The Electronic contract

What is the electronic contract?

An electronic contract is an agreement made online that creates a mutual obligation between two parties and is enforceable under certain legal requirements.

In electronic contracts, agreements are made online. Rather than interacting in person or by phone, the parties communicate digitally. Even though an electric contract is digital, it is still a contract. The agreement creates a mutual obligation between two individuals or companies that must meet certain legal requirements in order to be enforceable.

It is an agreement between two individuals or companies to create a binding mutual obligation that must include certain essential elements to be enforceable:

1. Offer: A specific offer from one party to the other to perform some service or pay for some good.
2. Acceptance: An acceptance from the other party agreeing to the terms of the offer.
3. Promise: A promise to do the action that has been accepted, such as payment for certain goods.
4. Consideration: Something of value given by one party to the other in exchange for goods or services.
5. Capacity: Whether or not the signers understand the terms being agreed to.
6. Legality: The contract matter itself is legal.

Are electronic contracts legally binding?

It is true that electronic contracts are legally binding. E-signature laws, such as the Electronic Signature in Global and International Commerce Act (ESIGN Act) and the Uniform Electronic Transactions Act (UETA), make electronic contracts equally enforceable. As with traditional paper signatures, both acts recognize e-Signatures as valid.

The Difference between E-contract and the traditional contract

• Traditional contracts are time-consuming whereas electronic contracts are not:

In the business world, negotiation in contracts is a major step that requires countless modifications. The print sign scan routine takes up a lot of time to handle it. Having face to face meetings is another drawback as a lot of unmatched time is consumed by both parties.

This is not the case with electronic documents; handling negotiations are much easier when you go digital. Contracting parties can receive, view, and sign the contracts anywhere and anytime.

• Electronic contracts involve fewer errors than traditional contracts:

Carrying out contractual processes traditionally might leave either party with discrepancies as there are more chances of errors or manipulation. This leads to legal disputes and other situations in which one or both parties have no legal leverage.

On the other hand, electronic contracts are completely automated, which means there are fewer chances of typographical errors, and one can easily track the manipulations if any.

• Electronic contracts save you on unnecessary operational costs:

The implementation of the contractual process involves manual time and efforts along with the material such as paper, printing, etc. That adds to the transactional cost of a contract. This additional cost disappears instantly when you switch to electronic contracts.

• Availability of Templates:

An e-contract management system gives you the option to create your document using a variety of pre-made templates that can be customized to suit your specific needs. This is much quicker than traditional contract creation, where you have to draft your document from scratch, which can take days or even weeks.

How to conduct an E-Contract?

An electronic contract must meet specific requirements to ensure that all parties involved are protected and that the contract can be upheld in court if necessary. The e-contracts are termed valid when the following element is considered.

1. Offer and acceptance: An offer is a proposal to enter into a contract, and acceptance is the agreement to the terms of the offer.
2. Consideration: Consideration is what one party receives in exchange for fulfilling their obligations under the contract, typically in the form of money or services.
3. Capacity: Capacity refers to the legal ability of the parties to enter into a contract, including being of legal age and mental competence.
4. Legality: Legality means the contract must not violate laws or public policy.
5. Consent: Consent is the voluntary agreement of the parties to enter into the contract without coercion or fraud.
6. Writing and signature requirements: Some contracts require a written agreement and signature to be considered legally binding, which can be achieved through electronic signatures in electronic contracts.‍

The Advantages and Disadvantages of E- Contracts

First: Advantages of Electronic Contracts:

1- Low Transaction Cost: Compared to traditional contracts, electronic contracts have a lower overall transaction cost. Changes to terms and conditions, especially those affecting a high volume of agreements, are especially challenging. The new terms can, for example, automatically be accepted by all relevant parties as part of a sophisticated clickwrap agreement. The system will then save employees’ time by capturing important information. Additionally, it reduces the cost of paper, ink, and other contract-related expenses.

2- Convenient Use: A significant advantage of electronic contracts is their ease of use. In addition to being modifiable, they are also more accessible. A dynamic repository can store digital agreements, making them easy to find and use. Business contracts can be automatically assessed across the organization by analyzing data and metrics from contracts kept in the repository.

3- Time Efficient: Contracts traditionally require extensive redlining and e-mail correspondence. Signing the document or discussing the remaining details may even require an in-person meeting. There is no need to meet in person when dealing with electronic contracts.

Second: The disadvantages of E-Contract:

Even though E-Contract is one of the best concepts introduced in the business world, it still contains some disadvantages, which are mentioned below:

1. Unassured security: there’s no proper assurance that the vendors would provide protection for business deals, as a result, you should exercise extreme caution when dealing with potentially dangerous electronic software, which can be a disadvantage of electronic signatures.

2. Reliance on proprietary software: One disadvantage of electronic signatures is the reliance on proprietary software, which may be a concern for businesses that do not want to contract with other vendors.

3. Restricted storage: one of the disadvantages of E-Contract is that some of the electronics companies you sign with have limited storage, making it difficult for them to store all of the documents on their servers. This makes these businesses depend on other sources, but many are concerned about the security of customer information.

The purpose of using E-Contracts

In business, electronic contracts have multiple use cases:

• Online service contracting agreements.
• Purchase and sale of products, contracting of insurance policies.
• Opening of bank accounts and contracting of financial products.
• Remote commercial agreements.
• Documents related to the hiring of employees and many more.