India: E-Commerce In India

Last Updated: 21 October 2014
Article by Lakshay Dhamija

Most Read Contributor in India, September 2016

E-commerce in today's world has become one of the most essential part of everyday life. Particularly for urban areas, the accessibility to platforms of e-commerce is not just an opportunity but rather a necessity for most people. In 2014 nearly 75% (2.1 billion) of all internet users in the world (2.8 billion) live in top 20 countries. The remaining 25% (0.7 billion) is distributed among the other 178 countries, each representing less than 1% of total users. China, the country with most users (642 million in 2014), represents nearly 22% of total, and has more users than the next three countries combined United States, India, and Japan1 .

It is not surprising to note that India is in a prime position for the growth and development of the e-commerce sector. The most prominent sector for which e-commerce presents an opportunity is retail since it provides for a vivid change from brick to mortar establishments to virtual shops which could operate for a fraction of the cost.

Social networking plays an important role in driving consumers online and getting them to engage with brands. While Indians primarily use the internet for communications, largely in the form of email, social media is also an important driver of internet user in India. The Internet and Mobile Association of India (IMAI) report estimates 243 million internet users in the country by June 2014, overtaking the US as the world's second largest internet base after China. The IMAI report can be corroborated with data from other sources such as Facebook, according to which India had 82 million monthly active users by June 30, 2013, the second largest geographical region for Facebook after the US and Canada.

The Indian Government for providing broadband connectivity to the local and village level government bodies has approved projects. The Government is expected to enable broadband internet connectivity at the rural levels for the purpose of providing services such as e-commerce, e-entertainment, e-education, e-health, e-governance to people and businesses. E-Commerce and its business models:

E-commerce is a type of business model, or segments of a larger business model, that enables a firm or individual to conduct business over an electronic network, typically the internet. However, there exists no typical definition for the term e-commerce, it is generally used in the sense of denoting a method of conducting business through electronic means rather than through usual physical means. E-commerce challenged the traditional structure of businesses trading with consumers bringing to the fore various business models which has empowered consumers.

The most commons business models facilitated by e-commerce are:

(a) B2B: Business to Business (B2B) describes commerce transactions between various businesses thereby enabling various businesses to build new relationships with other businesses. Such as between manufacturer and a wholesaler, or between wholesaler and a retailer.

(b) B2C: Business to Consumer (B2C) describes activities of businesses serving end consumers with products and/or services. The direct dealing has always existed between businesses and consumers however, with surfacing of e-commerce the momentum is been gained in such transactions.

(c) C2C: Consumer to Consumer (C2C) involves the electronically facilitated transactions between consumers through some third party. Traditionally consumers have had dealings with other consumers, but only few of those activities were in a commercial sense.

(d) C2B: Consumer to Business (C2B) involves consumers which provide goods/services to businesses and create value for the business.

(e) B2B2C: This is an alternative to the B2C model and in this type of model there is an additional intermediary business to assist the first business transact with the end consumer. For instance, Flipkart which is one of the successful e-commerce portals and which provides a stage for consumers to purchase a wide options of goods such as books, music CDs, etc.

Therefore, the panorama of conducting business through e-commerce may seem uncomplicated and economical, there are varieties of legal factors that an e-commerce business must seriously consider and keep in mind before commencing and while carrying out its activities.

Legal Validity of Electronic Transactions in India

There are various legal issues relating to formation and validity of electronic transactions such as online contracts and enforcement issues which are dealt hereinafter.

(A)Formation of an E-Contract:

The most common forms of e-contracts are click wrap, browse wrap and shrink- wrap contracts. The terms and conditions in such contracts are made available to the contracting party in a form that is considerably different from the standard paper contracts. In click wrap contract, the party's affirmative acceptance is taken by means of checking on an 'I accept' tab with the scroll box that allows accepting party to view the terms and conditions.

In case of browse wrap agreement the mere use (or browse) of the website makes the terms binding on the contracting party.

In case of Shink wrap agreement the contracting party can read the terms and conditions only after opening the box within which the product (commonly a license) is packed. Such agreements are relevant in the context of e-commerce mostly because of the kind of goods associate with shrink-wrap agreements.

(B)Online Contracts Validity:

The Indian Contract Act, 1872 governs all the e-contracts in India which inter alia mandate certain pre-requisites for a valid contract such as free consent and a lawful consideration. The question which needs to be examined is how the requirements of Indian Contract Act would be fulfilled in relation to e-contracts. Further, the Information Technology Act, 2000 ('IT Act') provides fortification of the validity of e-contracts.

As per Indian Contract Act, 1872 some of the important requirements of a valid contract are as follows:

(i) The contract should be entered with the free consent of the parties;

(ii) There should be lawful consideration for the contract;

(iii) The parties should be competent to contract;

(iv) The object of the contract should be lawful.

The terms and conditions associated with e-commerce platform are of utmost importance in ensuring and deciding that e-commerce transaction meet with requirements of a valid contract. Unless expressly prohibited click wrap agreements would be enforceable and valid if the requirements of valid contract as per Indian Contract Act, 1872 are fulfilled.

There is no requirement under the Indian Contract Act to have written contracts physically signed. However, specific statues do contain signature requirements. Further, the very nature of e-commerce is that it is practically impossible to check the age of anyone who is transacting online and which pose problems and liabilities for e-commerce platforms because the position under Indian Law is that the minor is not competent to enter into contract and such a contract entered is not enforceable against the minor.

In India, every instrument under which rights are created or transferred needs to be stamped and stamping of the instrument further depends on specific stamp duty legislations enacted by different states in India.

(C) Standard Form of Online Contracts are Unconscionable

In India there is no well developed jurisprudence on the question of whether standard form of online agreements are unconscionable. Though, the courts of India as per Indian Laws previously dealt with instances where contract terms including standard form contracts were negotiated between parties in unequal bargaining positions. Certain provisions of Contract Act deal with unconscionable contracts such as when the consideration in the contract or object of the contract is opposed to public policy. In such cases the contract itself cannot be valid.

The courts can put the burden on the person in the leading position to prove that the contract was not induced by the undue influence.

In the case of "LIC India Vs. Consumer Education & Research Center"2 the Hon'ble Apex Court of India interpreted an insurance policy issued by Life insurance corporation of India by bringing in certain elements of public purpose. The court noted that" in dotted line contracts there would be no occasion for weaker party to bargain as to assume to have equal bargaining power. He has either to accept or leave the service or goods in terms of the dotted line contract. His option would be either to accept the unreasonable or unfair terms or forgo the service forever."

It is highly important to have a well thought out terms which form online contracts in order to make sure that sufficient opportunity is provided to the customers to familiarize themselves with the terms thereof. Besides the above there are also various other legal, tax and regulatory issues more specifically Security Issues, Consumer Protection Issues, Intellectual Property Issues, Content Regulation, Intermediary Liability, Jurisdictional Issues and issues relating to taxation which need to be taken in mind while dealing with e-commerce transactions.


The growth of the e-commerce industry is not only indicative of the increasing openness of the public but has also brought to the front the issues that the legal system of the country has been faced within. The legal system has constantly tried to be updated especially with the enactment of IT Act to deal with lots of issues emerging from the use of internet.

Therefore, a comprehensive understanding of the legal regime and the possible issues that an e-commerce business would face together with effective risk management plans has been the need of the hour for e-commerce businesses to succeed in this industry.


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