In the digital age, the inclusion of arbitration clauses within the Terms and Conditions (T&C) of websites has become a common practice, outlining the agreed-upon dispute resolution mechanism for online transactions. This practice is exemplified in a case involving a Marketing and Operational Consulting Agreement (MOCA) where Clause 15 incorporated terms and conditions from the appellant’s website, including an arbitration clause (Clause 14). A dispute arose over non-payment of assured monthly revenue, prompting the respondent to file a suit. Despite the appellant’s attempt to seek arbitration under Section 8 of the A&C Act, the Commercial Court narrowly construed the arbitration clause, leading both parties to appeal to the High Court.

The primary issue revolves around whether Clause 14 of the Terms and Conditions, containing the arbitration clause, was effectively incorporated into the Marketing and Operational Consulting Agreement (MOCA) between the parties. The appellant argued that the arbitration agreement covered disputes regarding non-compliance, while the respondent contested the incorporation of the arbitration clause into the MOCA. Another key issue concerns the interpretation of the scope of the arbitration clause. The appellant argued that disputes regarding non-payment fell within the broader scope of “application” of the agreement, while the respondent contended that the arbitration clause was limited to matters of construction, interpretation, and application of the MOCA’s terms.

The Court addressed the issue of incorporation by considering whether the MOCA made an express reference to the Terms and Conditions containing the arbitration clause. It held that the inclusion of a hyperlink in Clause 15 of the MOCA, leading to the website’s Terms and Conditions, constituted sufficient incorporation of the arbitration agreement into the MOCA, satisfying the requirements of Section 7(5) of the Arbitration and Conciliation Act.

Regarding the interpretation of the arbitration clause’s scope, the Court emphasized that disputes concerning non-payment still involved interpreting and applying the MOCA’s terms. It referred to the Supreme Court’s precedent, stating that the examination at the pre-referral stage is prima facie regarding the existence of the arbitration agreement and arbitrable disputes. Consequently, the Court concluded that the dispute fell within the ambit of the arbitration agreement.

Ultimately, the Court allowed the appeal, terminated the proceedings before the Commercial Court, and directed the parties to resolve their dispute through arbitration, affirming the effectiveness and enforceability of the arbitration clause incorporated by reference into the MOCA.

This case highlights the significant role of digital agreements and arbitration clauses in contemporary commercial transactions, especially within the online domain. Through its examination of incorporation and interpretation issues, the Court brings clarity to the enforceability and breadth of arbitration clauses in digital contracts. the case establishes a crucial precedent for the enforceability of arbitration clauses in online agreements, fostering legal certainty and facilitating efficient dispute resolution in the digital marketplace.

Author of this article:
Adv. Ravish Bhatt,
Partner, R&D Law Chambers,
Dual Qualified Lawyer Solicitor | International Tax Affiliate

Connect with Mr. Bhatt on Linkedin: https://www.linkedin.com/in/adit-ravishbhatt/

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