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Published by Enhelion, 2021-11-09 00:41:37






As people of the Information Age, we are no strangers to the phrase
‘electronic commerce’, or ‘e-commerce’. In simple words, e-commerce
signifies commercial transactions conducted over the internet. Electronic
contracts or e-contracts form an intrinsic part of e-commerce, and thus, it
is imperative to discuss e-commerce before understanding the nature of e-
contracts. History was made on August 11, 1994, when Daniel M. Kohn, a
21 year-old cyberspace entrepreneur based in New Hampshire, made the
first successful commercial transaction over the internet secured by data
encryption technology. He sold a CD of the rock musician Sting’s Ten
Summoner’s Tales album to Phil Bradenberger of Philadelphia, through
his (Kohn’s) website called NetMarket, which required customers to
download a unique browser that ran only on Unix, thus securing the
transaction.1 The buyer paid $12.48 along with shipping costs using his
Visa credit card, and marked the beginning of what was termed as “a new
venture that is the equivalent of a shopping mall in cyberspace”.2

1 Michael Grothaus, ‘You’ll Never Guess What The First Thing Ever Sold On The Internet Was’ (Fast
Company, 26 November 2015)
ever-sold-on-the-internet-was accessed 3 January 2019
2 Peter H. Lewis, ‘Attention Shoppers: Internet Is Open’ The New York Times (New York, 12 August 1994)
D00001 accessed 3
January 2019

The European Commission defines e-commerce as “any activity which
involves enterprises interacting and doing business with customers, with
each other or with administrations by electronic means. It includes
electronic and online ordering and payment for goods which are delivered
by post or courier, as well as online delivery of goods and services such as
publications and software. Also included in electronic commerce are
activities such as share trading, auctions, collaborative design and
engineering, marketing and after-sales services.”3 As per the World Trade
Organization (WTO), e-commerce means “the production, distribution,
marketing, sale or delivery of goods and services by electronic means”.4
The UNCITRAL Model Law5 does not provide a definition of e-
commerce, but in its Guide to Enactment6, the United Nations specifies
certain electronic modes of transmission which fall under the ambit of e-
commerce. They are: “(i) computer to computer transmission of data in a
standardized format, (ii) transmission of electronic messages involving the
use of either publicly available standards or proprietary standards, and (iii)
transmission of free-formatted text by electronic means, such as through
the Internet”.7 A more recent definition was offered by the Organisation
for Economic Cooperation and Development (OECD) in 2009, wherein e-
commerce was defined to include “any transaction for the sale or purchase
of goods and services conducted over computer networks by methods
specifically designed for the purpose of receiving or placing of orders.

3 European Initiative on Electronic Commerce, European Commission (21 April 1997)
4 Work Programme on Electronic Commerce, World Trade Organization (25 September 1998) WT/L/274
5 UNCITRAL Model Law on Electronic Commerce 1996
6 UNCITRAL Model Law on Electronic Commerce with Guide to Enactment 1996 with additional article 5 bis
as adopted in 1998, United Nations 1999
7 ibid 17

Payment and the ultimate delivery of the goods or services do not have to
be conducted online, while orders made by telephone calls, facsimile or
manually typed e-mail are excluded”.8

E-commerce transactions can be classified into five categories, based on
the parties involved in the transaction:9

• Business-to-Consumer: popularly called the B2C model, it involves
businesses selling directly to consumers. Major business models of
B2C include e-tailers, community providers, portals, content
providers, transaction brokers, service providers and market creators.
E-tailers are basically online retail stores; thus, their revenue model
is sale of goods. These online stores could either be completely
virtual without any physical existence, such as Amazon, or they
could be complementary online versions of existing brick and mortar
stores, hence called brick and click stores, such as Walmart.
Community providers offer a virtual environment for users with
similar interests to meet, network and communicate, such as social
networking sites of Facebook, LinkedIn, Twitter, and generate
revenues by charging subscription, advertising and affiliate referral
fees. The portal business model offers search tools plus an integrated
package of content and services such as email, video streaming,
calendar, navigation, shopping, news, blogging among others, and
rely on advertising fees, premium service charges and affiliate
referral fees for revenue generation. Examples include Google,

