Chwee Kin Keong v Digilandmall.com Pte Ltd


Chwee Kin Keong v Digilandmall.com Pte Ltd [2005] 1 SLR 502: [2005] SGCA 2

Context: This Case deals with the issue of unilateral mistake. This is one of the first prominent case that deals with the issue of web based contract.

In this case, Defendant was selling IT products over internet in Singapore. The HP laser printer was advertised on the Defendant’s website and on the website of HP for $3,854. Due to the mistake on part of one of the employee of a related company, the price of printer was altered to $66 on the website, which was not noticed by any of the employee. The Appellants (there were six appellants) discovered this price and ordered more than 100 printers each. The Company on discovering the mistake rectified it and sent an e-mail stating that it will not complete this order.

The Court held that (also considering the background of the appellants) that they had a constructive knowledge about the mistake in the pricing of the product. Due to this mistake related to the fundamental terms of the contract, the contract was held void under the common law.

Three important judicial inference can be drawn from the judgement of the Court:

1. The goods displayed on the e-commerce websites are an invitation to treat, just like the advertisement placed on any billboard or in any shop, this is different from offer. Further, this difference between invitation to treat and offer will be subject to the language used on the website of the company selling the product.

2. The element of consensus ad idem cannot be claimed by the party(who is aware of such mistake) against the other party (who has committed such a mistake). This is an exception to the general rule which states that a party is bound to the contract even though a mistake may have been committed by it while entering into the contract.

3. The issue of snapping-up, as stated in the case of Tamplin v James,  has been distinctively differentiated from the issue of unilateral mistake.

 

P R Transport Agency v. Union of India


The issue of Place in case of Electronic Contract was given the first judicial clarity in the case of P R Transport Agency v. Union of India (AIR 2006 All 23). In this case one of the issue before the Allahabad High Court was: “Does the Court have jurisdiction?”

In this case, P R Transport Agency (PRTA) was awarded a tender by BCCL in Jharkhand. The acceptance of the PRTA’s bid was conveyed through an e-mail. The e-mail was received at Chamauli, Uttar Pradesh(U.P.). The respondent contended that since the tender had taken place in Jharkhand, no cause of action arose in Uttar Pradesh. The Court relied on Sec 13(3) of the Information Technology Act and held that when the mail was sent, it was intended for the address from where the Company was working. Since, the office of the Company was in Chamauli and Varanasi, both of which fell within U.P so the High Court had jurisdiction. So, a partial cause of action arose which allows the High Court to exercise its jurisdiction. There were other issues also discussed by the Court, but for our consideration, I have focused on the issue of place in case of Electronic Contract under section 13 of the IT Act.

Sec 28 of Indian Contract Act Vs. Sec 29(2) of the Limitation Act – Prevalence of the Special Law


Definition of Special Law

 

The term Special Law is defined under Indian Penal Code, where Sec 41 defines it as a law applicable to a particular subject. The Supreme Court has also defined Special Law in the case of Kaushalya Rani vs Gopal Singh, 1964 AIR 260. The Court Stated that:

 

A ‘special law’, therefore, means a law enacted for special cases, in special circumstances, in contradis- tinction to the general rules of the law laid down, as ap- plicable generally to all cases with which the general law deals. In that sense, the Code is a general law regulating the procedure for the trial of criminal cases, generally; but if it lays down any bar of time in respect of special cases in special circumstances like those contemplated by s. 417(3) & (4), read together, it will be a special law contained within the general law. As the Limitation Act has not defined ‘special law’, it is neither necessary nor expedient to attempt a definition.”

 

Applicability of Sec 29(2) of the Limitation Act with regard to the Amendment in the Indian Contract Act Sec 28

 

a. The Supreme Court in case of Mukri Gopalan vs Cheppilat [1995 AIR 2272], while dealing with the issue of calculating the limitation period under sec 18 of the Kerala Buildings (Lease and Rent Control) Act, 1965, held that sec 29(12) will be applicable. The Court applied the Limitation act as the Rent Act fulfilled the requisites laid down by the court. The conditions quoted by court was:

 

A mere look at the aforesaid provision shows for its applicability to the facts of a given case and for importing the machinery of the provisions containing Sections 4 to 24 of the Limitation Act the following two requirements have to be satisfied by the authority invoking the said provision. (i) There must be a provision for period of limitation under any special or local law in connection with any suit, appeal or application. (ii) The said prescription of period of limitation under such special or local law should be different from the period prescribed by the schedule to the Limitation Act.

 

If the aforesaid two requirements are satisfied the consequences contemplated by Section 29(2) would automatically follow. These consequences are as under: (i) In such a case Section 3 of the Limitation Act would apply as if the period prescribed by the special or local law was the period prescribed by the schedule. (ii) For determining any period of limitation prescribed by such special or local law for a suit, appeal or application all the provisions containing Sections 4 to 24(inclusive) would apply insofar as and to the extent to which they are not expressly excluded by such special or local law.

