The validity of an electronically signed contract is recognized in India as long as such a contract satisfies the essential elements of a valid contract, including offer and acceptance, presence of a lawful consideration and lawful object, free consent of the parties, competency of the parties to contract, intention of the parties to create a legal relationship, the certainty and possibility of performance as intended, etc. The conclusion of electronically signed contracts on the satisfaction of these essential elements of a contract has also been recognized by Indian courts.
The Information Technology Act, 2000 ("IT Act") recognizes electronically signed contracts and provides that where a contract is expressed in electronic form or by means of an electronic record, such contract will not be deemed to be unenforceable solely on the ground that such electronic form or means was used for the purpose. The IT Act also provides for the type of signatures that can be used for the authentication of electronic records, namely (i) digital signatures and (ii) electronic signatures. Digital signatures issued by licensed certifying authorities (CA) are reliable and are legally valid in a court of law as per the IT Act, as they employ private and public keys that are unique to the subscriber and constitute a functioning key pair for authentication of a document.
While legal recognition has been provided to electronically signed contracts, as per the IT Act, the following documents cannot be signed electronically:
- A negotiable instrument (other than a check, demand promissory note or a bill of exchange issued in favor of or endorsed by an entity regulated by the RBI and other prescribed authorities) as defined in Section 13 of the Negotiable Instruments Act, 1881.
- A power of attorney as defined in Section 1A of the Powers of Attorney Act, 1882 (except when such power of attorney empowers an entity regulated by the RBI, SEBI or other prescribed authorities to act on behalf of them).
- A trust as defined in Section 3 of the Indian Trusts Act, 1882.
- A will as defined in Clause (h) of Section 2 of the Indian Succession Act, 1952, including any other testamentary disposition called by whatever name.