Electronic contracts vs traditional contracts is a debate that more and more law firms are starting to have.
As you continue to explore new avenues of digital transformation, the need for paperless processes becomes even more significant.
Compared to digital processes, creating, printing, and sending paper documents to clients or business partners can slow your workflow down significantly and cost you money in lost productivity.
For this reason, law practices — and other companies, too — are now increasingly turning to an electronic agreements and electronic signatures as a smarter alternative to traditional hard-copy contracts.
Below, we explore some benefits of e-contracts and how they can help your business.
What is an electronic contract?
An electronic contract is a legally binding agreement in a digital format.
Typically exchanged through email or by using contract management software, an electronic contract acts as an agreement between two individuals or companies.
Whether a contract is electronic or a traditional paper-based agreement, it should clearly outline each party’s responsibilities in its terms.
In addition, an online contract must contain the following legal elements to be enforceable:
- Identification – Which parties are involved?
- Offer – From one party to another to pay for goods or perform a service
- Acceptance – Agreement of the terms of the offer
- Consideration – The value given by one party to the other in exchange for goods or services
- Legality and capacity – Assurance that the signers understand the contract’s terms
One of the main advantages of online contracts is that it’s often quicker to create and obtain signatures than with paper-based alternatives, due to both digital sending methods and signatures.
In terms of security, digital contracts are also more secure as they’re harder to tamper with, and wet signatures are more prone to fraudulent interception.
Law firms that use electronic contracts capitalize on their convenience to obtain client agreements faster and get started on substantive matter work more quickly.
This eases cash flow burdens and gets clients onboarded more quickly by reducing paper-based processes and contracts.
What is a traditional contract?
Also known as a hard-copy contract, a traditional contract requires parties to meet in person to obtain a legal agreement.
Sometimes, numerous meetings are required to agree on terms and conditions, make amendments, and finally meet again in person to sign the contract.
A traditional contract is written up according to what the parties want, and with every change, a new draft contract is created.
It can take a substantial amount of time to draft a paper contract, not to mention the operational costs involved with the cost of paper, re-printing, and ink.
Compared to traditional contracts, the automation of electronic contracts helps eliminate human error and speeds up the entire process — offering a better experience for all parties involved.
As we’ve mentioned, electronic agreements and contracts are undoubtedly a more efficient and cost-effective way of generating agreements.
E-contracts are a forward-thinking approach for businesses that already store data in the cloud, as they’re easily accessible when the need arises.
However, there are some situations, for law firms and real estate agencies in particular, that require paper documentation, including:
- Lease or rental agreements
- Wills and trusts
- Mortgage agreements
- Promissory notes and notarized documents (although this is changing)
- International shipping contracts
- Contracts including complex financial transactions
- Sale of real estate or personal property
Electronic contracts save time through digital processes
Hard-copy traditional contracts can kill an agreement with a potential client simply because it takes longer for them to receive, read, consider, and sign an enforceable contract.
Think about the timeline involved that lengthens the whole process:
- 1 day to draw up and mail the contract as is,
- 3 to 5 business days for the client to receive the contract in the mail,
- 1 to ??? days for the client to get around to viewing the contract,
- 1 to ??? days for other stakeholders/employees to view the contract and agree to sign,
- 1 day for the client to sign and mail the document back to you,
- 3 to 5 business days for you to receive the signed document in the mail.
This is assuming that your client spends a certain number of hours at their desk every day and can view the contract as is within a reasonable amount of time.
With more employees on the move than ever before, your proposal is likely to sit in the inbox basket for several days before your prospect even opens the envelope.
All of this amounts to a stalled deal that may never happen because it took too long for the prospective client to receive, view, and sign the document.
E-contracts solve this issue by enabling your prospects to view and provide a digital signature for a proposal instantly on a computer, smartphone, or tablet.
In some cases, they may simply have to click an “I agree” button to close the deal.
Greater efficiency through electronic agreements can make your law firm far more productive.
You can also create a sense of urgency, because prospects may check their email 15 times per day (or more) no matter where they are.
Furthermore, another electronic contracting advantage is that you can draw up and submit the contract without manually entering or updating data in your proposal.
You can make any changes or updates quickly and send out the proposal or a link to a web page minutes after your initial meeting with the potential client.
You experience fewer errors with electronic contracts
Another crucial difference between electronic contracts and traditional contracts is that electronic versions are generally less prone to errors.
Think about it discrepancies in contracts generally occur in one of two ways:
1. Human error
The contract’s creator may have failed to proofread the contract or provide accurate data. The recipient of the contract may have failed to read certain conditions within the document, instead of blanketing the contract with signatures and initials to save time.
Either the sender or the recipient ‘doctored’ the contract after the signatures and initials were added.
