Online Contracts: Efficiency, Security, And Convenience

Beyond 2024, fueled by technological advancements, most businesses will shift to online contracts. Conventional paper contracts have the drawbacks of management difficulties, physical damage risk, manual processing time, and storage expenses. Companies seeking quick and efficient solutions may prefer digital over traditional. Additionally, they are simpler to create, modify, and store, which makes contract management easier. There are issues, though, like ensuring legal compliance and dealing with possible cybersecurity risks. So, here’s all you need to know before transitioning to online contracts, including its benefits, considerations, and tools. 

What is an Online Contract?

An online contract is a written legal agreement created, signed, and managed electronically. They can take various forms, from simple email agreements to complex documents to even texts. These contracts are commonly used in e-commerce, software agreements, service subscriptions, and digital transactions. 

Online contracts can be formed through various digital means, such as clicking an "I agree" button, signing an electronic signature, or exchanging emails. They often replace traditional paper contracts, offering greater efficiency and convenience. Unlike traditional agreements, these legal agreements don’t need physical signatures and paperwork. Properly drafted online contracts can offer significant advantages, such as faster execution, cost savings, and ease of management.

1. Speed and Efficiency: Traditionally, drafting, printing, signing, and mailing contracts can be time-consuming. Online contracts eliminate these delays. With just a few clicks, parties can create, share, and sign agreements in real-time. It enhances productivity and helps businesses close deals faster.

2. Cost-Effective: Online contracts reduce the costs of paper, printing, and shipping. Additionally, they minimize administrative expenses tied to contract management and storage. By adopting digital contracts, businesses can save significant money over time.

3. Enhanced Security: Concerns about the security of sensitive data are valid, but online contracts often come with robust security features. Many contract management platforms use encryption, secure storage, and authentication processes to protect against unauthorized access. This ensures that both parties can trust the integrity of their agreements.

Are Online Contracts legit?

Online contracts are legally legitimate and enforceable in many jurisdictions, provided they meet specific legal requirements. They are valid if they demonstrate mutual consent, consideration, and a clear understanding of the terms and conditions. Courts often uphold such agreements when both parties have knowingly and voluntarily entered into the terms and when the acceptance is clear and unambiguous. Electronic and digital signatures in online contracts carry the same legal weight as wet signatures. 

There are different types of online contracts, including clickwrap, browsewrap, and shrinkwrap agreements. Clickwrap agreements involve users clicking an "I agree" button to accept terms. Browsewrap agreements, however, allow users to be bound by terms simply by using the website, often without a clear action like clicking. Shrinkwrap agreements are more common in software purchases, where the terms are revealed once the packaging is opened. Factors like the terms' visibility, the consent process's clarity, and the particular contract laws of the jurisdiction can all affect enforceability. 

How can I make a contract online?

Creating online contracts involves several steps to ensure legal enforceability. These written agreements must have proof of offer, acceptance, consideration, awareness, capacity, and legality. The first crucial step in creating an online contract is determining the type of agreement required for your situation. This could range from a service contract, rental agreement, sales contract, or employment contract to a non-disclosure agreement. Each contract type comes with its own set of standard terms and clauses, so it’s important to select a template that suits your needs. 

Step 1: Select Contract Template

Online contract generators, such as LegalZoom or Rocket Lawyer, offer a wide variety of templates for different contract types. By choosing the right one, you ensure that all necessary components of the agreement are included, such as payment terms, deadlines, and rights and responsibilities. Additionally, understanding the type of contract you need ensures that the agreement meets any legal requirements specific to that contract type. This first step is foundational in avoiding legal or business complications down the line. Once you have the correct template, you can move forward with customizing it to fit your specific circumstances.

Step 2: Customize the Template

After selecting the appropriate contract template, the next step is to customize it by filling in the relevant details. This includes personalizing the document by adding the names of the parties involved, the terms of the agreement, timelines, payment details, specific obligations, and any special clauses that may apply to the situation. Customization is critical, as a generic contract may not fully reflect your specific needs or expectations. Many online platforms offer tools that allow you to adjust language, modify clauses, and add conditions to fit your circumstances more precisely. Clarity is key during this stage—ensure all terms are well-defined, leaving no room for misunderstanding. For instance, if the contract involves payment, specify amounts, due dates, and method of payment. Likewise, any obligations or duties for either party must be clearly outlined to avoid confusion later. Customizing the contract ensures that both parties are aligned on what is expected and agreed upon before proceeding to the next phase.

