Unit 4
Unit 4
Unit 4
4.1 E-Commerce - Meaning, Concept and Background, Online Contracts and Issues
Meaning of E-Commerce
E-commerce, which stands for electronic commerce, is the buying and selling of goods,
services, and information through the internet. It involves using digital platforms,
websites, or applications to conduct transactions, ranging from product purchases to
financial exchanges. E-commerce includes a variety of business activities, such as
transferring money, exchanging information, and fulfilling product orders—all done
electronically. This allows individuals and businesses to interact with each other
globally, eliminating the need for physical presence, and providing both sellers and
buyers with greater flexibility and convenience.
The e-commerce ecosystem is vast and can take many forms depending on the
participants involved, ranging from businesses and consumers to individuals and
organizations. E-commerce can facilitate both tangible and intangible exchanges, and it
is rapidly evolving with new technologies, creating even more opportunities for
businesses to engage with customers.
1. Online Shopping:
Buying Physical Goods Through Online Stores: One of the most common forms of
e-commerce is online shopping, where consumers can browse, compare, and
purchase physical products directly from e-commerce websites or mobile apps.
These can include anything from clothing, electronics, groceries, and furniture, to
books and toys.
Online shopping provides consumers the flexibility to shop 24/7, without the need
to visit physical stores. Consumers can explore a wider variety of products, read
reviews, and compare prices from multiple sellers or brands in one place.
2. Electronic Payments:
Secure Methods of Payment: Electronic payments are a vital part of e-
commerce, as they enable customers to pay for products or services
online. These secure payment systems include credit and debit cards,
PayPal, mobile wallets (like Apple Pay and Google Wallet), and bank
transfers.
Payment systems have evolved to become more secure and user-friendly,
with encryption technologies such as SSL (Secure Sockets Layer) ensuring
that sensitive financial information remains private. Additionally, the rise of
digital payment platforms and services allows for quicker transactions,
both for consumers and businesses, while reducing the risk of fraud.
3. Digital Products:
Intangible Products and Services: Unlike physical products, e-commerce
also facilitates the sale of digital goods and services. These include things
like e-books, downloadable software, music, movies, video games, online
courses, and subscriptions (e.g., Spotify, Netflix).
Digital products have grown immensely popular due to the convenience of
instant access and downloadability. These products typically don’t require
physical shipping and are available to the consumer as soon as the
transaction is completed. For instance, you can purchase and download
an e-book within minutes without needing to wait for shipping.
4. Marketplaces:
Online Platforms with Multiple Sellers: Marketplaces like Amazon, eBay,
and Etsy serve as platforms where multiple independent sellers list their
products for sale, and consumers can shop from a wide range of options.
These platforms act as intermediaries, connecting buyers with sellers and
often providing additional features such as product recommendations,
reviews, and secure payment gateways. Marketplaces allow small
businesses and individuals to tap into a large customer base without
having to create their own online store.
Amazon and eBay, for example, provide a global platform where sellers
can list items, manage inventory, process orders, and ship goods to
customers, while buyers enjoy an extensive variety of products from
di erent sellers in one place.
Concept of E-Commerce:
E-commerce represents the use of internet technologies to facilitate commercial
transactions, and it can be broken down into several key concepts:
Business Models in E-Commerce: E-commerce supports di erent types of business
models, each involving di erent participants. These include:
Background of E-Commerce:
Conclusion:
E-commerce is a dynamic and continuously evolving sector that has fundamentally
changed how businesses operate and how consumers shop. From the early days of
electronic transactions to today's sophisticated digital marketplaces, e-commerce has
become a cornerstone of the global economy, and its future continues to be shaped by
new technological innovations and changing consumer behaviors.
Online Contract
E-Contracts are those contracts which are formed between two or more parties through
negotiations by the use of any electronic means. They are also known as cyber
contracts, digital contracts and online contracts. It is similar to traditional contracts
which are based on paper and the exchange of goods and services takes place for a
specific amount of consideration. The only exception in e-contract is the mode of
contract which is digital in nature I.e. internet or any e-instrument.
Definition of E-Contract
E-Contract is any kind of contract formed in the course of e-commerce by the interaction
of two or more individual using electronic means , such as e-mail , the interaction of
individual with an electronic agent such as computer program or the interaction of at
least two electronic agents that are programmed to recognize the existence of a contract
.
1. E-contract:
The Indian Contract Act and the IT Act are legally valid e-contracts. E-contracts are ruled
by certain rules that mandates that contracts can be undertaken through free consent
and lawful consideration between the two individual. There is a huge possibility that in e-
contract minors also enter into contracts. So in order to stop minors entering into
contract the forms on the websites should mention that whoever the individual
undertakes the contract should be above 18years.
