What You Need To Know About Working With Digital Contracts

With the rise of digital transformation both in the workplace and in our private lives, you’ve likely already have come across digital contracts. If not, you probably will soon! But what are digital contracts, and what do you need to know to work with them? Let’s dive in!

What Are Digital Contracts?

 

As the name implies, digital contracts are electronic agreements that contain the same information as traditional paper contracts. You’ll find details about the parties involved, the terms of the contract, and at the end, signatures serve as an agreement to these terms. Digital contracts can be used in place of paper agreements, and there are many benefits to using them, which is why so many businesses, contractors, and individuals are moving towards digital contracts. In summary, you could say that digital contracts are the electronic version of paper contracts—like a scan, just better. Why better? Let’s have a look:

Benefits of Digital Contracts

 

Fast Processing

 

Digital contracts can be created and processed much faster than paper contracts, which need to be printed, shared, signed, and scanned. All you have to do is type up the agreement and upload the document to an electronic signature tool to send for signing. In fact, you can save up to 5 days’ turnaround time by opting for electronic contracts over paper contracts.

Ease of Use

 

Digital contracts are also more accessible because they can be stored on the cloud or in shared folders instead of being filed away in an office cabinet. This can be useful for team members and the contract creator. Should anything in the contract need to be changed before signing, they can just access it, make the changes, and they’re done. No more printing multiple versions until you’ve used up an entire tree for one contract!

Digital contracts also make it easier for parties to communicate—rather than meeting in person or having to email back and forth about any discrepancies or confusion over the agreement, both parties can annotate digital contracts directly on the file. Changes can be tracked to help everyone navigate the negotiation phase.

Cost Effective

 

With printing and posting, paper contracts can become pretty costly by the end of the process, especially with larger, more complex agreements that need to be shared among many parties that all need their own copy. The only cost associated with digital contracts is a document management toollike Smallpdf.

Secure

 

You can have a lot more control over who has access to the agreement when you opt for digital contracts compared to paper, which needs to pass through many hands to get from A to B. They can be sent directly from one individual to another through secure tools to ensure only the intended recipient can view or edit them. They also can’t get lost in the mail or be destroyed accidentally.

Not sure what to look for when choosing a secure and trustworthy contract management tool? Check out our Guide to Choosing the Right PDF & E-Signing Software for Your Business.

Are Digital Contracts Legally Binding?

 

In most cases, digital contracts are just as valid as their paper counterparts! Thanks to a variety of electronic signature acts around the world, if both parties are happy with processing and signing the agreement electronically, the contract is generally enforceable by law. With every year, the list of exceptions grows smaller—still, make sure to check your local laws regarding electronic and digital signing to be on the safe side!

Signing a Digital Contract

 

We just mentioned it: There are two types of e-signatures: electronic and digital. But what’s the difference between them, and which one do you need to sign your digital contract?

Electronic signatures could be a scan of your wet signature or a signature created on an electronic signature tool that’s been placed on your digital contract as an image—no frills or extra information hidden beneath it.

A digital signature can be created in the same way but offers more security. Digital signatures create a cryptographic fingerprint that’s unique for each signee and contain a Long-Term Validation (LTV) timestamp. These features are used to authenticate signees as well as protect your contract and signature from tampering. Any changes made to a digitally signed contract will invalidate the signatures, meaning that the authentication (which you can do with any regular PDF Reader) will fail.

Both electronic and digital signatures are widely accepted, so the one you use will probably depend on your own preference or the type of contract. Different countries—and even states—have different regulations, so, again, we encourage you to check in with your local e-signature laws to be on the safe side!

Head to Smallpdf eSign for free electronic signatures, or get your hands on a free 7-day trial of Smallpdf Pro for digital signatures and a bunch of other nifty features!