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CS Professional · Artificial Intelligence, Data Analytics and Cyber Security - Laws and Practice · Internet and Other Technologies

A start-up proposes a smart contract that automatically releases payment to a supplier once an IoT sensor confirms delivery. Under the Information Technology Act, 2000, the legal position of such a contract's electronic form is best described as:

A smart contract cannot be denied legal effect merely because it is in electronic form, as the IT Act recognises electronic records. However, it must still satisfy the Indian Contract Act essentials such as offer, acceptance, consideration and lawful object. No CCA registration or court approval is needed.

  1. AVoid solely because no paper document or physical signature exists
  2. BValid only if registered with the Controller of Certifying Authorities
  3. CNot capable of being a contract unless a court first approves its code
  4. DNot deniable legal effect merely because it is in electronic form, subject to the general requirements of the Indian Contract Act, 1872Correct

Explanation

The IT Act gives legal recognition to electronic records and signatures, so electronic form alone does not invalidate an agreement. The essentials of a valid contract under the Contract Act still must be met. No registration with the CCA or prior court approval is required.

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