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Online Contract and its types || Legal Issues || OnlineNotesNepal

Online Contract and its types || Legal Issues || OnlineNotesNepal


With the advanced use of the internet and electronic commerce, online contracts have assumed importance mainly in terms of reach and multiplicity. An online contract or an electronic contract is an agreement modeled, signed, and executed electronically, usually over the internet. An Online contract is conceptually very similar and is drafted in the same manner in which a traditional paper-based contract is drafted. In case of an online contract, the seller who intends to sell their products, presents their products, prices, and terms for buying such products to the prospective buyers. In turn, the buyers who are interested in buying the products either consider or click on the ‘I Agree’ or ‘Click to Agree’ option for indicating the acceptance of the terms presented by the seller or they can sign electronically. Electronic signatures can be done in different ways like typing the name of the signer’s in the specific signature space, copying and pasting the scanned version of the signature, or clicking an option meant for that purpose. Once the terms are accepted and the payment is made, the transaction can be completed. Communication is basically made between two computers through servers. The online contract is brought to the scene to help people in the way of formulating and implementing policies of commercial contracts within business directed over the internet. Online Contract is modeled for the sale, purchase, and supply of products and services to both consumers and business associates.

Online can be categorized into three types mainly i.e. browse or web wrap contracts, shrink wrap contracts, and clickwrap contracts. Other kinds of online contracts include employment contracts, contractor agreements, consultant agreements, Sale re-sale, and distributor agreements, non-disclosure agreements, software development and licensing agreements, source code escrow agreements. Though these online contracts are witnessed in our everyday life, most of us are not aware of the legal complexities connected to them; the use of online contracts faces many technical and legal challenges.


Online contracts can be of three types mainly i.e. shrink-wrap agreements, click or web-wrap agreements, and browse-wrap agreements. In our everyday life, we usually witness these types of online contracts. Other types of online contracts include employment contracts, contractor agreements, consultant agreements, Sale re-sale, and distributor agreements, non-disclosure agreements, software development and licensing agreements, source code escrow agreements.

1. Shrink-Wrap Agreements

Shrink-wrap agreements are usually the licensed agreement applicable in case of software products buying. In the case of shrink-wrap agreements, with the opening of the packaging of the software product, the terms and conditions to access such software product are enforced upon the person who buys it. Shrink-wrap agreements are simply those which are accepted by the user at the time of installation of software from a CD-ROM, for example, the Nokia pc-suite. Sometimes additional terms can be observed only after loading the product on the computer and then if the buyer does not agree to those additional terms, then he has an option of returning the software product. As soon as the purchaser tears the packaging or the cover for accessing the software product, the shrink-wrap agreement gives protection by indemnifying the manufacturer of the product for any copyright or intellectual property rights violation. Though, in India, there is no stable judicial decision or precedent on the validity of shrink-wrap agreements.

2. Click-Wrap Aggrements

Click-wrap agreements are web-based agreements that require the assent or consent of the user by way of clicking the “I Agree’ or “I Accept” or “Ok” button on the dialog box. In clickwrap agreements, the user basically has to agree to the terms and conditions for usage of the particular software. Users who disagree with the terms and conditions will not be able to use or buy the product upon cancellation or rejection. A person witnesses web-wrap agreements almost regularly. The terms and conditions for usage are exposed to the users prior to acceptance. For the agreement of an online shopping site etc.

3. Browse-Wrap Agreements

An agreement made intended to be binding on two or more parties by the use of a website can be called a browsewrap agreement. In the case of browsewrap agreement a regular user of a particular website deemed to accept the terms of use and other policies of the website for continuous use.

Though these online contracts have become common in our daily, there are no precise judicial precedents on the validity and enforceability of shrink-wrap and click-wrap agreements. Other countries have dealt with these online agreements such as courts in the United States have held that as far as the general principles of the contract are not violated, both shrink-wrap agreements and click-wrap agreements are enforceable.

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