Digital Contracts: How to Create and Manage
Digital contracts offer many advantages over traditional paper-and-ink agreements. Their legality is recognized in jurisdictions around the globe, which means they’re just as enforceable as their paper counterparts. And they’re easy to create and manage using a contract lifecycle management (CLM) system.
CLM software makes it easier to track changes, finalize negotiations, collect signatures, and make documents available to remote users without having to worry about version control or attachments. Let’s dive in, and see how simple it is to create and manage contracts digitally.
What is a digital contract?
A digital contract is a legally binding agreement that’s created and signed digitally. Also known as an electronic contract or e-contract, a digital contract is drafted, signed, stored and managed entirely in an electronic format. Keeping a contract in one centralized digital location makes it easier to track changes, finalize negotiations and collect signatures within the document itself – all remotely, with any compatible smartphone or computer.
Digital contracts eliminate the need for paper, postage and storage space for paper-and-ink agreements. They also help reduce human errors, and can be easily tracked and audited within a contract lifecycle management (CLM) system. And importantly, digital contracts allow for the use of electronic signatures, which are recognized as legally equivalent to handwritten signatures in many jurisdictions worldwide.
Are digital contracts legal?
Most jurisdictions around the world consider digital contracts to be legally equal to paper-and-ink contracts. The Electronic Signatures in Global and National Commerce (E-SIGN) Act in the United States, the European Electronic Identification, Authentication and Trust Services (eIDAS) Regulation, and other similar laws in other countries confer legal validity on electronic contracts and e-signatures.
These laws stipulate that an e-contract is just as legally binding as an equivalent paper-based contract. In other words, a digital contract (like a paper one) is only as valid as its legal enforceability. For example, all parties must have the capacity to enter into a contract, the agreement must make a clear offer, the terms and conditions must be well-defined, and all signers need to display clear intent to sign.
How to create a digital contract
People create digital contracts in a wide variety of ways. If you’re starting with a paper contract, you can use a scanner or smartphone camera to turn it into a digital file, which you can sign digitally. Alternatively, if you’ve got a PDF or Microsoft Word file of your contract, you can upload it into your CLM software and sign it there. However, uploading a document in one of those formats won’t enable you to make edits.
If you want real-time editing and collaboration features, your best bet is to start a new live document in Concord and draft your contract from scratch – or copy-paste text from your source document into the live doc you create. This will give your entire team the ability to track changes, add comments, and edit a contract in real time, adding smart fields and e-signature functionality as you go.
How to sign a contract digitally
You can digitally sign a contract in several different ways, each of which offers its own pros and cons. The traditional method is to sign your name on paper, scan it or take a photo of it, and insert the resulting image into your document. While this may be a familiar process, however, it’s time-consuming and cumbersome, and provides no security whatsoever – since anyone can paste your signature into another document.
Microsoft Word also provides built-in electronic signing functionality, though it’s a bit complicated to use. Today, many people prefer to use free online signature tools, which make it easy to upload and sign a document with just a few clicks. Even so, many free tools lack identity verification and editing capabilities. CLM platforms like Concord, by contrast, offer secure, compliant, easy-to-create electronic signatures, along with a robust set of features for editing and organizing your contracts.
How to manage digital contracts
Cloud-based CLM software like Concord makes it easy to draft, store, sign and track your contracts in one central location. A best practice is to use your CLM platform as a contract repository, and create templates for all your standard contract types. Users can then copy and customize each template to suit the terms of an individual agreement – standardizing your entire contract creation process.
What’s more, a digital approach to contract management will let you automate the processes of sending them out for approvals and signatures, rather than sending them as email attachments. Managing contracts in the cloud will also enable you to automate deadline tracking and set reminders for contracts about to renew, ensuring tighter compliance, as well as stronger performance from each relationship.
Digital contract examples
To get you started in the world of digital contract creation, we’ve provided a few sample templates to try out with CLM software like Concord. You can download them below:
To use these examples to create your own contracts, just upload them into your CLM software, edit the text to reflect your organization’s details, and add your own custom fields – then share the resulting contracts within the CLM platform. That’s all there is to it!