8 Electronic and Mobile Commerce, OECD, 26 July 2013, DSTI/ICCP/IE/IIS(2012)1/FINAL
9 S. V. Joga Rao, Computer Contracts & Information Technology Law, vol 1 (2ndedn, Wadhwa and Company
2005) 1226

Yahoo, Bing, Content providers like the Wall Street
Journal (, Harvard Business Review (,
or offer information content to users in the form of
news or entertainment, and charge subscription fees along with
content downloading charges. Transaction brokers like Expedia and handle online transactions for consumers, otherwise
handled offline in general, and rely on transaction fees as primary
source of revenues. Market creators are businesses which provide an
online platform for sellers and buyers to meet, display, search for,
and agree on a price for products. For instance, the auction business
model of eBay, where listing and transaction fees generate revenue.
Service providers, as the name suggests, offer online services to
users such as the various services offered by Google Apps.10
• Business-to-Business: popularly called the B2B model, this type of
e-commerce transaction involves businesses selling to other
business. The most common business models of the B2B type are e-
distributor, e-procurement, exchange, industry consortium and
private industrial network. E-distributor involves an online version
of a wholesale store supplying goods and services to another
business, such as IndiaMART. E-procurement firms such as Ariba
create and sell access to digital markets for buyers and sellers to
transact, whereas B2B models like exchanges create an independent
digital market for purchasers and suppliers to conclude commercial
transactions. Industry consortia are vertical marketplaces owned by
industries that cater to specific industries such as chemical,

10 Kenneth C. Laudon and Carol Guercio Traver, E-commerce 2014 (10thedn, Pearson 2014) accessed 4 January 2019

automobile or aerospace industries, whereas private industrial
networks are digital platforms created for networking and
communication by firms engaged in business together.11
• Consumer-to-Consumer: popularly called the C2C model, it
involves commercial transactions between two individuals over a
digital marketplace, such as OLX.
• Consumer-to-Business: popularly termed as the C2B model, it
involves an online commercial transaction where the consumer is the
seller and a business is the buyer, for example, a blogger selling
advertisement space to a business house.
• Administration/Governments -to- Administration/Governments, or,
Business/Consumers: also known as electronic governance, it
involves transactions between two governments or between
governments and businesses.12

After a general overview of e-commerce, let us now explore the concept of
electronic contracts. Also referred to as online contracts, cyber contracts or
digital contracts, an e-contract, put in simple terms, is “an agreement
which is drafted and signed in electronic form”.13 It is defined as “a kind
of contract formed by negotiation of two or more individuals through the
use of electronic means, such as e-mail, the interaction of an individual
with an electronic agent, such as a computer program, or the interaction of
at least two electronic agents that are programmed to recognize the

12 Rao (n 9)
13 ‘Enforceability of E-Contracts in India’ (Newslex, D. H. Law Associates, March 2013)
20-%20March%202013%20-%20D.%20H.pdf accessed 5 January 2019

existence of a contract.”14 E-contracts are also defined as “the automated
process of entering into contracts via the parties’ computers, whether
networked or through electronic messaging.”15 To sum up, contracts
entered into via computers, using the means of Internet, email, or via any
other computer related products such as databases and software, are e-

E-contracting has several benefits. E-contracts can substantially reduce the
time to contract. By enabling digitization and automation of contracts, e-
contracts help parties to the contract establish a faster contracting process,
while also facilitating reduced process costs. E-contracts help businesses
gain competitive advantage by ensuring an improved contract management
process and contract content reuse. Most modern businesses in the new
media age are contract-intensive, and place heavy reliance on efficient
management of contractual relations for maintaining successful trade
relations. Contract management involves analysing past, current and future
contractual relations of a company, including their creation, execution and
termination, renewals, risk analysis and dependencies. E-contracts help
automate the entire process, and also improve contents of contracts, by
checking for consistency of the contract terms digitally. E-contracts also
provide better contract monitoring opportunities. They enable automatic
interpretation of contract contents and thus eliminate the need to manually
link contracting systems with the production or delivery management
systems. Finally, electronic contracts, powered by their strategic

