How to Make Contract Signing Online Secure and Effective
Written by Julian Canlas
A contractor should never sign a contract without understanding and negotiating its key terms. In this week’s post, we will be sharing with you some best practices all signatories should observe when it comes to contract signing, whatever industry you’re in.
Why Do Contracts Need To Be Signed?
Contracts become legally binding and formal only after signatures from the involved parties are obtained. Signing the contractual document confirms your intention to execute the terms listed in the contract.
Who Signs Contracts In An Organization?
A signatory, or a representative will sign their name on behalf of the organization. These people need to have obtained the age of majority and be involved in the execution of the document. In companies, an individual who has legal authority (usually the Director or C-suite personnel) will sign contractual documents on the company’s behalf.
Why Should Your Company Adopt Online Contract Signing?
Online contract signing tools can eliminate ineffective workflows and struggles faced by your contract management team. You should also make sure you use electronic signature tools such as DocuSign (which is also embedded within Contract Hound), which allows you to share contracts with multiple parties on a centralized platform from anywhere and at any time.
- Great for remote companies. Online contract signing helps to improve the productivity of your employees. This is done by reducing the back-and-forth emailing and communications associated with contract signing. With remote work, emailing contracts to be signed can still require a tedious process of printing, signing, scanning, and emailing the signed contract back. This time-consuming process hinders productivity as this time could have been spent on other tasks.
- User friendly & no more paper pushing. With a contract management platform, all you need to do is simply upload your document and assign the signatory involved. Once signed, the signatory can update the contract status. The process is simple, intuitive and does not require the tedious process associated with traditional contract signing. It not only saves you time, but also money spent on paper, postage and mailing the documents out! Plus, no more going through different papers by storing the relevant contracts in one centralized platform.
- More efficient & smoother workflows. How great would it be if you could set up approval workflows that automatically encourage signatories to sign documents? With a contract management platform, notifications and reminders for signature and approvals can be set to scale your contract management processes and speed up approval workflows. Employees can also chat within the platform, enhancing the productivity and connectivity amongst teams.
- Error free and secure. We understand that employment contracts may sometimes be complex to navigate. Using online signing with software such as DocuSign simplifies complex forms with step-by-step guidance, highlighting document fields, to guide signers and help parties understand how to fill in the document.
Signing Protocols You Should Familiarize Yourself With
Signing protocols assist in the timeliness of your contract execution, ultimately expediting your deals. Leaving out any formalities could lead to unnecessary delays and hence, here are the basic contract signing protocols to follow:
- Confirm the final draft. You may have many drafts of the contract before finalizing the contract. Confirm the final draft with your contract team and send out the final version to all parties involved. For the contract to be properly executed, all parties need to sign the final version (and not the final draft).
- Define signatories. The appropriate signatories involved need to sign the contract. Thereafter, verify the contract signatures before sending out copies of your signed contracts.
- Copies. Every party involved in the contract should have a copy of the original signed document. Hence, the number of copies and signature pages prepared should equal the number of parties involved.
- Execution. Your contract will not be executed until the involved parties have signed the document. Additionally, it will not be legally binding if there is only one party’s signature on it. Once executed, remember to set an effective date for the agreement.
Best Practices Before Signing A Contract
- Read the whole contract once through first. This sounds like a given, but when parties are in a rush to embark on the project, contractors may just skim through the terms and proceed with the signing. This inadvertently results in errors such as typography and conflicting provisions which may have dire consequences.
- Keep an original. As mentioned in the signing protocol, all parties to the contract should have identical signed original copies of the contract.
- Cross-verify. This includes performing a background check on the other party’s legal existence, license (if relevant), regulatory compliance, financial position, etc. This will help you predict any difficulties and pre-identify problems that may arise during the partnership.
- Understand the terms mentioned and clarify any you are unsure of. There are many terms such as contractual indemnity agreements which may be difficult to understand. In some industries such as real estate, owners may take this opportunity to shift the liability to the contractor. Hence, it is important to clarify and understand all terms stated in the contract to mitigate potential consequences.
- Verify that the contract does not violate any laws. If you are contracting with parties operating in different states, you’ll need to verify if the contract violates any state laws. Certain states have specific requirements regarding contract terms that may make certain terms in the contract unenforceable.
- Check if your contract obligations and payment terms are the same as what was agreed. Look out for ambiguous and obscure language used in the contract and raise them. This is because obscure language could possibly turn a simple payment term into a risky “pay-if-paid” clause. This clause acts as a condition precedent, requiring owners to pay the contractor before the contractor has a duty to pay a supplier/subcontractor.
When Not To Sign?
These are some red flags that you should look out for before deciding whether to sign the contract:
- You don’t understand certain terms stated in the contract and would like to review it with a legal professional.
- If you were threatened or under duress at the time of the contract signing.
- If there are missing details such as dates, dollar amounts, etc.
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