What Is an Electronic Contract and How to Manage It?

For a high-growth company with an expansive reach, working with someone on the other side of the globe is pretty normal.

That’s why it's important to have reliable systems in place for contracting. If not, manual contract workflows will take away the valuable time you could use for scaling your business operations.

Here’s where electronic contracts or eContracts fit in.

They're all done online, so the process is clean and reliable. It all began with the passage of the Government Paperwork Elimination Act (GPEA) in 1998.

Consider the following data. In 2014, about 210 million transactions were signed electronically. We can assume that some of these transactions involve eContracts among others.

e-Signature growth and transaction projection from 2012 to 2017 (in millions)

Curious to learn more about electronic contracting and how it can help your business grow faster?

Read on and get to know!

What is an electronic contract?

An electronic contract (eContract) is a paper-based contract translated into digital format. It’s generally exchanged through the sending of emails or other cloud-based services. In short, it’s a legally binding agreement between two or more parties that is formed and executed using electronic means.

One advantage of eContracts is that they’re often faster to execute than their traditional counterparts ― thanks to the use of digital signatures technology. Also, they’re difficult to forge since eSigns are unique and secure electronic copies of your wet signatures.

Yet, online contracts can be difficult to enforce without the following legal elements. They must be present to ensure electronic agreements are enforceable:

  • Offer
  • Acceptance
  • Consideration
  • Intention to create legal relations or meeting of the minds
  • Legality and capacity
  • Certainty

This article here describes each of the essential elements of a contract in detail.

Here’s what matters. Most jurisdictions treat digital contracts with the same weight as traditional contracts. So the question is…

Is there a difference between traditional contracts and electronic contracts?

eContracts work just like paper contracts. However, being the digital counterpart also comes with pertinent differences ― mostly in favor of such an agreement. Some of them are:

  • Electronic agreements can be completed faster since they don’t require the same level of back-and-forth between parties that in-person transaction entails.
  • Traditional contracts are often physically created by hand, while eContracts are typically created using the software that’s why they’re easier to create and edit.
  • Online contracts are more convenient because you can sign them anytime, anywhere ― no need to track down a physical copy of the contract.
  • Traditional contracts often require witnesses, while electronic contracts generally don’t.
  • Digital contracts are more secure, as they cannot be easily altered or tampered with. Yet, they can be easily retrieved when needed.
  • The electronic contracting process is more environmentally friendly, as they eliminate the need for paper.

Still, please note that although an electronic contract is generally more efficient, there are a few numbers of contracts that still require paper documentation.

Examples are:

  • sale of real estate or personal property
  • wills and trusts
  • lease/rental agreement
  • contracts that involve international shipping or complex financial transactions
  • documents that need to be notarized or witnessed

Are electronic contracts legally binding?

Clearly, the answer is yes.

We talked about earlier that a contract must contain certain elements in order to be legally enforceable. Additionally, there are 2 important laws that justify this: the Electronic Signatures in Global and National Commerce Act (ESIGN) and the Uniform Electronic Transactions Act (UETA).

Both confirm that electronic signatures are just as legal as pen-and-paper signatures. That means a contract or record of transactions can't be declared invalid or unenforceable just because it's electronic.

Are we good? Now let's talk about the different types of digital agreements.

Types of electronic contracts

So businesses increasingly use electronic transactions thus electronic contracts have become more and more popular. Here are six common types of electronic contracts that you might come across:

  • Clickwrap agreements. This is the most common type of electronic contract and they’re usually fairly simple. You typically see this type when you buy something online or sign up for a service. You’ve got to click "I Agree" on a website’s Terms of Service agreement before proceeding.
  • Browsewrap agreements. These are similar to clickwrap agreements, but instead of you seeing the terms upfront, they're usually located somewhere on the website ― usually a hyperlink in the footer. This type doesn’t require the user to take any affirmative action to indicate their acceptance.
  • Shrinkwrap contracts. They’re often used when purchasing sealed physical goods. The terms and conditions are included in the packaging and bind the customer once the product has been opened.
  • Web-Form Contracts. They’re an agreement in which the terms and conditions are presented on a web page. The user agrees to them by filling out and submitting the form. This type of agreement is typically used for membership agreements, terms of service, and other online contracts.
  • Email agreements. They’re contracts formed through email communication between the parties. Normally, by sending back an email with "I agree" in the subject line or body of the message, you agree to the terms and conditions attached.
  • Signature contracts. They’re electronic versions of traditional paper contracts, thus requiring the user to sign agreements online. This is with a digital signature that has the same legal weight as a handwritten signature.

