Every business relies on contracts. A contract is a legal document that acts as a promise between two parties defining payment that one party will provide when the other delivers goods or services. Digital contracts are becoming the norm, allowing you to save money while expanding your customer base. With a digital contract, a company in the European Union can more easily close a sale with a customer in North America.
As your business grows, using eSignatures and electronic contracts enables you to increase revenue and employee productivity.
What Is an Electronic Contract?
An electronic contract (e-contract) is a legal agreement created and signed digitally, replacing paper contracts.
Most businesses use contract management software to:
● create templates
● send the e-contract to all signatories
● View signing status
● Use e-signatures
● Store all documents online
The e-contract process is faster than using mail and gives you visibility into the entire process.
What Is an Electronic Signature?
Electronic signatures (eSignatures) are digital formats that verify a document’s authenticity and validate signatories’ intent. They replace handwritten or “wet ink” signatures so that no one needs to use a pen and paper to complete the transaction. By documenting everyone’s acceptance of the contract’s terms and conditions, eSignatures are legally binding.
Examples of what an eSignature looks like include:
● Scanned image of a handwritten signature
● Typed name
● Check box
● Electronic sound
Some types of electronic signatures are more secure than others, so you should learn the difference between eSignatures and digital signatures when using electronic contracts.
Understanding Electronic Transactions Laws
Since contracts are legally binding documents, you need to understand the different electronic transaction laws that govern them. When you’re reviewing these laws, you need to consider where your business is located, where it’s incorporated, what industry you’re in, and where the signee resides. All these factors will play a part in what law or laws you must follow.
Electronic Signatures in Global and National Commerce Act (E-Sign) Act
Signed into law in 2000, the E-Sign Act is a US law that establishes the general rule for validating electronic records and signatures used for interstate or foreign commerce. Under the E-Sign act, electronic records can satisfy any statute, regulation, or rule of law requiring written consent.
Electronic Communications Act of 2000 (ECA)
Signed into law by the United Kingdom’s Parliament, the ECA set out the cryptography and electronic signature requirements that companies need to use for electronic transactions.
It is part of a larger legislative framework that includes the Electronic Signatures Regulations 2002 and the Electronic Commerce (EC Directive) Regulations 2002 that support electronic communications and transactions.
Electronic Identification and Trust Services (eIDIAS)
In 2014, the European Parliament signed eIDIAS into law. The eIDAS regulation established a predictable regulatory environment for secure and seamless electronic interactions.
The regulation allows people and businesses to use their country’s electronic identification (eIDS) for public services across the EU. It also created a cross-border trust services market so that all electronic transactions would have the same legal status as paper transactions.
State and Regional Differences
It’s also important to remember that different states or regions may have stricter laws than the ones listed above. Some regions require special Qualified Electronic Signatures (QES) that include an authenticated time stamp to be seen as equal to a handwritten signature. However, this may also apply to specific types of contracts, not all of them.
6 Reasons to Adopt Electronic Contracts and eSignatures
Contracts are necessary to hold everyone involved in a transaction accountable. However, contract signing is time-consuming and cumbersome. Electronic contracts and eSignatures eliminate companies' burdens and speed up the process.
Easy to send and sign
Your business handles a lot of contracts. Some examples of the contracts that your business manages every day could include:
● Non-disclosure agreements (NDAs)
● Employee contracts
● Contracts with vendors
● Sales documents
Electronic contracts eliminate burdensome manual processes, like copying and sending paper documents through the post. Even better, it’s easier for the person signing them. They can sign and return an electronic contract with just a few clicks.
The process is even more difficult if a contract requires more than two signatures. With electronic contracts and eSignatures, you don’t need to send or collect multiple copies of the same document. Everyone can digitally access the same contract version and sign it.
Collaborate Across the Contract Lifecycle
Contracts are a process involving many people and departments. From beginning to end, your contract lifecycle can include representatives from any or all of the following departments:
● Customer Success
● Senior leadership
With electronic contracts, you can create a repository giving everyone the necessary access. This makes collaboration easier since people can access the documents without sending requests or emails interrupting their daily job functions.
Standardize Contracts with Templates
Typically, you reuse legal language from one contract to the next. For example, your legal department probably uses the same standard indemnification language in every contract, outlining which party compensates the other when something goes wrong.
With electronic contracts, you can create templates to re-use the approved contract language without copying and pasting. All you have to change is the contracting parties’ names.
Integrate into Workflows
Most companies adopt technologies to eliminate repetitive tasks. For example, you might use a meeting scheduling technology to eliminate the back-and-forth emails to help find a time that works for everyone.
With electronic contracts and eSignatures, you can build automated workflows for contracts:
The workflows allow you to:
● Increase productivity
● Protect contract accuracy
● Ensure everyone who needs to be involved is involved
● Gain transparency
● Stay organized
Secure Sensitive Data
Contracts often contain sensitive data. They might contain signatories’ personally identifiable information (PII) or intellectual property. When you use electronic contracts, you increase security because you can:
● Set access according to the principle of least privilege
● Monitor users’ access
● Prevent unauthorized downloads
● Encrypt data to mitigate risk
Comply with Privacy Laws
Privacy laws include security but also require you to give people access to their data. For example, under the General Data Protection Regulation (GDPR), a consumer can ask you for copies of their personal data or to delete their personal data.
Electronic contracts make it easier for you to respond to these requests. When you have a centralized electronic contract repository, you can do a quick name search to locate all the data you need. You remain compliant and save time.
Tresorit eSign: Easy-to-Use eSignature for Contracts
Electronic contracts save your business time and money. You can complete transactions faster, across the sales pipeline or with vendors. With Tresorit eSign, you get the security and privacy capabilities you need with easy-to-use workflows.
With Tresorit’s secure cloud and file sharing solutions, you have the end-to-end encryption to protect contracts and their sensitive data. By incorporating Tresorit eSign, you can create templates and build workflows to manage the entire electronic contract lifecycle in a single location. Our solution provides fine-grained access controls with monitoring capabilities to limit and detect unauthorized access. With Tresorit eSign, you can document the contract lifecycle, including who sent the contract, who needs to sign it, when they signed it, and where they signed it. With our holistic solution based on giving you control over your data, you get the security you need with the ease of use you want.
To see how Tresorit eSign can help your electronic contracts lifecycle, contact us today for a demo.