14 US Legal Definitions 5 January 2019
15 General Usage for Internationally Digitally Ensued Commerce (GUIDEC) Version II, International Chamber
of Commerce 5 January 2019
16 Ambika S Patil, ‘Legal Regulation of E-contract: An Indian Perspective’ (Shodhganga 2015) accessed 5 January 2019

information technology architecture, introduce ‘agility’ in the contracting
process. More often than not, companies miss out on advantageous
opportunities due to time and resources wasted on extensive
synchronization requirements. Due to their digital representation, e-
contracts ensure substantial reduction in the people-process
synchronization requirements, and thus speed up the contracting process.17


While The Indian Contract Act 1872 spells out the ingredients for a valid
contract, namely, offer and acceptance, lawful object and consideration,
consensus ad idem of competent parties, certainty of performance and
terms which are reasonable and capable of being enforced, the Information
Technology Act 2000 (“the IT Act”) lays down the framework for e-
contracts and their enforcement. The IT Act does so by awarding legal
recognition to electronic records18. It lays down that electronic documents
will be legally valid provided they are made available for a subsequent
reference, under a law which required information to be in
writing/typewriting/print form.19 In essence, section 4 of the IT Act
equates electronic documents with paper documents. Similarly, digital
signatures have also been legally recognized.20 The Act also places
liability on the creator of online content by attributing e-records to the
originator in three cases, namely, if the sender was the originator himself,

17Samuil Angelov and Paul Grefen, ‘An Analysis of the B2B E-Contracting Domain – Paradigms and Required
Technology accessed 5
January 2019
18 Section 4, The Information Technology Act, 2000.
19 Ibid.
20 Section 5, The Information Technology Act, 2000.

an agent of the originator, or an automated information system
programmed by the originator or his agent.21

Offer and acceptance play a crucial part in the validation of a contract. The
IT Act provides the electronic equivalent of offer and acceptance in
sections 12 and 13. These sections spell out the time and place of
despatch, and receipt of e-record. Despatch occurs once the e-record
enters a computer resource outside the control of the originator, unless
otherwise specified, meaning that an arrangement can be made whereby
despatch will be considered to have been occurred once acknowledgment
by addressee is confirmed.22 The determination of receipt of e-records is
two pronged: if the addressee has designated an e-resource (for the
purpose of receipt), receipt occurs when the e-record enters the designated
computer resource; and if the addressee has not designated an e-resource,
then receipt occurs when the e-record is retrieved by the addressee.23


Electronic contracts are generally of the ‘I accept’, ‘I agree’ or ‘Submit’
nature. They can be of three types: Shrink Wrap, Click Wrap or Browse

7.3.1 Click Wrap

These contracts are typically used to grant permission to download
software packages or access some sites. Users are required to indicate their

21 Section 11, The Information Technology Act, 2000.
22 Section 13, The Information Technology Act, 2000.
23 Ibid.

consent, either by typing phrases such as ‘I accept’ or ‘I agree’ followed
by clicking on a ‘submit’ or similarly phrased buttons, called the ‘type and
click’ agreements; or by clicking an icon saying ‘I agree’ or ‘OK’ buttons,
hence called ‘icon clicking’ agreements.24 Click wrap contracts do not
really provide any scope for negotiation between the parties involved, as in
traditional contracts, and they are usually in the nature of ‘take it or leave
it’. As such they are adhesion contracts whereby the terms and conditions
of the contract are not revealed in entirety before agreeing to the contract.
The user gets to know about all the terms once they have removed the
‘wrap’ of the contract, just prior to actual use of the software/product.
India does not have a judicial precedent wherein they have adjudged the
enforceability of click-wrap contracts, but several courts in the US have
passed several judgments upholding the validity of these kinds of
contracts. In Hotmail v. Money Pie25, the clicking of an ‘I agree’ button at
the bottom of a terms and conditions page was considered sufficient.26 In
i.LAN Systems Inc. v. Netscout Service Legal Corp27, click wrap licenses
as a rule were held enforceable. It was observed that by clicking on the “I
agree” button, users had overtly consented to the terms.28 In Rudder v.
Microsoft Corporation29, court held the Click Wrap Agreement
enforceable stating “that scrolling through several pages was akin to
having to turn through several pages of a multi-page paper contract and
to not uphold the agreement would lead to chaos in the marketplace,
render ineffectual electronic commerce and undermine the integrity of any