Step 3: Review the Contract

Once the contract has been customized, both parties need to thoroughly review the document. This step is essential to ensure that the terms and conditions reflect both parties' intentions and that all the necessary elements are included. The review process should involve checking for any errors or inconsistencies in the contract, such as incorrect names, dates, or figures. It's also important to read through all clauses, especially those related to payment, deadlines, obligations, and dispute resolution. If there are any ambiguities, unclear language, or concerns, they should be addressed before proceeding. Often, it is recommended to consult a legal professional at this stage, particularly for complex or high-stakes contracts, to ensure the document complies with applicable laws and protects both parties’ interests. Both parties should also verify that the contract is fair and balanced. Once the review is complete and all revisions are made, both parties can agree to move forward with the contract, ensuring that all issues are resolved before signing.

Step 4: Legal Verification

In many cases, particularly for more complex contracts, seeking legal verification is a prudent next step. While online platforms often offer legally sound templates, having an attorney review the contract ensures that it adheres to local laws and industry regulations, particularly for high-value or sensitive agreements. A legal professional can identify any potential risks or ambiguities that may not be obvious to the parties involved. They can also confirm that all legal requirements are met, such as compliance with consumer protection laws or industry-specific regulations. Legal verification can also help ensure that the contract includes enforceable terms and that both parties are adequately protected. If any terms are unfair, illegal, or unenforceable, a lawyer can suggest revisions to make the contract more robust. Even if the contract seems straightforward, having a legal expert provide input gives both parties peace of mind, knowing the agreement is legally sound. Once the contract passes legal scrutiny, it can be signed, and the agreement becomes binding.

Step 5: Sign the Contract Electronically

Once both parties are satisfied with the contract and it has been legally reviewed, the next step is to execute the agreement through electronic signatures. E-signatures are legally recognized in many countries and jurisdictions, making them a convenient and efficient way to formalize contracts without the need for physical paperwork. Platforms like DocuSign, Adobe Sign, and Sertifi provide secure methods for both parties to sign electronically. These services also ensure the integrity of the signed contract, as they track and log every action taken during the signing process. Electronic signatures are a quicker alternative to traditional methods, especially in the context of international agreements, eliminating the delays that may come with mailing physical documents. The signing process typically involves each party reviewing the contract one final time before affixing their signature. After the signatures are applied, the contract is legally binding. Both parties will receive a copy of the signed document, and the agreement is now in effect, ensuring that all obligations are enforceable.

Step 6: Store and Share the Signed Contract 

Once the contract is signed, both parties must store the signed copy for future reference. Most electronic signature platforms automatically store a copy of the contract, but it is important to download and securely store the document in a safe and accessible location. Digital storage options, such as cloud storage services, provide an efficient and secure way to retain the contract, ensuring it is protected from loss, theft, or damage. Additionally, both parties should share the signed contract, ensuring that everyone has access to the final version of the agreement. This step ensures transparency and helps prevent any misunderstandings or disputes later on. By having clear access to the signed contract, both parties can reference the terms whenever necessary. In case of future amendments or renewals, keeping an organized and secure digital archive makes the process more manageable and ensures that no crucial document is misplaced. Clear communication and record-keeping contribute to the smooth management of the contract throughout its duration.

Step 7: Monitor and Manage the Contract

After a contract is signed and executed, managing and monitoring its ongoing performance is the next step. Monitoring ensures that both parties fulfill their obligations as outlined in the contract, such as meeting deadlines, making payments, or adhering to specific terms. Many online platforms offer contract management tools that allow you to set reminders for critical milestones, such as payment dates or project deadlines, helping both parties stay on track. If any issues arise, such as delays or breaches of contract, it’s important to address them promptly to avoid escalating disputes. Regular communication between the parties is key to ensuring compliance with the contract's terms. Additionally, some contracts may require periodic reviews or updates, such as when certain clauses need revision or extension. At this stage, tracking performance and maintaining clear, open communication helps mitigate risks and prevents misunderstandings. If the contract needs to be amended, most online platforms also allow for easy digital revisions. Effective management ensures that both parties uphold their commitments, safeguarding the integrity and effectiveness of the agreement.