 

The Court further also stated that:

 

15. After repealing of Indian Limitation Act, 1908 and its replacement by the present Limitation Act of 1963 a fundamental change was made in Section 29 (2). The present Section 29(2) as already extracted earlier clearly indicates that once the requisite conditions for its applicability to given proceedings under special or local law are attracted, the provisions contained in Sections 4 to 24 both inclusive would get attracted which obviously would bring in Section 5 which also shall apply to such proceedings unless applicability of any of the aforesaid sections of the Limitation Act is expressly excluded by such special or local law. By this change it is not necessary to expressly state in a special law that the provisions contained in Section 5 of the Limitation Act shall apply to the determination of the periods under it. By the general provision contained in Section 29(2) this provision is made applicable to the periods prescribed under the special laws. An express mention in the 21

 

special law is necessary only for any exclusion. It is on this basis that when the new Rent Act was passed in 1965 the provision contained in old Section 31 was omitted. It becomes therefore apparent that on a conjoint reading of Section 29(2) of Limitation Act of 1963 and Section 18 of the Rent Act of 1965, provisions of Section 5 would automatically get attracted to those proceedings, as there is nothing in the Rent Act of 1965 expressly excluding the applicability of Section 5 of the Limitation Act to appeals under Section 18 of the Rent Act.

 

b. In Hukumdev Narain Yadav vs. Lalit Narain Mishra [(1974) 2 SCC 133], Supreme Court examined the provisions of the Representation of the People Act and Section 29(2) of the Limitation Act while dealing with election petition under the Representation of People Act. The Court on the point of limitation for filing an election petition, held that:

 

17. ….. Even assuming that where a period of limitation has not been fixed for election petitions in the Schedule to the Limitation Act which is different from that fixed under Section 81 of the Act, Section 29(2) would be attracted, and what we have to determine is whether the provisions of this Section are expressly excluded in the case of an election petition. It is contended before us that the words “expressly excluded” would mean that there must be an express reference made in the special or local law to the specific provisions of the Limitation Act of which the operation is to be excluded. As usual the meaning given in the Dictionary has been relied upon, but what we have to see is whether the scheme of the special law, that is in this case the Act, and the nature of the remedy provided therein are such that the Legislature intended it to be a complete code by itself which alone should govern the several matters provided by it. If on an examination of the relevant provisions, it is clear that the provisions of the Limitation Act are necessarily excluded, then the benefits conferred therein cannot be called in aid to supplement the provisions of the Act. In our view, even in a case where the special law does not exclude the provisions of Sections 4 to 24 of the Limitation Act by an express reference, it would nonetheless be open to the court to examine whether and to what extent the nature of those provisions or the nature of the subject-matter and scheme of the special law exclude their operation. The provisions of Section 3 of the Limitation Act that a suit instituted, appeal preferred and application made after the prescribed period shall be dismissed are provided for in Section 86 of the Act which gives a peremtory command that the High Court shall dismiss an election petition which does not comply with the provisions of Sections 81, 82 or 117.”

 

c. The Supreme Court followed this position in the cases of The Commissioner of Sales Tax, Uttar Pradesh, Lucknow vs. M/s. Parson Tools and Plants, Kanpur [AIR 1975 SC 1039], Anwari Basavaraj Patil & Ors. vs. Siddaramaiah & Ors. [(1993) 1 SCC 636] and Gopal Sardar vs Karuna Sardar (2004) 4 SCC 252.

 

d.  The Supreme Court in case of Vidyacharan Shukla vs Khubchand Baghel And Others [ 1964 AIR 1099]has also held that:

“’This observation clearly supports the position that s. 29(2) would apply even to a case where a difference between the special law and the Limitation Act arose by the omission to provide for a limitation to a particular proceeding under the Limitation Act.”

 

Sec 28 of the Indian Contract Act

 

The Law Commission of India(LCI) in its 97th report released in March 1984 discussed the scope of Section 28 of the Indian Contract and held that the then current provisions created an unfair advantage for the large corporations and also resulted in creating uncertainty in transactions. The Commission relied on judgments of the Kerala High Court[1] and Bombay High Court[2] specifically to illustrate its point, though reference was also given to other judgments.

 

In the Kerala High Court judgment[3], the Court has categorically held that Section 28 of the Indian Contract Act does not specifically hits at the time limit of the contract.

 

The LCI recommendation led to the 1997amendment to the Indian Contract Act, whereupon a clause was to sec 28 as: “…which extinguishes the rights of any party thereto under, or discharges any party thereto from any liability, under or in respect of any contract on the expiry of a specified period, so as to restrict any party from enforcing his rights, is void to that extent.”