Now that's done, let's get to the good stuff.

Can an agreement be signed electronically?

Yes, you can. For consistency, please refer to contracts that require a signature from this point forward.

There are three methods to give your legal signature:>

  1. The traditional method of using a pen and paper where you print and sign an emailed document ― however, this isn’t the most efficient method.
  2. When you receive a copy via email and send it back signed using a digital signature tool like DocuSign or SignNow. Electronic documents led us to rely on such eSignature services.
  3. Here’s a better method ― sign using CLMs. They are software to manage the end-to-end contract lifecycle. So drafting, collaboration, approval & agreement signing happens in one place. A good example is Avokaado.

Let’s show you how to sign using the contract platform.

How to sign an electronic contract with Avokaado?

If you have a signed document (maybe in Word/PDF) ready for additional signing, you need to share it with other signers. Here are the steps to do it.

  1. First, click on the "+ New Document"  button. You can see this whether from the Workspace or Documents tab.
  1. Next, select "Upload a document".
  2. Open the new document by clicking on it. You can then add other signatories (or even yourself if you’re also a signor) as a collaborator with signing rights. We recommend using the SignNow eSignature.
  1. Once you click on "Send for Signing", you and other parties will receive an email notification that includes the link to view and sign the online document.

Note: PDFs in .asice or .edoc containers that are electronically signed can't be previewed in Avokaado. However, Dokobit signing can be used to add additional signatures.

Now that the link has been shared, add your signature in 3 easy options.

  1. Just click the link in the email notification and it’ll redirect you inside Avokaado software to see the document.
  2. Select the "Sign" button.
  3. Click the "Get started" and then "Start".
  4. You have 3 ways to add your signature:
  • You type in your full name
  • Or draw your name
  • Or upload your signature picture(smaller than 4MB) + click on "Sign"
  1. Click “Sign”. Once you've pressed "Done", the page returns to Avokaado home.

How to make and manage electronic contracts?

Signing electronic documents are easier with CLMs. As shown above, signing with Avokaado requires only a few clicks.

However, CLM solutions are more than a tool for signing. They automate contracting workflows at various stages thus simplifying the whole contracting process.

To see how they make and manage electronic contracting, let's look at the contracting stages that Avokaado CLM oversees.

  • Request and intake mean identifying the parties involved. From there determine the terms of the agreement such as specifying the rights and obligations of each party, as well as any conditions that must be met in order for the contract to be valid.
  • Authoring that sets forth the creation of the agreement.
  • Collaboration and redlining so you can include further inputs from colleagues or negotiation with external collaborators.
  • Final reviews and approvals or when the stakeholders review the document in preparation for the contract approval process.
  • Execution so as to the signing of the parties involved.
  • Post-Execution includes amendments, addendums, renewals, and terminations.

Avokaado is a CLM that can help you generate electronic contracts, and build approval workflow until signing contracts online. Every step of the process is simplified, auditable, and automated.

Make and manage electronic contracts

Truth is, electronic contracts are the now and future. It’s more efficient, secure, and faster than traditional methods of contracting ― print it out, sign it, scan it, and email it back.

To be fully prepared of using it, you can start using CLM to make contract drafting to signing simpler and that includes tasks in between. That makes it your single stack for storing, generating, negotiating, approving, and signing contracts.

Ready to try it out?

Start with Avokaado CLM. We offer a free trial so you can see how easy and convenient electronic contracting with CLMs can be.

Try modern Avokaado CLM for free for 7 days

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