2. Data Protection:
Protecting the facts in online is the major worry of every individual. The Information
Technology 2011 and the Section 43A of the IT Act both highlights the recommendations
of how to protect the data in India.Every Company should take care in order to protect
from corruption , damage , loss or destruction of any kind of private information or data
also in the communication of the contract between parties.
Sometimes it is seen that e-commerce website are operated by some other parties who
are specialized in the same stream . The information is protected by the third party. If the
agreement do not provide IP rights between parties then there is a possibility of
infringement on trademark , copyright or patent at online platform.
In e-contract the consumer has the right to cancel the product after it was ordered. If the
customer is not satisfied with product returns the product to the seller. Many times we
have seen that consumers get attracted with the products on the screen as it looks eye
catching and orders it but when the product reaches in hand they become unsatisfied
and returns the product. Many times consumers also face fraudulence. It should be
further observed that if goods are canceled the refunds should be receive by the
consumers within few days but traders usually block the consumers money by not
refunding. Hence refund time should be mentioned in advance by the law which if
exceeded by the trader will lead to fine.
In electronic contracts we have faced issues like ordering goods but receiving false
goods. We have many time seen such cases in our real life as well as read in newspapers
like a person ordered a laptop but received a brick , a vim bar instead of Samsung Galaxy
Core 2 , pieces of stones was received once instead of iPhone 4S. The legislation orders
the seller to provide equal amount of compensation to the su ered consumers to curb
the issues. But still there are sellers who does acts in order to harass the consumer. In
order to stop this issue strict rules and laws should be imposed.
4.2 Online Payments and Information Technology Act 2000
Online Payments are financial transactions conducted through digital platforms or over
the internet, where goods, services, or other financial obligations are settled
electronically rather than through physical forms of payment such as cash, cheques, or
money orders. This method of transaction has revolutionized the way businesses and
consumers interact, enabling instantaneous financial exchanges in a global
marketplace. Online payments are facilitated by various technologies that ensure the
secure transfer of funds, protection of personal data, and the integrity of the transaction.
Some common forms of online payments include:
The ease of use, convenience, and global accessibility of online payments have made
them the preferred method for millions of users worldwide. They play a central role in e-
commerce, online subscriptions, utility bill payments, peer-to-peer transfers, and
various other financial activities. However, due to the sensitivity of the information
involved, especially in the case of credit cards, personal data, and banking details,
security is paramount. As online payment systems have evolved, ensuring data
protection, fraud prevention, and regulatory compliance has become essential.
The Role of the Information Technology Act, 2000 (IT Act, 2000)
The Information Technology Act, 2000 (IT Act, 2000) is a landmark legislation in India that
provides the legal framework for electronic governance, cybersecurity, and digital
transactions. As the use of the internet and online platforms for business and
communication grew exponentially, there was a need to regulate and safeguard
electronic interactions. The IT Act addresses various aspects of digital and online
transactions, including those involved in online payments.
In the context of online payments, the IT Act plays a pivotal role in ensuring that digital
transactions are secure, legally recognized, and protected from fraud or unauthorized
access. Below is an in-depth analysis of how the IT Act is linked to online payments:
One of the key features of the IT Act is its provision for the legal recognition of electronic
records. Traditionally, contracts and financial transactions were executed on paper, but
the rise of digital commerce necessitated a legal framework to recognize electronic
transactions. Section 4 of the IT Act gives legal validity to electronic records and
electronic contracts, ensuring that online transactions and payments are as legally
binding as traditional paper-based ones.
As online payments involve the transfer of sensitive financial and personal data, the IT
Act addresses the importance of cybersecurity and data protection.
Section 43A of the IT Act mandates that entities, including businesses that handle
sensitive personal data (such as credit card details or bank account numbers), must
implement adequate security practices and procedures to safeguard this information.
This section ensures that payment processors and e-commerce platforms maintain
stringent security standards to prevent data breaches and unauthorized access,
minimizing the risk of data theft or fraud.
This provision ensures that online payment systems maintain robust encryption and
other security measures to protect the confidentiality of users’ sensitive data during the
transaction process. Failure to adhere to these standards can lead to penalties and
legal consequences for businesses.
3. Protection Against Cybercrimes (Sections 66C, 66D, and 66F)
With the increasing use of online payments, there is also an escalation in cybercrimes
like fraud, hacking, phishing, and identity theft. The IT Act includes several sections
aimed at penalizing and deterring such criminal activities:
Section 66C criminalizes the identity theft of an individual’s personal or financial details
with the intent to commit fraud, including stealing information to make unauthorized
online payments.
Section 66D deals with cheating by personation, particularly in cases where criminals
use fraudulent means, such as phishing attacks, to steal payment credentials and carry
out unauthorized transactions.
Section 66F addresses cyber terrorism, which includes using online platforms to engage
in acts that threaten the financial stability of individuals, businesses, or even the nation.
