points to Ponder

• Which are the contracts relevant for start-ups?

• Which are the contracts relevant for JV?

• Which are other contracts usually used by corporate

organizations?

▫ “Comprehensive contracts for CEOs become the new

norm” - Times of India
Start-up contracts
• Founders Agreement

• Seed Funding Agreement

• Adviser Agreement

• Venture Capital Funding/Investor Agreement

• “Comprehensive contracts for CEOs become the
new norm” - Times of India
• Earlier it was similar to other employment
agreements
• Elaborate details of compensation, responsibilities,
performance parameters
• Severance Pay
• Non-disclosure clause
• Non compete clause
Standard Form of Contract
• Example: Sachin walks into LIC office and expresses
interest in joining an insurance policy
• The officer pulls out a 10 page long policy agreement and
asks Sachin to sign on it
• Sachin states that he want to change the policy
agreement
• The contract terms are already written by the LIC and
officer said it can’t be changed-‘Take it or leave it’
contracts
Advantages of Standard Form for
Business
• Provides convenience to business organisations

• Reduce burden of negotiating and forming a new

contract for each customer

• Prevalent in all form of business/commercial

activities