In this article, I’ll write all about e-contracts or electronic contracts. I’ll describe its elements and shed some light on types, legality and how you can set up e-contracts workflow.

The development of the internet pervades our lives creating very new needs that require timely solutions and answers. At the same time, the increasing use of internet services promotes the need for electronic contracts on a daily basis by employers worldwide. The e-business sector uses electronic contracts and agreements that exist by simply creating a new email account for any online purchase.


Electronic or Digital Contracts

Electronic contracts are a dynamic response to the speed and efficiency needs of modern businesses. Just like a traditional contract, an E-contract is an agreement that is entered into by competent parties, forging a legal relationship between them.  The only unique element, in this case, is that the e-contract would take place through a digital platform.

As with many other facets of our lives, convenience takes precedence. Using a digital platform to develop a contract means that it can be formed at any time or place. All it requires is the interplay of at least two parties. These parties can be individuals, computer programs or electronic agents programmed to acknowledge the existence of a contract. 

The first stage of the process of an e-contract is the formation, or contract establishment, which involves the validation of the contractual parties and contract. After the formation of the contract, the second stage of the process deals with performance and post-contractual activities. 

The E-contract Elements

An E-contract is a digital version of a traditional paper contract, so it’s based upon the same legal precedents. The essential parts of a binding contract are; Offer, Acceptance, Consideration, Mutuality of Obligation and Legal Competency and Capacity.

The offer refers to an expression of intention to take part in a binding contract with another party. It’s basically a promise set as the base of exchange for services rendered by another party. 

The offer is received by the offeree and it can be negotiated and altered until a compromise is met by the parties involved. The acceptance is the acknowledgement of the offer through an email, a website form or an online agreement.

Consideration element is the item of value negotiated for the parties in the contract. In other words, consideration is the principal reason for the parties developing a contract.

Mutuality of Obligation occurs once the consideration element is determined and the parties agree upon the expectations of performance. The aim of the mutuality of obligation is to avoid the future invalidation of the contract by creating transparent expectations for its execution.

Legal Competency and Capacity defines which parties are able to enter into a contract. Setting the legal status of the parties preserves those people who may not be able to discern the contract elements. Typically this refers to minors, mentally incapacitated individuals or those who have undergone bankruptcy.

A legally binding electronic contract has to meet these five essential elements. Learn more about the elements of a legal contract.

Types of E-Contracts

E-contracts provide a timely solution to the companies that have to form multiple contracts without temporal or geographical restraints. As technology users and consumers, we agree to several digital contracts entered in different websites and platforms we access on a constant basis. Normally there are three types of E-Contracts:

  • Shrink Wrap Contracts are agreements that are encased within the products. The employment of the product is considered an agreement with the contract by the consumer.
  • Click Wrap Contracts have no chance for negotiation. The user is provided with just two options; to agree or disagree with the terms and conditions of particular software. Their access is contingent upon their agreement with these set terms.
  • Browse Wrap Contracts don’t require express consent. The terms and conditions of use from the websites or other downloadable products are linked usually at the bottom of the website. 

Other types of existent E-contracts include contracts for employment, sales and resale agreements, contracts for consultants, software developer and licensing agreements.

The Legality of the Electronic Contract

In 2000, U.S. federal legislation enacted the Electronic Signature in Global and International Commerce Act regarding the legality of the electronic contract. The legislation made E-contracts and E-signatures legally binding in the same way as traditional paper contracts.

The validity of e-contracts must satisfy the requirements of the law with respect to its development. An electronic contract is considered valid if there is mutual agreement by and between the parties. It also specifies that an electronic contract must be performed by a competent legal subject. In a valid E-contract, its consideration element is clear and legal within the guidelines of the existing laws and regulations. 

Furthermore, the digital contract shall be stored appropriately and made available to be accessed after it has been signed. It’s important to prove the validity of an e-contract through evidence that shows there has been consent between the parties to receive information electronically, expressly or by implication.

E-signature Legality and Assets

According to the Electronic Signatures in Global and National Commerce Act, an electronically signed contract is as valid as a contract signed with pen and paper since the year 2000. This law governs international e-commerce and provides a convenient method for businesses to deal with legally binding documents and contracts in an ever-evolving technological world.

By using an electronic signature, companies and businesses reduce the time required in attaining signed documents. Prior to this development, obtaining a signed paper document was restricted by location, time, and sometimes even the involvement of a notary public. The transformation to digital contracts and electronic signatures changes this paradigm by enabling the involved parties to exchange and sign documents in minutes from anywhere across the globe. 

The process of electronic signature doesn’t require shipping, or faxes, or even paper. This allows businesses, companies and individuals to send unlimited documents to have signed in a convenient way.

Electronic signatures are also very difficult to counterfeit. The e-signature tools are equipped with security systems that protect your private information and legal documents from forgery and fraud. By overcoming geographical barriers and time constraints in a safe and secure fashion, e-contracts have quickly replaced the standard paper paradigm of past centuries as the new standard for the future.