This provision helps protect online payment systems from becoming a target for large-
scale attacks or malicious activities.
These sections are crucial for ensuring that online payment systems and platforms
remain secure, protecting both businesses and consumers from financial losses due to
cybercrimes.
To ensure the authenticity of online payments and transactions, the IT Act makes
extensive use of digital signatures. A digital signature is a cryptographic mechanism that
guarantees the integrity and authenticity of electronic documents or messages, ensuring
that the sender is legitimate and the information has not been altered in transit.
Section 3 of the IT Act defines the concept of digital signatures and the process for their
issuance. Digital signatures are essential in online payments to verify that the transaction
was initiated by the rightful party, making them an indispensable feature of secure
payment gateways and platforms.
Section 5 of the IT Act discusses the legal recognition of digital signatures, which makes
it clear that a digitally signed electronic transaction holds the same legal standing as a
traditional paper-based signature.
By ensuring that online payments are authenticated through secure digital signatures,
the IT Act helps to prevent fraudulent transactions and secure sensitive payment data.
5. Regulation of Online Payment Systems (Section 70B & Payment Systems
Guidelines)
The IT Act also lays the foundation for the regulation of online payment systems in India.
Section 70B of the Act established the Indian Computer Emergency Response Team
(CERT-In), which is responsible for monitoring and responding to cyber threats,
particularly those a ecting payment systems and online transactions. CERT-In
collaborates with other government agencies, financial institutions, and businesses to
ensure that online payment systems are safe from cyber threats and attacks.
Moreover, the Reserve Bank of India (RBI), in conjunction with the IT Act, has issued
various guidelines and regulations for the operation of online payment systems. These
include mandates for secure payment gateways, the use of two-factor authentication
(2FA), encryption protocols (e.g., SSL/TLS), and periodic security audits. These
guidelines aim to ensure that online payments are processed in a secure and compliant
manner, minimizing the risk of fraud or data breaches.
Additionally, mechanisms for dispute resolution related to online payments are provided
under the IT Act, empowering consumers to take legal action in cases of unresolved
disputes, faulty transactions, or non-compliance with payment agreements.
Conclusion
In conclusion, the Information Technology Act, 2000 is essential for the legal and
regulatory framework surrounding online payments in India. By recognizing the legality of
electronic records and signatures, safeguarding sensitive data, criminalizing
cybercrimes, and ensuring the security of digital transactions, the IT Act plays a crucial
role in enabling secure, trusted, and legally protected online payment systems. It
provides businesses and consumers with the assurance that online financial
transactions are protected from fraud, data breaches, and other cyber threats, while also
promoting transparency and accountability in the digital economy. As e-commerce and
online payments continue to grow globally, the IT Act remains a vital tool in maintaining
the security and integrity of the online payment ecosystem in India.
4.3 Consumer Protections in Cyberspace, Liability of Internet Service Providers
Introduction
The document begins by discussing the rapid growth of the cyber world, driven by
advancements in networking technologies. The internet has transformed into a major
platform for trade and commerce, o ering consumers benefits such as competitive
prices, diverse product choices, and convenient delivery services. This has led to a
significant shift towards online transactions. However, the growing use of the internet for
shopping has also introduced challenges, particularly regarding consumer protection in
cyberspace. Common issues such as undelivered products or goods that don’t match
the description have become prevalent, creating a need for robust consumer protection
mechanisms.
E-Consumers
With the growth of e-commerce and e-business, a new group of consumers known as "e-
consumers" has emerged. These are individuals who use online platforms to buy goods
and services. The rise of e-consumers is closely linked to the increasing accessibility of
the internet and the growing preference for the convenience of online shopping. The
document highlights the di erences between o line and online shopping:
E-commerce platforms ensure that product descriptions, sizes, and pricing details are
clear and accurate to help consumers make informed choices. However, the document
also notes that consumer protection issues, such as fraud and defective products, have
increased with the rise of online shopping.
The principle of caveat emptor (let the buyer beware) is central to consumer transactions,
both online and o line. In the digital space, it implies that consumers should be cautious
and ensure they understand the terms and conditions of a service before entering into a
transaction. Online consumers are expected to read the privacy policies and terms of
service posted on websites, which serve as legal contracts between consumers and
service providers.
Privacy policies are legal agreements that explain how a business collects, uses, and
protects consumers' personal information. The document lists examples of personal
data collected by websites, such as names, addresses, email details, payment
information, and even social security numbers. Privacy policies are crucial because
many countries have laws that require businesses to protect users’ data. An example
cited is the California Online Privacy Protection Act (CalOPPA), which mandates that
businesses collecting personal data from California residents must disclose their privacy
practices.
