Digital contract signing: This is what you need to consider!

Digital contract signing: Basics

Digital contract signing is an essential part of financial and business transactions these days. They are legally enforceable agreements that help businesses run smoothly. Contracts not only minimize risk, but protect both individuals and businesses by helping them understand their rights and obligations under any agreement.

Contracts signal that the parties have reached an agreement and understand the terms contained therein. In other words, they give all parties a fair and equal opportunity to mutually agree on terms and reconcile each party’s personal expectations.

However, documents that are not properly signed can cause the contract to become invalid and affect legal rights. Therefore, it is important to understand the contents of a contract before using digital contract signing.

What does digital contract signing mean?

Digital contract signing legally binds one to the written agreement. In this process, the parties involved in the contract digitally (also referred to as “electronically”) sign the corresponding contract after they have negotiated and agreed on the terms. Signing a contract shows legal decision-makers such as judges that the agreement was entered into consciously and that one was capable of doing so at that time. In other words, to sign a contract digitally is to make a legal promise that is enforceable by law and in court.

Contracts guarantee a standard of practice and provide clear specifications through clauses and terms. This helps avoid misunderstandings between parties and leads to better work efficiency. They also serve as written evidence when a contract is breached - also known as a breach of contract - and provide a company with protection and remedy when such an event occurs.

What is an electronic signature?

Using digital contract signing means using an electronic signature, eliminating the need for handwritten signatures on paper documents. An electronic signature can be used on legal documents, contractual agreements, invoices, financing documents and more. It can take the form of a digital version of a person’s signature. An electronic signature is proof that the signer accepts or agrees with the contents of the document. electronic signatures are legal and secure and is common practice nowadays.

Digital contract signing: Valid and legally compliant?

Yes, using electronic signatures for digital contract signing are legal and recognized as valid in Regulation No. 910/2014, known as eIDAS, which came into force across Europe on July 1, 2016.

The eIDAS is directly applicable in all European Member States as it is a regulation and not a directive. It replaces the previous European standard for electronic signatures (Directive 1999/93/EC), which left room for interpretation and made it difficult to validate and recognize electronic signatures between different EU countries, hindering the consolidation of a single market for European e-commerce.

The eIDAS Regulation also lays forth the non-discrimination concept. Thus, the legal admissibility of a signature cannot be denied on the grounds that it is in electronic form. Any electronic signature provided via a trust service certified by a country in the European Union therefore has evidential value throughout the European Union.

Digital contract signing: What are the consequences of this?

Before using digital contract signing, whether it’s for accepting a job, buying a good, or hiring a service, there are many things to consider to avoid potential problems in the future. Signing a contract may be just a simple signature, but with this signature, one is consciously saying yes and no to various obligations and consequences.

When you use digital contract signing, you are saying the following:

1. you have read the contract: When you use digital contract signing, you acknowledge that you have read and understood the contract and are bound by its terms.

2. one agrees to be bound by the terms and conditions of the contract: This also means that one acknowledges and accepts all the conditions and possible consequences contained in the contract when one wishes to sign a contract digitally. These clauses ensure that the parties know their rights and obligations.

3. one intends to enter into the contract: Moreover, when one wants to sign a contract digitally, it shows the intention to make the agreement legally binding. Even if a party denies the intention to make an agreement legally binding for some reason in the future, the signed contract implies their agreement to do so.

4. One has the legal authority to sign it: By having a contract digitally signed, it is acknowledged that the parties who signed it are authorized to do so. In other words, the parties signing a contract for a company are authorized representatives of their company in contract negotiations.

5. One is mentally competent to sign the contract: When one has a contract digitally signed, one is also acknowledging that both parties are mentally capable of signing. This is one of the most important elements of a contract. All parties must be mentally capable of entering into a contract, otherwise the contract may be void and invalid. Whether someone is mentally capable of signing a contract depends, in most cases, on their ability to fully understand the meaning and implications of the words in the contract or the transaction itself.

Conclusion

Many people often think that signing a contract - whether you handwritten sign a contract or use digital contract signing - is just a formality, forgetting that they are legally enforceable agreements. When you sign a contract, you are committing to its terms and could be held legally responsible and liable for what it contains. Therefore, it is important to know these consequences and review the contents of contracts carefully.

Author:

Markus Presle