With the increasing popularity of e-commerce, many businesses try to adopt its processes and transactions to the ever developing digital age. To make sure that deals done online or without physical correspondence with the other party are legitimate, organizations commonly use e-contracts to seal their deal. These e-contracts are slowly becoming the face of modern businesses. As such, it is important for contract managers to have a better understanding about what electronic contracts are and how to properly implement an automated contract lifecycle management system.
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What are electronic contracts?
Electronic contracts or e-contracts are simply digital versions of regular contracts. However, unlike a regular contract, careful consideration is a must to make sure that it will be valid within the interpretation of the law. Different countries have different systems in place that make e-contracts legally binding. E-contracts can be legally binding if there is a record of electronic signatures, e-mail correspondence, message exchanges, or other forms of communication that shows intention of all parties in joining the agreement.
What makes an e-signature legal?
Different countries have different guidelines when it comes to the legal recognition of electronic signatures. In the United States, the Electronic Signatures in Global and National Commerce (ESIGN) Act and the Uniform Electronic Transactions Act note that e-signatures are legally enforceable as long as there is evidence of the signer’s intent to accept the terms and join the agreements.
Do electronic signatures hold up in court?
Digital documents with electronic signatures are legally binding as long as it’s in compliance with ESIGN and it can show the intent of the signee to enter into contract with the other party. Electronic signatures provided using DocuSign and other popular e-signature platforms, have been ruled by the US court to be presumptively valid. Internal signatures system, on the other hand, needs to comply with all the requirements under the ESIGN Act and corresponding state laws before it can be held up in court.
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What are E-contracts and their classification?
When it comes to e-contracts, there are four common classifications: Shrink-wrap contracts, Clickwrap contracts, Browse-wrap contracts, Emails, and E-signature. Shrink-wrap contracts are commonly used in licensing software. It got its name from the shrink-wrap packaged of the CDs used for software installation. Before users can install a software, they must first agree to the terms of the license agreement.
Clickwrap contracts are enforced when users click a button or check a box below a long block of text detailing the terms and conditions before using a web-based service or software. In this contract, the users are more likely to be ‘forced’ to agree to the terms to proceed to the web page or use an application. Browse-wrap contracts refer to the agreement users need to agree on before they can browse or gain membership of certain websites.
Some countries also consider correspondence over an Email to be legally binding, especially if both parties show intent in entering an agreement with each other. While some courts often uphold the validity of an unregistered and unsigned contract through Email correspondence, attaching an e-signature can cement the legality of digital contracts.
How do I get an e-contract?
Under ESIGN, UETA, and most laws in different countries, the use of an e-contract is accepted as proof of a legally binding agreement between two or more parties. However, contract managers need to take certain measures to ensure that the e-contract they draft are both valid and enforceable. Informed consent is the most important requirement of e-contracts. The signee should know that sending an affirmation through Email or e-signature means agreeing to the terms and not merely to acknowledge that they have received the document.
While e-contracts are accepted in almost every part of the world, some businesses may opt to use pen and paper in sealing a deal. There are laws in other countries that give the right to signers who wish to use paper to be allowed to opt out of using e-contracts. Signers also have the right to be informed that they can withdraw their consent at any time.
Just like regular contracts, e-contracts need proper management. Keeping all Email correspondence related to the business can be quite a daunting task. Thankfully, there are a lot of contract management software. When it comes to implementing a centralized data repository of e-contracts and other legal documents, Zendoc is the best. Armed with a powerful AI, Zendoc can comb through all business records, import legal documents, and assign them actionable tags.
How are the contracts classified?
Contracts are often classified according to their formation, performance, and execution. When based on their formation, a contract can either be express, implied, or quasi-contract. Express contracts refer to agreement where all parties involved accept the terms presented at the time of contract formation. Implied contract, on the other hand, infers from the circumstances of the agreement and the conduct of both parties. In quasi-contract, the rights and obligations are not based on the agreement of both parties but by the operations of law.
Contracts can also be distinguished based on their performance. Unilateral contracts are one-sided contracts in which only one has fulfilled the contractual obligation at the time of formation. Bilateral contracts refer to the agreements in which both parties do not perform their obligations right away during the formation of the contract. If based on execution, contracts can either be executed or executory. Executed contracts refer to deals in which both parties have already performed their contractual obligations. Executory contracts are agreements that are not yet finished by both parties.
More on this topic: What is a Contract Management Framework?
About Zendoc
Zendoc is a full-service AI-powered document automation system that not only organizes all of your agreements into a single database but keeps you up-to-date on what you need to do to extract as much value from your documents as possible. You don’t have to worry about forgetting your obligations because you don’t have to remember them in the first place.