Irrespective of the circumstances, traditional documents allow both parties to introduce too many errors.
This, in turn, can result in legal disputes and other situations in which one or both parties have no legal leverage.
Electronic contracts produce fewer typographical errors. How? They:
- Allow you and the recipient to view and adjust the terms of the contract digitally on a web page before agreeing to sign it.
- Foster a more collaborative process in which both parties may develop the contract together and agree to mutually beneficial business transactions.
- Allow both you and the recipient to enter client data once to populate multiple fields. This ensures that addresses, names, signatures, and initials are consistent across the entire contract.
Electronic contracts can reduce operational costs
Electronic contracts can eliminate the need for office supplies and equipment required to produce traditional contracts and business transactions, including:
- Printing equipment
- Printing equipment maintenance and repairs
- Printing ink refills
- Filing and storage
All of these costs disappear instantly when you switch to electronic contracts.
Not only do you save your company these costs, but you also save time and money for your clients or business partners who don’t have to or are unable to meet with you face-to-face.
Integrations and APIs allow you to integrate electronic contracts with your key workflows
If you use document workflow software like PandaDoc, you can easily integrate your electronic agreements and contracts into your wider processes.
For instance, PandaDoc integrates with CRMs like Salesforce, HubSpot, and Zoho. That means all your critical client data and contracts will be in the same place.
What’s more, the PandaDoc API lets you build further integrations of your own.
Automated contract generation, signing, and more can be seamlessly combined in unique workflows.
Electronic documents are more secure than paper documents
Paper documents can be manipulated at any time throughout document creation, submission, and signing.
This is why companies go to great lengths to keep the original agreement intact, such as keeping multiple copies or signing documents in the presence of a notary.
Contract management software with electronic signing capabilities can reduce or eliminate a signee’s ability to tamper with a finalized document during a sale of goods.
Even if both parties are allowed to collaborate and alter a document as it’s being developed, the best software still offers features such as:
- Limited access to signatures, initials, or requested information,
- Tracking and recording versions/history of a document,
- Authenticating a document and a sender/recipient using encryption,
- Detection features that alert one or both parties that someone has tampered with the document,
- Compliance options for ensuring that your contracts are both legal and legally binding.
Electronic contracts improve service provision
Electronic contracts allow you to provide documents for your clients faster.
They can sign documents from any location on any device without waiting for hard copies to come in the mail.
Software like PandaDoc offers an autofill feature, so your clients can sign or initial a document once, and it automatically fills out the rest of the document with those same signatures.
This time-saving feature allows clients or partners to sign an electronic contract from a phone, computer, tablet, or other device through electronic means.
It’s perfect for when someone customer wants to move forward with a contract and doesn’t have the patience for it to arrive in the mail.
In many cases, they may only have to click an “I agree” button or provide an eSignature to get things moving.
Electronic contracts meet compliance and contract law regulations
More and more national and state governments are now accepting eSignatures and electronic contracts as legally-binding — especially in the wake of the pandemic.
In fact, there are few circumstances where electronic agreements and signatures aren’t acceptable. Even the IRS accepts electronic filing and signing.
Electronic contract software, too, keeps user information secure so that contracting parties can sign an enforceable contract without compromising their privacy.
You can feel confident that your electronic contract software meets all compliance standards and contract law.
You can easily create and edit templates with electronic contracts
Do you produce high-volume contracts for a variety of clients or business partners?
If so, writing and rewriting contracts can become time-consuming. Electronic contract software allows you to create or customize templates that you can use multiple times.
Do you need to change your online contract slightly for a different scenario? No problem. You can easily work from an existing template and only change the sections that apply to new situation.
The software will easily save your template so that you can return to it. You can also save multiple versions of the template and use them at any time.
This saves you a lot of time in drafting or re-drafting a traditional contract.
It’s easier to monitor, track, and find data
Have you ever found yourself looking through page after page of a paper contract just to find one word, phrase, date, or even typo?
If you have multiple versions of the same contract, you could spend hours sifting through several pages of several files just to find the smallest mistake or bit of content that you need to change.
By using electronic contracts and a software solution like PandaDoc, you can perform quick searches through a single document or throughout your entire database to find what you’re looking for.
You can find a term, a phrase, an amount, or another piece of information in a single online contract quickly and easily. Imagine how much time and energy you can save through quick searches.
Experience the advantages of electronic documents
As you can see, there are many
advantages to using electronic contracts rather than traditional paper contracts. Electronic contracts vs traditional contracts is no longer a fair fight.
You can save money in operations expenses, improve your productivity and efficiency, and create more secure electronic transactions with greater accountability.
PandaDoc also integrates easily with your CRM and other business-critical tools.