24 E-Contract: An Overview, available at accessed 21 January 2019
25 No. C-98 JW PVT ENE, C 98- 20064 JW, 1998 WL 388389 (N.D. Cal., 1998.
26Stuti Bansal, ‘The New Age Agreements – Click Wrap Agreements’ accessed 21 January 2019
27 183 F. Supp. 2d 328 (D. Mass. 2002).
28 Supra note 11.
29[1999] OJ No 3778 (Sup Ct J).

agreement entered into through this medium.”30In Feldman v. Google31,
the plaintiff disputed the enforceability of a forum selection clause in an
online advertising contract contained in a click-wrap agreement, by
claiming that the agreement had neither been signed nor seen and
negotiated by him. The Court held that Feldman could not have opened an
online account with Google without visiting the webpage that contained
the click wrap agreement with its terms and conditions, including the
forum selection clause. The webpage contained a notice in bold print at the
top stating, “Carefully read the following terms and conditions. If you
agree with these terms, indicate your assent below.”32 At the bottom of the
webpage was a checkbox declaring, “Yes, I agree to the above terms and
conditions”33 which was viewable without scrolling down and needed to
be clicked on, before proceeding to the next step. The facts that Feldman
had created his account, placed ads and incurred charges for the same,
meant that he had to have clicked the box34. The court upheld the
enforceability of the click warp agreement observing that, “To determine
whether a clickwrap agreement is enforceable, courts presented with
the issue apply traditional principles of contract law and focus on
whether the plaintiffs had reasonable notice of and manifested assent
to the clickwrap agreement. The user here [Feldman] had to take
affirmative action and click the “Yes, I agree to the above terms and
conditions” button in order to proceed to the next step. Clicking
“Continue” without clicking the “Yes” button would have returned the

30 Ibid.
31 513 F. Supp. 2d 229 (E. D. Pa. 2007)
32 ibid
33 ibid
34 ibid

user to the same webpage. If the user did not agree to all of the terms, he
could not have activated his account, placed ads, or incurred charges.”35

7.3.2 Shrink Wrap

In Shrink Wrap contracts, “party to the contract can read the terms and
conditions only after opening or unwrapping the box within which the
product (commonly a license) is packed.”36This unwrapping is considered
as the consent of the party to bind itself to the contract.37 Shrink Wrap
contracts were held enforceable in ProCD Inc. v. Zeidenberg38by
observing that “if a buyer is presented with additional terms and offered
the opportunity to reject and return the goods and subsequently does not
reject the goods, then the buyer will have accepted those terms.”39 In Hill
v. Gateway40, plaintiffs purchased a computer from Gateway by placing a
telephonic order. The computer was delivered in a box containing the
terms and conditions of the sale agreement in it. One of the clauses of the
agreement was an arbitration clause. The plaintiff-purchasers had the
option to return the computer within 30 days and thereby reject Gateway’s
terms of sale. However, they chose not to do so. But soon after the 30 days
period was over, the plaintiffs discovered faults and defects in the
computer and its components, and complained about the same to Gateway.
When Gateway did not respond and resolve their issues, the plaintiffs
instituted a class action suit against Gateway. Gateway sought to dismiss
the class action suit and moved to compel the parties to arbitration, based

35 ibid
36LakshayDhamija, ‘India: E-Commerce in India’ accessed 21 January 2019
37 Supra note 9.
38 86 F.3d 1447.
39 Ibid.
40 105 F. 3d 1147 (7th Cir. 1997)

on the arbitration clause in the terms of sale of the shrink wrap agreement.
The plaintiffs contended that they did not read or review the terms of the
shrink wrap agreement closely, and hence did not have adequate notice of
the arbitration clause. The court upheld the enforceability of the terms of
sale in the shrink wrap agreement, which meant that the arbitration clause
was also valid on grounds that “terms inside of a box of software bind
consumers who use the software after an opportunity to read the terms
and to reject them by returning the product. The plaintiffs intended to be
bound by the terms and conditions of the sale, including the arbitration
clause, by not returning the computer within the thirty (30) days provided
in the terms and conditions.”41 Hence, it was held that the shrink wrap
agreement was enforceable.