 

This amendment caused uncertainty with regard to the guarantees specially given by the financial institutions. It is evident in the press release[4] of the Central Government where one of the salient features of the Banking amendment 2012 has been stated as:

 

“To exempt guarantee agreements of banks from the purview of the section 28 of the Indian Contract Act, 1872 to bring finality to redemption of such guarantees.”

 

In light of the judgment in case of Kerala Electrical and Allied Engineering Co Ltd v. Canara Bank[5] and the discussion in the LCI report, it is clear that sec 28 stipulated a prescription to the contracting parties to decide the extent of their rights though this prescription is a subset of the limitation which is stated under Limitation Act, it is only confined to define the legal validity of the contract. The Current amendment does not hit upon the time limit of the Contract but attempts to provide clarity for redemption of such guarantees in the contract.

 

[1] Kerala Electrical and Allied Engineering Co Ltd v Canara Bank, AIR 1980 Ker 151

 

[2] New India Assurance Co v R.M.Khandelwal, AIR 1974 Bom 228

 

[3] Kerala Electrical and Allied Engineering Co Ltd v Canara Bank, AIR 1980 Ker 151

 

[4] http://pib.nic.in/newsite/erelease.aspx?relid=91116

 

[5] AIR 1980 Ker 151

 

 

 

 

 

 

 

 

 

Readings on Electronic Contracts in India


The Class of Advanced Contract was off today and so I moved on to find some good articles on electronic contract for my reading. In the last class, we had a discussion on two cases related to electronic contract –

i. Chwee Kin Keong v Digilandmall.com Pte Ltd [2005] 1 SLR 502: [2005] SGCA 2. – It dealt with the concept of unilateral mistake. An article on the analysis of issue of common mistake in contract law can be read on this link (I know it is the top most search result in google when searching for this case, still this article discusses this case in one of the most relevant context.)

ii. Trimex International Fze Limited, Dubai v Vedanta Aluminium Ltd (2010) 3 SCC 1: (2010) 1 SCC (Civ) 570: (2010) 2 CTC 581 (SC) – It dealt with the issue of validity of a contract entered between the parties through exchange of mail. A very good analysis of this case can be found here – at Practical Academic Blog.

Further, You can find a well written piece of article on EBC website which analyses the Electronic Contract and the Information Technology Act. Though written in 2004, the article still is a very standard analysis of the contractual issues that arises in an electronic contract. The article is titled as INFORMATION TECHNOLOGY ACT, 2000 — A CONTRACTUAL PERSPECTIVE by Devadatt Kamat.

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Jurisdiction in Electronic Contract – Sec 13 of the IT Act


Jurisdiction is an important issue under an electronic contract. The ease of accessibility that is conferred upon the parties in an electronic commerce creates challenges for the legal system.

Sec 13 of the Information Technology Act (IT Act) answers this by bringing clarity and objectivity to this issue.

The Section deals with four major issues from both sides, i.e the Proposer and the Acceptor. The issues are:

i. The Time of Dispatch of Electronic Contract

ii. The Place of Dispatch of Electronic Contract

iii. The Time of Receipt of Electronic Contract

iv. The Place of Receipt of Electronic Contract

These issues can be decided by the Parties, through a prior agreement. But, if there are no such agreement, then the default position under Sec 13 of the IT Act will take place.

In this case, Dispatch means, when the electronic information has moved from the computer resource and is beyond the control of the originator; while Receipt means when the electronic information has moved in a computer resource which is within the control of the receiver.

The Time of Dispatch or Receipt will be determined based on the time the electronic information was received or sent from the Designated Computer Resource (DCR).

(The Designated Computer Resource means the computer address or the web address which has been designated for sending and receiving such electronic information.)

Thus, there may be three scenarios:

i. A DCR exists and the information was sent or received by it, thus, based on the time the information was sent or received by it, the time of Receipt or Dispatch will be decided.

ii. A DCR do not exists, then the moment the information is received or sent by any computer resource of that person or entity, the time will be decided based on that.

iii. A DCR exists but the information was sent to any other Computer Resource, then unless the information is sent to DCR, the communication will be held to have not taken place.

The Place of Dispatch or Receipt will mean the physical Place of business where the party intended to receive such electronic information.

In case, the party has not clarified or does not have any such physical place of business, then it will include the usual place of residence of the party. This issue of place is important to decide the legal issue of jurisdiction.

As, due to the advancement in the electronic communication, the information terminal are not fixed and electronic information can be accessed from any place at any time. It becomes difficult to determine which Court shall have the jurisdiction in case of any dispute. Thus, Sec 13 clarifies that the intended physical place of business will be the place for receipt and dispatch of any electronic information.

