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E-signatures: 3 mistakes to avoid

Things have changed fast, haven’t they? Here I am, blogging about electronic signatures. You could be reading this on your phone. But it’s not that long since business was always done at desks and commercial deals were sealed person-to-person, with a stack of paper and a fountain pen. I remember it well.

Now, there are more mobile devices in the world than there are people – at least 7.22 billion and counting, according to data from digital analysts at GSMA intelligence. The digital revolution, and the fact we can carry it in the palm of our hands, has changed the way we do business, and the way we sign on a dotted line.

We’ve probably all guaranteed receipt of a parcel at the door, scribbling onto an electronic screen with a tiny plastic stick. Utility contracts and plenty of consumer deals can also be signed online, some with a simple ‘x’ in a box.

So, where does that leave companies who have major commercial contracts to complete? Would a million-dollar deal signed on a mobile phone stand up in court? At Four Business Solutions, we’ve been working with e-signatures for a few years now; here are the three key pieces of advice I pass on to our B2B clients and the mistakes to avoid:

1) Take action now

If you bury your commercial heads in the sand, and believe e-signatures won’t become part of your business, you will miss out. E-signatures are big news, with the industry expected to be worth more than $5 billion by 2020. Today, electronic signatures are a recognised and legally binding means of signing documents and contracts in most countries around the world (if you’re really curious, have a look at Adobe’s Global Guide to Electronic Signature Law)

Although there hasn’t been a major test case yet, this is an issue that commercial lawyers are getting their teeth into right now. A recent note issued by the Law Society and the City of London Law Society, on commercial contracts, concluded that English and Welsh courts will accept a document bearing an e-signature as prima facie evidence that the document is authentic, which is the same weight as given to a wet-ink signature. In other words, you can sign it online, and the courts will accept that the deal was made “in writing”. You can take a look at the Law Society’s best practice on Electronic Signatures.

So, electronic signatures are a perfectly valid way to sign a B2B contract. Despite this, I find many of the clients I work with are still wary. They see e-signatures as novel technology and certainly don’t want to be early adopters, they’d rather sit back, wait and make sure they get a VHS and not a Betamax (and if you don’t get that reference, ask someone over 40…). Here’s the hard fact though. We all feel the urge to cling onto the familiar. But if you want your business to thrive in the 21 st century, you should already be offering e-signature capability. Take action now.

2) Upgrade your software

Managing e-contracts is soon going to become a critical factor for any business. A number of products have been launched offering e-signature solutions, the one we recommend is called Contract Insight. With this system, your sales force can make an agreement verbally, the other party gets an email with the contract attached; they can read it, sign it electronically and email it back. It’s simple and tells business partners that you’re an agile, modern company.
There’s no doubt that contracts made with e-signatures offer enormous benefits to our B2B clients, big or small. It’s part of providing the best contract management. The whole procurement process becomes more efficient, faster and professional. Neither supplier nor vendor has to go through the rigmarole of signing with a pen, scanning sheets of paper, getting them into the post, waiting for registered deliveries and the burden of archiving. The benefits are so obvious that many public and private sector organisations have already started using e-signatures to reduce mailing costs, speed up procurement and spend less time on contract management. I genuinely think we’re on the cusp of this becoming the norm, of B2B executives saying, “…but of course an e-signature is okay”.

3) Keep your wits about you

I’ve just explained that e-signatures are a perfectly valid way of signing a contract.
But that doesn’t mean you can just send a few emails and hope for the best. One million dollar legal case in 2012 highlighted the drama – and cost – that can result if you don’t manage your digital contract process formally. The case was called Golden Ocean Group v. Salgaocar Mining Industries PVT Ltd. It boiled down to a breach of agreement over a shipping deal, where the Court of Appeal held that negotiations held through a series of emails could arguably amount to a guarantee, even when no final guarantee had been signed.

The legal advice after this case is that you should always mark emails “subject to contract”. And the wider point for me is that there’s always more to a contract than the signature. It’s about using a process which makes everything clear. Good contract management should, amongst other things:

  • Establish identities
  • Ensure the legal elements of proof
  • Prove intent to sign on both sides.
  • Ensure the person who is signing, and/or witnessing, is authorised to sign.

It’s also important to remember that some contracts are not appropriate for e-signatures, for example, property deeds, or one involving a company that is only authorised to execute deeds by attaching a seal.

To sum up, in my experience, and after the many conversations I’ve had with lawyers, it’s always worth framing your e-contract process properly to avoid problems. You might not be using a pen anymore, but you still need to cross the i’s and dot the t’s. You’ll also want to make sure that your data is encrypted and your agreements are secure. That means using efficient, purpose-designed B2B software. It’s an investment that will more than repay itself in the savings you’ll make, the time you’ll slash from your procurement process and the peace of mind of knowing your commercial interests are protected.

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