Terms of Service
Terms of service agreements are essential for defining the relationship between online
businesses and consumers. They outline the rights and responsibilities of both parties
and serve as contracts. These agreements typically include:
While terms of service are not always legally required, they provide critical protection
for businesses and consumers alike. By clearly stating the terms, companies can
prevent misunderstandings and limit their liability in case of disputes.
The document identifies several issues that consumers face in online transactions:
1. Confidence in the Source: The internet allows anyone to create a website and o er
goods or services. This raises concerns about the legitimacy of sellers and the
potential for scams. Consumers must ensure they trust the seller before revealing
personal information.
2. Security of Information: Online transactions often require consumers to provide
sensitive information, such as credit card details. Consumers worry about the
safety of this information and whether it can be stolen or misused. Online retailers
must employ secure methods, such as encryption, to protect consumer data.
3. Privacy: Consumers are concerned about the use of their personal information.
They want assurances that their data won’t be sold to third parties or used for
purposes beyond the transaction.
4. Customer Service Standards: If products are not delivered as promised, or if they
are defective, consumers may struggle to resolve the issue. Many consumers
expect the same level of service from online retailers as they would receive from
physical stores, including warranties and easy returns.
5. Fraud: Online shoppers are vulnerable to scams, such as phishing emails, fake
websites, and fraudulent transactions. These threats require stronger regulation
and legal protections for consumers.
Remedies for Consumers
1. Legal Remedies:
The Information Technology Act, 2000: This act provides a legal framework for
electronic transactions, digital signatures, and online contracts. It ensures the
protection of personal data, regulates e-commerce platforms, and provides legal
recognition for electronic documents and payments.
The Consumer Protection Act, 2019: The CPA 2019 addresses the challenges
posed by e-commerce, including issues like misleading advertisements and
unfair trade practices. It mandates that e-commerce entities provide clear
product information and establish grievance redressal mechanisms. The act also
created the Central Consumer Protection Authority (CCPA), which can take action
against non-compliant businesses.
The Indian Contract Act, 1872: This act governs consumer contracts and o ers
protection for consumers in cases of breach of contract. It is particularly
relevant when disputes arise from online transactions.
2. Tort Remedies:
In cases where contractual remedies are insu icient, consumers can seek
damages under tort law. This includes cases of fraud, negligence, or product
defects. The landmark Donoghue v. Stevenson case established that
manufacturers owe a duty of care to all consumers, even if they are not direct
buyers.
3. Technical Remedies:
The internet has enabled the dissemination of product information at a reduced
cost, which helps consumers make informed decisions. It also allows
businesses to disclose contractual terms online, reducing the likelihood of
surprise clauses. Furthermore, online forums and complaints platforms give
consumers a voice and leverage in resolving disputes.
Conclusion
Wherein real-world road, air and rail networks were the access to travel, o ered by the
respective states and their governments, the network access to people on cyberspace to
surf was brought about by the ISP's, the internet services providers. In the simplest terms,
to be an intermediary is to be like a conduit for the passage of any
information/communication. They act like aggregators between those who wanted to
generate and spread information and those who wanted to consume information.
When the time came where the dubious and inauthentic information had become a
nuisance for global peace, economy, trade, etc. There was a need to regulate and
control the information on the internet, and since it was di icult to keep track of
individuals worldwide, it was done through the source that acted as a medium to
aggregate this connectivity, the ISP's, the internet service providers.
The issue of online copyright infringement liability for the ISP's thus became prevalent
since the use of the internet started to expand rapidly. The imperative question that
arises here is to what extent are ISPs responsible for the third party material put on the
internet by users of their facilities?
Because of the hurdles and constraints on keeping track and catching hold of individuals
on a worldwide level, because of geo-cultural, geopolitical and simply inability of
copyright and intellectual property owners to seek infringement damages against those
who misappropriate their intellectual or digital properties, the internet service providers
have become an accessible mule to address this problem, namely since they allow the
internet or data pirates to exist, for which reason the content owners find it righteous to
sue the ISP's for their data infringement because the ISP's naturally are in a position to
control and secure the internet through plausible policing.
The liability for copyright infringement rests on three theories; direct, vicarious and
contributory infringement. Direct infringement occurs when a person violates any
exclusive right of the copyright owner. Vicarious liability arises when a person fails to
prevent infringement when he can and has a right to do so and is directly benefited by
such infringement.
In the United States, one of the Acts which provides liability for the ISPs is the Digital
Millennium Copyright Act, 1998. This Act governs the liability of the internet sites and ISPs
for copyright infringement of its user. It provides a mechanism for copyright owners to
force site owners and ISPs to remove infringing material.
The following elements are part of the regime under the DMCA:
1) The online service provider [hereinafter OSP] must have a designated agent
to receive notices and it must use a public portion of its Web site for receipt
of notices;
2) The OSP must notify the U.S. Copyright O ice of the agent's identity and
the Copyright O ice will also maintain electronic and hard copy registries
of Web site agents.