What is a Digital Contract?
Adopting digital contracts, as well as an effective contract management software is crucial in ensuring your business’s growth and success in the years ahead. But so is understanding what a digital contract is and how it's essential to your business’ success in an increasingly digital world.
A digital contract, or an e-contract, is a contract that is created and signed electronically. Digital contracting is a process that turns the entire contracting lifecycle — not just signature, or storage, but every stage of the journey — into a data-first, collaborative, browser-based workflow.
Just like paper-based contracts, digital contracts are perfectly legal and all the essential elements of contracting law equally apply to them. They generally have the same elements found in an average contract that does the following:
- Defines the parties of the contract
- Provides the parties’ contact information
- Defines the terms of the contract
- Provides the terms of performance and obligation
- Contains signatures
To learn more about the characteristics of a simple contract agreement, click here.
Are Digital Contracts legal?
Like any contract, digital contracts are legally binding and definitely hold up in court. Thanks to the Electronic Signatures in the Global and International Commerce Act (ESIGN Act) and the Uniform Electronic Transactions Act (UETA), digital contracts are just as enforceable as traditional pen-and-paper contracts.
That being said, not all contracts are able to be executed electronically. Here are a few examples of contracts that must be signed in the traditional ink and paper format:
- Documents relating to adoption, divorce, and other family law matters
- Documents to cancel or terminate health or life insurance
- Wills, codicils, and testamentary trusts
- Notices of default, repossession, foreclosure, or eviction,
However, under some circumstances, digital contracts and electronic signatures may be permitted.
Why are Digital Contracts important?
Digital contracts are now widely used by various companies in different industries as they are considered one of the best ways to establish business agreements.
Digital contracts and contract management go hand in hand in playing a strategic part in any company’s business operations. With efficient contract management, the company can strengthen its competitive edge and quickly respond to the challenges of the rapidly-developing operating environment.
Here are a few different benefits of digital contracts for organisations:
- Minimal time wasted
When you’re handling multiple contracts a day, you can get overwhelmed and it can be easy to miss critical deadlines. In addition to this, we traditionally spend a lot of time drafting, printing, and then sending out physical contracts to clients or stakeholders, which can take a significant amount of time.
Contract digitization is often paired with contract management systems like Lexagle which saves time as there are abilities such as contract search, retrieval, and data analysis.
- Cloud storage capabilities
When you switch to digital, you will be able to save on physical space, as well as eliminating the need for employee attention to your contracts.
An automated contract management workflow means you can consolidate contracts into one organised and easily accessible database. By centralising your contracts, you will be able to have better transparency and access to relevant documents without compromising security.
- Better collaboration among teams
With digitised contracts, you’ll have the ability to access contracts from anywhere, and the ability to collaborate more easily with colleagues on the same contract.
In addition to this, having a digitalised contract repository allows you to route contracts to the right people at the right time — which means a seamless task flow without any bottlenecking. It also means everyone is held accountable for their duties and responsibilities within the company.
Electronic Signatures will also likely revolutionise
Amidst the COVID-19 pandemic, remote working gave rise to more digital contracts started being used, and with that, electronic signatures experienced a significant rise in popularity with its growth appearing to be exponential.
It has been no surprise that electronic signatures have undoubtedly facilitated a shift in the workplace, and there is a vast array of benefits to support why we should switch to this non-traditional digital transformation solution. Understanding how to electronically sign a contract is just as important as understanding digital contracts.
What are Electronic Signatures?
An electronic signature is an acknowledgment provided in an electronic format that an individual or business can use to demonstrate acceptance by a party. It can also be used to authenticate the party involved.
When reading about electronic signatures in Singapore, you may also come across a term called ‘digital signature’. Upon first glance they may seem very similar, however, they have very distinct differences.
Digital Signature (Encryption/Decryption Technology) - Digital signatures support electronic signatures. They secure sensitive data, detect tampering efforts, and strengthen signing trust.
Electronic Signature (Legal Concept) - Electronic signatures only show who signed, what was signed, and the intent and consent of the parties.
How are Electronic Signatures authenticated?
Electronic signatures are recognised under Singapore’s Electronic Transactions Act 2010 (ETA). They may be accorded the same legal status as a “wet ink” signature, provided that the following requirements are met:
- The electronic signature is unique to the person using it.
- The electronic signature is capable of identifying such a person.
- The electronic signature is created in a manner or using a means under the sole control of the person using it.
- The electronic signature is linked to the related electronic record such that if the record was changed, the electronic signature would be invalidated.
Furthermore, it has to be created during the operational period of a valid certificate. Such certificate must be issued by:
- An accredited certification authority
- A recognised certification authority
- A public agency approved by the Minister for Communications and Information to act as a certification authority
- The parties have expressly agreed between themselves (sender and recipient) to use a digital signature as a security procedure, and the digital signature was properly verified by reference to the signatory’s public key
To read more about digital signatures, how their authenticity is ensured, and the legality of electronic signatures in Singapore and more, click here.
How a Contract Management Platform helps
Digital contracts and electronic signatures go hand in hand in ensuring a smooth process when creating contracts, and it can be even easier and more efficient with a digital contract management platform like Lexagle.
Here are a few benefits using a digital contract management platform has to offer:
- Generate: Manage drafting contracts and easily handle requests. You can create easy-to-use workflows customised to your contract process.
- Negotiate: Communicate easily with contracting parties within a single platform. The Ironclad Editor lets you work collaboratively in one system, rather than redlining through emails.
- Approve: Run the contract by stakeholders and get approval within a single platform.
- Accept: Decide how the contract will be signed, and all parties can sign digitally.
- Fulfill: Meet important deadlines, account for renewals, and fulfill other obligations once the contract is approved
- Analyse: Analyse your contract after the deal has concluded. Useful metadata can inform business and contracting decisions for the future.
- Optimise: Analysed data can be used to automate processes, improve business operations, and find growth opportunities.
- Renew: Create alerts to stay on top of renewal dates. Contract management software also gives you the data to know whether you want to renew based on your business performance.
Streamline your contract lifecycle with Lexagle
Contracts are at the core of every business. In every process, whether it is hiring a new employee, contracting a supplier or anything in between there is always a contract involved. Although simple contracts are one of the easiest contracts to draft up, we can make it even easier for you.
At Lexagle, we provide a modern, holistic platform that empowers organisations to drive contracts. With a focus on users and boosting simplicity, we’ll help you see immediate value in their investment with our contract management platform. Check out our features from drafting a contract to storage and retrieval here.
If your business is ready for the next step forward in this digital age, do not hesitate to contact us for a free demo today.