The issue of Place in case of Electronic Contract was given the first judicial clarity in the case of P R Transport Agency v. Union of India (AIR 2006 All 23). In this case one of the issue before the Allahabad High Court was: “Does the Court have jurisdiction?”

In this case, P R Transport Agency (PRTA) was awarded a tender by BCCL in Jharkhand. The acceptance of the PRTA’s bid was conveyed through an e-mail. The e-mail was received at Chamauli, Uttar Pradesh(U.P.). The respondent contended that since the tender had taken place in Jharkhand, no cause of action arose in Uttar Pradesh. The Court relied on Sec 13(3) of the Information Technology Act and held that when the mail was sent, it was intended for the address from where the Company was working. Since, the office of the Company was in Chamauli and Varanasi, both of which fell within U.P so the High Court had jurisdiction. So, a partial cause of action arose which allows the High Court to exercise its jurisdiction. There were other issues also discussed by the Court, but for our consideration, I have focused on the issue of place in case of Electronic Contract under section 13 of the IT Act.

In this case, the Court could have given more clarity to this issue, as at many places the High Court has used the term “Chamauli/Varanasi” for the ease of deciding the jurisdiction of High Court. The court could have clarified that the Jurisdiction lies with one of the two places. As, that would have clarified the issue more.

Thus , while drafting the Electronic Contract, it is better advised that the parties should take care to define the terms about the place and time of entering into the electronic contract, to add clarity to their commerce and avoid any legal uncertainty.

Important Elements in Electronic Contract


In my previous post, I referred to a term “Originator”. In an Electronic Contract, the term Originator is analogous to the term Party, used in case of written contracts.

The three most important terms that must be understood in Electronic Contracts are:

i. Addressee: The term is defined under Sec 2(b) of the Information Technology Act, “addressee” means a person who is intended by the originator to receive the electronic record but does not include any intermediary.

ii. Intermediary: The term is defined under Sec 2(w) of the IT Act, “intermediary” with respect to any particular electronic records means any person who on behalf of another person receives, stores or transmits that record or provides any service with respect to that record and includes telecom service providers, network service providers, internet service providers, web-hosting service providers, search engines, online payment sites, online-auction sites, online market places and cyber cafes.

iii. Originator: The term is defined under Sec 2(za) of the IT Act, “originator” means a person who sends, generates, stores or transmits any electronic message or causes any electronic message to be sent, generated, stored or transmitted to any other person but does not include an intermediary.

Further, Sec 11 of the IT Act refers to the attribution of the electronic records, it states that any electronic communication can be attributed to the Originator if communication has been sent by originator or by the person authorized by the Originator or through an automatically operated information system.

Its an important element in electronic contract, as it helps to decide the obligation on the Parties. If an information was communicated either through a person authorized on behalf of Originator of through the automatic system, then it is deemed that communication has taken place.

Acknowledgement in Electronic Contract


In India, Sec 12 of the Information Technology Act, 2000 (hereinafter referred to as IT Act), discusses the issue of Acknowledgement. It is modeled on Article 14 of the UNCTRAL Model Law on Electronic Commerce 1996.

The Sec 12 of the IT Act states two important propositions:

a. The Acknowledgement, in absence of any pre-decided agreement, can be communicated through any means of communication or can even be done or deemed to be done through any conduct.

b. The effect of acknowledgement has also been stated:

i. If the Originator has already stipulated that acknowledgement must be communicated then in event of non-communication of acknowledgement, it will be deemed that no such communication was done as result the acceptance or the offer made will not have any legal effect. Thus, no Contract will come into existence.

ii. In event there is no perquisite for acknowledgement from the side of the originator, then the there is no need for acknowledgement, but the originator may request for an acknowledgement. If any such request has been made then it must be accompanied with a reasonable period of time for the other party to respond. In this case if no acknowledgement is received then it will have the same effect as discussed in the preceding paragraph.

In an interesting read, the Sec 12 (2) of the IT Act was used as ground along with Sec 2 (r), (v) and (za) by Dr. Subramanian Swamy in the case of Dr. Subramanian Swamy v. Election Commission of India though its Secretary (W.P. (C) 11879 of 2009) at Delhi High Court to demand for a paper receipt from the Electronic Voting Machine. The Court did not accept this contentions. Surprisingly, this section was not referred when the same case was discussed before the Supreme Court.

Acknowledgement stated under Sec 12 does not create or add a qualification to acceptance, the concept of unqualified acceptance under the Indian Contract Act, still stands strong. This concept of acknowledgement has been used to add more clarity to electronic contract. It also ensures that in virtual world where people enter into contract without any physical meeting or even without any online meeting, more certainty can be added with regard to offer and acceptance.