7.3.3 Browse Wrap

Browse Wrap agreements are the ones which do not require the users to
click or type on any ‘I accept’ or similar boxes to convey their consent. It
is confirmed simply by entering the website or downloading the software
concerned. The terms and conditions are usually included in the website as
a hyperlink. These types of contracts are valid so long the users have
actual or constructive notice of the terms and conditions before
downloading the software or using the website. The court in Hubbert v.
Dell Corp.42 held that “the blue hyperlink entitled ‘Terms and Conditions
of Sale’ which appeared on numerous web pages should be treated the
same as a multipage written paper contract. The blue hyperlink simply
takes a person to another page of the contract, similar to turning the page

41 ibid
42 359 Ill.App.3d 976 available at accessed 21 January 2019

of a written paper contract. Although there is no conspicuousness
requirement, the hyperlink’s contrasting blue type makes it conspicuous.
Common sense dictates that because the plaintiffs were purchasing
computers online, they were not novices using computers. A person using
a computer quickly learns that more information is available by clicking
on a blue hyperlink.”43 However, in Specht v. Netscape Communications44,
the defendant’s website displayed a notice stating “Please review and
agree to the terms of the Netscape SmartDownload software license
agreement before downloading and using the software,”45 at the bottom of
the software download page. The abovementioned software license stated,
this statement was not displayed anywhere near the ‘download’ button of
the software, the court refused to enforce the browse-wrap agreement
observing that, “a consumer’s clicking on a download button does not
communicate assent to contractual terms if the offer did not make clear to
the consumer that clicking on the download button would signify assent to
those terms. […]California’s common law is clear that “an offeree,
regardless of apparent manifestation of his consent, is not bound by

43 ibid
44 306 F.3d 17 (2d Cir. 2002)
45 ibid
46 ibid

inconspicuous contractual provisions of which he is unaware, contained in
a document whose contractual nature is not obvious.”47


An important issue for consideration is whether electronic contracts are
admissible as evidence in courts of law. In India, statutory provision for
admissibility of electronic records is laid down in section 65B of the
Indian Evidence Act. The section states that “any information contained in
an electronic record which is printed on a paper, stored, recorded or
copied in optical or magnetic media produced by a computer shall also be
deemed to be a document and be admissible in any proceedings as
evidence without further proof or production of the original document,
subject to conditions.”48 In Societe Des Products Nestle v. Essar
Industries49 , the Delhi High Court observed that “Rapid rise in the field of
information and technology in the last decade of 20th Century and the
increasing reliance placed upon electronic record by the world at large
necessitated the laying down of a law relating to admissibility and proof of
electronic record. The legislature responded to the crying need of the day
by inserting into the Evidence Act sections 65A and 65B, relating to
admissibility of computer generated evidence in the only practical way it
could so as to eliminate the challenge to electronic evidence. By virtue of
the provisions of Section 65A, the contents of electronic records may be
proved in evidence by the parties in accordance with the provisions
of Section 65B.”50 In State of Punjab v. Amritsar Beverages51, the Supreme

47 ibid
48Section 65B, The Indian Evidence Act, 1872
49 2006 (33) PTC 469 Del
50ibid, para 11

Court noted amendments in various Indian legislations brought about by
internet and other information technologies: “Section 464 of the Indian
Penal Code deals with the inclusion of the digital signatures. Sections 29,
167, 172, 192 and 463 of the Indian Penal Code have been amended to
include electronics documents within the definition of 'documents'. Section
63 of the Evidence Act has been amended to include admissibility of
computer outputs in the media, paper, optical or magnetic form. Section
73A prescribes procedures for verification of digital signatures. Sections
85A and 85B of the Evidence Act raise a presumption as regards
electronic contracts, electronic records, digital signature certificates and
electronic messages.”52Evidentiary value of electronic records was
reiterated in State of Delhi v. Mohd. Afzal53 , where it was observed that
“Electronic records are admissible as evidence. If someone challenges the
accuracy of a computer evidence or electronic record on the grounds of
misuse of system or operating failure or interpolation, then the person
challenging it must prove the same beyond reasonable doubt.”54

In the 2007 US decision of Lorraine v. Markel American Insurance Co.55,
neither party provided ‘authentic’ electronic records which could be
admitted as evidence, and hence, the United States District Court of
Maryland laid down the process for admitting an electronic document into
evidence, which includes “authenticating an electronic signature by
verifying the identity of the person purporting to sign an electronic
document, creating an audit trail for the entire electronic transaction

