There are a number of definitions and examples, one of the most common is a typical software license agreement, the purchaser is asked to tick a box to accept the terms and conditions, and an electronic agreement is signed. Completed with one click in a fraction of a second.
But not all agreements are signed this way, and it’s worth looking at the old traditional way of drawing a contract and signing it, and the variations in between.
In the “old” days, either a word document or some other contract template would be located, a legal person may even draw the agreement from a clause library or library of standard agreements. These contracts could take days to compile, check and get approved.
The draft document could either be circulated for comment, or where its standard terms and conditions, printed out for signature. The parties would then need to be present somewhere to sign it, at an office, in a branch or by courier.
The parties fill in all the relevant information, (often forgetting or missing a place, initial or signature), either sign one copy, or two if another original was required, initial each page, hold in a filing cabinet, and possibly some form of scanning into a document management system. Then generally forgotten.
Firstly, use standardised application forms and contracts, and digitise them. By this we mean hold the relevant information electronically, that way there is no additional data capture, the same information can be reused, and contracts can be automatically created.
The next step is to sign them electronically (far more robust than trying to decipher someone’s scrawl years later), and the poor CEO is saved from having to sign and initial hundreds of pages every day.
But then it’s what happens next is the real value, the organisation has all this data in an electronic format, to be stored, shared between systems, to set up reminders, tasks and obligations. Management now has insight into the contracts that are being entered into, and the underlying information for trending, risk analysis, reporting, etc. No more lost documents, untraceable authority paths, different terms and conditions. Standard agreements can be routed to the relevant business units, and with contracting happening in an instant, no more delayed booking of revenue of provision of goods.
Digital contracts are relevant across the full spectrum of types of agreements, as are differing levels of digital signatures. From simple mass produced standard agreements through to highly complex negotiated and regulated one’s, filling in pieces of paper in ink and by hand is so “old school”.
Linking of digital identities provides another layer of efficiency, no more collecting of supporting information every time an application or contract is required, the parties have all that information available at the click of a button.
Be smart, move to digital contracting.