E-contracts are the future of business agreements. They allow you to create beneficial and low-risk contracts all without meeting the other party in person. However, just like with traditional arrangements, you must understand the elements required of your e-contract if you want to ensure its legality and validity.
What Is an E-Contract?
An e-contract or electronic contract is a type of agreement that you create virtually. Both parties conduct the steps required to form the deal through e-mail, computer software, or electronic agents programmed to recognize the contract.
Most of us are familiar with electronic contracts. For example, we enter them when we click the “I Agree” button at the bottom of a webpage containing the terms of the license. This is an efficient and easy means of forming an agreement, and you can even apply it to your business partnerships.
The Difference Between an E-Contract and a Normal Contract
Both forms of agreements are similar. The primary difference between a contract and an e-contract lies in its execution. The entire process of creating an electronic contract happens online. This offers its own set of benefits.
E-contract platforms offer a host of templates to suit your business needs, whereas traditional paper contracts require you to draft the entire agreement from scratch. The paper drafting process may take days or even weeks. Using templates can save you tons of time during this process.
Time and Efficiency
Physical agreements require the involved parties to meet face to face multiple times throughout the contract lifecycle. This can hold up the process as it’s often difficult to coordinate multiple people’s schedules. Virtual contracts make forming arrangements much more accessible. Everything is automated and completed remotely. As a result, parties are only required to fill in the basics such as their names, addresses, terms, etc.
With paper contracts, it’s easy to let mistakes fall through the cracks. Many people use a word processor to begin typing up the contents of an agreement. However, these programs don’t check for terms and conditions and other compliance issues. An innovative contract platform will safeguard against human error by ensuring that you don’t leave out essential clauses in your agreement.
The typical contract process has a significantly higher transaction cost than its virtual counterpart. With the traditional method, you must account for the cost of labor, paper, printing, and more. All of this increases the price. Utilizing digital contracts gives you a low-cost option as the process only requires an electronic platform.
In the same vein, we all know that paper documents are far less secure than electronic ones. There is a much higher chance of loss, theft, and forgery. As a result, this puts your confidential information at risk. On the other hand, online agreement platforms encrypt all of your data. They store all your data on a secure cloud-based platform. Losing documents becomes a thing of the past. Above all, tampering with contracts becomes nearly impossible.
Essential Elements of an E-Contract
Before entering an agreement, it’s essential to understand the essentials of an e-contract. That way, you can ensure that the deal is valid and legally enforceable. Even if one element is missing from your agreement, it may be voided, and both parties will be relieved from their obligations. Listed below are the essential elements of digital contracts that are required for their legality and validity.
1. Identification of the parties.
Like traditional contacts, e-contracts require you to identify the parties involved for the agreement to be binding. Both parties should have their names, addresses, contact information, and business affiliations listed at the beginning and end of the document. That way, the terms and conditions are legally enforceable. There’s no confusion about who the contract applies to.
2. The purpose of the contract (offer).
For an agreement to take form, someone must first extend an offer. The offer should include the duties and responsibilities of the offeror, and once the offeree accepts, a legally binding contract takes form. However, if the request is rejected or the offeree proposes a counteroffer, then the initial offer is invalidated.
3. List of rights and obligations of each party.
With any legal agreement, both parties have rights and obligations that they must list. Contractual obligations outline the duties that each party is responsible for performing. On the other hand, contractual rights are the set of rights that you’re guaranteed when entering a legally valid agreement. These can include the right to sell a product or service, rights to timely payment, and rights to refunds and repairs.
4. What each party is giving.
For an arrangement to even exist, there has to be an exchange of something. That is to say, one side wants something, and the other side can fulfill their request. Normally, there is an exchange of things such as property, products, protection, or services for monetary payment.
5. The term and fees of the agreement.
In an e-contract, you should include the timeframe that you want the agreement to be enforceable. A “term of the agreement” clause usually states, “this agreement begins on (start date) and continues until (end-date).” The fees need to be very clearly stated because they can be very different in any legal arrangement. For example, in an attorney agreement sometimes there’s a contract that’s contingency fee base vs a service fee. Sometimes you will see an e-contract that require initials by the fee information so that there’s no issue in the future with the expectations of a fee. With an e-contract it’s easier to add something like that before you send it to make sure both parties are clear.
6. Termination rights.
Contract termination rights are typically listed in the provisions. These allow a party to end the agreement under certain circumstances. There are two basic types of termination; for cause and for convenience. Termination for cause rights may be defined under contract law or listed in the agreement terms. However, with termination for convenience rights, you must source them in your e-contract terms as they aren’t defined under the law.
7. Dispute resolution.
A dispute resolution clause specifies what should happen between you and your counter-party in case of a disagreement. Accordingly, this clause should outline steps to resolve a dispute before it escalates. Therefore, including it can help prevent you and your business partner from resorting to lawsuits, which can be time-consuming and expensive.
Utilizing Contract Management Software to Create Legally Enforceable Digital Contracts
Utilizing technology-based contract management software is the most convenient way to draft, negotiate, and sign a legally binding e-contract. You can use this software to manage any type of online agreement while ensuring that they’re enforceable and error-free. Therefore, to efficiently create compliant and beneficial contracts for your business, it’s wise to invest in a contract management platform.