51 Appeal (civil) 3419 of 2006
52ibid, para 12
53 107 (2003) DLT 385
55241 F.R.D 534 (D. Md. 2007)

process from verifying the signatory of the electronic document,
confirming the absence of any modifications or alterations to an electronic
agreement, signature or other document after its creation, all the way
through electronically sealing the electronic document, and then securely
archiving and ensuring the retrievability of the electronic document.”56
The Court further added that failure to achieve the authentication
requirements renders the electronic document unenforceable and hence,
inadmissible as an evidence in a court of law. Further, in American
Express Travel Related Services v. Vinhee57, the Ninth Circuit Bankruptcy
Appellate Panel laid down an eleven-step foundation to determine the
‘authenticity’ of computer records or an electronic document in order to be
admissible as valid evidence, known as the ‘Imwinkelried foundation’. As
per the foundation, the following elements need to be proven:58

1. “The business uses a computer.
2. The computer is reliable.
3. The business has developed a procedure for inserting data into
the computer.
4. The procedure has built-in safeguards to ensure accuracy and
identify errors. This requirement includes details regarding
computer policy and system control procedures, including control of
access to the database, control of access to the program, recording
and logging of changes, backup practices, and audit procedures to
assure the continuing integrity of the records.

56 ibid
57336 B.R. 437 (B.A.P. 9th Cir. 2005)
58 Bruce S. Nathan & Terence D. Watson, ‘Electronic Signatures, Agreements & Documents; The Recipe for
Enforceability and Admissibility’
and-documents_-the-recipe-for-enforceability-an.pdf accessed 21 January 2019

5. The business keeps the computer in a good state of repair.
6. The witness had the computer generate a printout of certain
7. The witness used the proper procedures to obtain the printout.
8. The computer was in working order at the time the witness
obtained the printout.
9. The witness recognizes the exhibit as the printout.
10. The witness explains how he or she recognizes the printout.
11. If the printout contains strange symbols or terms, the witness
explains the meaning of the symbols or terms for the trier of fact.”59

Thus it can be concluded that electronic records/documents must be
authentic in order to be admissible as evidence.


A major concern in e-commerce disputes is determining jurisdiction of
concerned courts. In the case Casio India v. Ashita Tele Systems60, the
Delhi High Court assumed jurisdiction in an e-commerce dispute
observing that “as long as the defendant website can be accessed from
Delhi, it is sufficient to invoke the territorial jurisdiction of this Court”.61
However, this decision was overruled in Banyan Tree Holding v. A.
Murali Krishna Reddy62 where the court held that, “for the purposes of a
passing off action, or an infringement action where the plaintiff is not
carrying on business within the jurisdiction of a court, and in the absence

60 2003 (27) PTC 265 (Del.)
62 CS (OS) 894/2008 (High Court of Delhi, 23rd November 2009)

of a long-arm statute, in order to satisfy the forum court that it has
jurisdiction to entertain the suit, the plaintiff would have to show that the
defendant ‘purposefully availed’ itself of the jurisdiction of the forum
court. For this it would have to be prima facie shown that the nature of
the activity indulged in by the defendant by the use of the website was
with an intention to conclude a commercial transaction with the website
user and that the specific targeting of theforum state by the defendant
resulted in an injury or harm to the plaintiff within the forum state.”63

In CompuServe v. Patterson64, CompuServe, headquartered in Ohio
instituted a suit against one of its commercial shareware providers,
Patterson, a Texas resident, in the Federal District Court in Ohio. Patterson
contended that he had never set foot in Ohio, and hence the Ohio court
lacked jurisdiction over him. The appellate court held that the Ohio
jurisdiction applied to Patterson, and in doing so measured his ‘contacts’
in Ohio. The court held that Patterson had subscribed to CompuServe, and
accepted the Online Shareware Registration Agreement of CompuServe,
which contained an Ohio choice of law provision. Further, he repeatedly
uploaded his shareware programs onto CompuServe’s computers. Also, he
marketed his shareware software products through CompuServe. In light
of these ‘activities in Ohio’, Patterson “purposefully availed” himself the
privilege of doing business in Ohio. Also, Patterson’s subscription to
CompuServe’s Shareware Registration Agreement indicated his assent to
be bound by the Ohio choice of law provision.65

64 89 F. 3d 1257 (6th Cir. 1996)

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