One of the many perks of today’s modern business landscape is using digital contracts. They are an immense time and cost saver since you forego traditional paper documents in favor of their electronic counterparts. But are they legal and is it easy to create one? Let’s find out.
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What Is a Digital Contract?
A digital contract is a legally binding agreement enforced electronically between two or more parties. It can either be an electronic or a smart contract. An electronic contract is created and signed electronically, often with the help of a digital contract app.
Meanwhile, a smart contract uses code and runs on a blockchain, a virtually impregnable distributed ledger hosted in multiple participating networks. Both types are considered legally binding as long as they meet the essential elements of a contract (offer, acceptance, consideration, and intention).
In fact, several countries have enacted laws to recognize the legality of digital contracts. Examples include the E-SIGN Act in the US and the eIDAS Regulation in Europe.
What Is Digital Contract Management?
Digital contract management refers to the process of managing contracts in electronic form. It utilizes technology to store, organize, track, and analyze contracts. It also helps minimize the risks of lost hardcopies and fraudulent transactions.
Instead of the traditional pen-and-paper approach, you can use a digital contract management system to draft, sign, and execute contracts. The entire process usually takes place online. There’s also no need for the contracting parties to be physically present throughout each stage of the contract lifecycle.
Benefits of Digital Contracts
Digital contracts offer several advantages over traditional paper ones.
- Automated document drafting: Avoid starting from scratch with pre-approved templates making it easier to add, remove, or move text based on your desired output.
- Better access controls: Restrict access to your sensitive documents and set role-based permissions to maintain the confidentiality of your documents.
- Faster turnaround time: Use modern messaging systems (like email and online fax) to send contracts securely to the parties involved and make it easier to secure approvals.
- Easy file access: With digital contracts, you don’t need to sift through your stack of unsorted folders to retrieve a copy of your purchase agreement. All you need is your phone or laptop.
- Enhanced security and compliance: Digital contracts use advanced security technologies like encryption and dual-factor authentication so it’s easier to comply with industry standards and state regulations.
- Cloud-based storage: Save physical storage space by storing your contracts in the cloud.
How to Create a Digital Contract
There are several methods of creating a digital contract.
Option 1. Scan and upload a paper document
This is the most familiar process of making an electronic contract and has been the default for many businesses. You either use a scanner or a document-scanning app to create a digital version of a traditional paper contract.
However, this method is time-consuming and lacks security features. Likewise, you’re still bound to traditional paper formats when requesting signatures for your contracts.
Option 2. Type a contract using a word-processing tool
A straightforward option is to type your contract on a word processing tool like MS Word and then use an online signature tool to digitally sign it.
While this is slightly better than the previous option, it lacks advanced features that can boost your business. You also miss out on advanced security features that ensure the contract remains legally binding.
Option 3. Use a dedicated digital contract app
The best way to make a digital contract is to use a digital contract app like Fill. You just browse a template gallery and look for the contract template you need. For instance, if you’re a marketing agency, you can quickly create an Affiliate Marketing Proposal or an Advertising Agency Agreement with a few clicks.
These templates are drafted by professionals so you already have the right words as the foundation of your contract. You can also create dynamic fields so you can reuse the contract for all of your clients without editing it frequently.
Additionally, using a digital contract app gives you access to a centralized dashboard where you can manage your documents.
Examples of Digital Contracts
The majority of business processes can be covered by a digital contract. Here are several commonly used examples:
- Service agreements – used to establish the terms and conditions of a provided service
- Employment contracts – outline job responsibilities, salaries, benefits, and termination clauses and are signed by both employer and employee
- Sales contracts – detail the conditions for the sale of a product or service
- Lease agreements – detail the terms of lease like rent, duration, and responsibility
- Non-disclosure agreements (NDAs) – protect confidential information
- Software licenses – often use a simple click to “Agree” during software installation
- Vendor agreements – contain the terms between suppliers and a business
Limitations to digital contracts
While almost any paper-based contract can be transformed into a digital contract, there are several restrictions. The following contracts can’t be signed electronically:
- Wills, codicils, and testamentary trusts
- Legal documents concerning family matters like divorce and adoption
- Court documents like pleadings and motions
- Cancellation or termination of utility services and health or life insurance benefits
- Notices of product recall
- Eviction, foreclosure, and repossession notices
- Legal documents for transporting hazardous materials
According to the E-SIGN Act, the above documents must be signed physically and any electronically signed copies won’t be valid. However, when it comes to business processes, most agreements are legally binding even if they bear an electronic signature.
How Fill Can Help Create and Manage Digital Contracts
Fill offers a quick and secure way to create digital contracts so you can streamline your processes and focus on core activities. You can access a robust template gallery where you can find every kind of agreement drafted for different purposes and industries.
It’s intuitive to customize these templates and adapt them to your brand identity. You can securely send them for signature and enjoy a centralized area where you can monitor their progress. Furthermore, you can automate certain fields and processes so your workflow moves automatically without taking up too much of your time.
Check out the multiple features and benefits of using Fill with a free trial today.
