Digital Contracts in the Current Crisis
For any company, the core business value comes from the people involved within that business: customers, vendors, employees, shareholders and your basic operational staff. Your stakeholders make the pillars of your business.
As much as the presence of your stakeholders is needed, the validation of that presence is equally significant; this is where contracts play an important role to define and confirm a relationship between the company and its respective stakeholders for a given period of time. Without contracts, expectations of all involved parties are not defined, protection in violation of agreed terms is absent, and prices are not locked to the services offered. There is no accountability, no proof of work processes, no direction and so on.
Before explaining what digital contracts are, let us first define the need for contracts and the drawbacks of not having one:
Necessity of Contracts:
To provide recourse when the relationship falters
In cases where either party is faced with a decision to release oneself from the project, the contract must state alternative solutions to prevent the affected party from incurring heavy losses. Not only does this protect the development of the project, but it also keeps the relationship between these parties safe from distrust on future projects.
To lock in financial agreement
A contract ensures the service provider is paid on time and that the service receiver is held accountable in case of delayed payments. For big projects, payments per milestones completed is more efficient for both the service provider and receiver. It aids in keeping track of the project at hand and to issue any concerns after each milestone instead of altogether at the end of the project.
To describe responsibilities
Activities performed under each party needs to be validated and approved through the responsibilities described in the contract. Any action needed by each party to reach the goal of the stated project will be established in a contract to avoid the blame-game.
To establish a time frame for duties
Especially in a complicated project, many tasks are dependent upon the completion of other tasks belonging to either parties. Defining the time frame on which these prerequisites are completed enables an efficient productivity level to reach the project delivery date.
To protect both parties (or multiple parties) involved
The pressure of fulfilling tasks mentioned in the contract vividly defines the obligation to successfully complete those tasks in the given frame of time. Not only does this increase the odds of success, it also makes enforceability easier on the parties involved. In conditions like the client choosing another agency halfway through the project, or where the service provider performs poorly in the assigned project, all parties including the vendor are protected by the defined clauses agreed in the contract.
To outline the scope of work
The work to be performed for a requested service is described in detail along with important information like due dates and costs. Milestones, general timelines, circumstances under which a contract (or a particular clause in the contract) can be terminated as well as nondisclosure clauses are also defined. These terms are usually negotiated beforehand and written in the contract to be signed in agreement of those terms.
A written contract simply means everyone knows what they are supposed to do and makes it easier to resolve disputes.
The Issue with Contracts under Quarantine
If there is one thing that needs to be stated, it is that the quarantine imposed to avoid the spread of the Corona Virus has triggered a dynamic change in the way businesses now process. The quarantine has forced businesses to find unique ways of handling many of the processes that required human interaction without the direct contact of people.
This means conducting meetings digitally, managing projects and team work digitally, working from home on a digital platform, and signing contracts digitally. With the emergence of globalisation and innovative technologies, amongst the most popular E-transactions will now be E-contracts.
By definition of “quarantine” and generally speaking, the following points describe the issues with physical contracts:
- Parties have to assign a place to meet and sign the contracts.
- Signing contracts becomes difficult when the parties involved are situated thousands of kilometers apart.
- If the parties cannot meet physically, then they will have to send contracts via email (or another medium), download it, print it, sign it, scan it, upload it, and finally send it back. A similar workflow will be conducted amongst all the parties involved.
- The above process becomes long and confusing when more than two parties are involved in one contract.
- It is difficult to keep track of the signed soft-copy (and hard-copy) amongst a hoard of documents.
E-Contracts – an Absolute Solution
E contracts, or electronic contracts, are contracts that are formed online. In today’s world, developers have been building mediums (computer agents) programmed to recognise the formation of the contract. Yakeen is one such product by Elm which can integrated into the software dedicated for contract signing.
Yakeen is aimed allowing transparency and trust between two or more entities during business transactions. It allows entities to verify data of people such as customers, visitors, employees and applicants. The person’s data on Yakeen matches the regularly updated data from official records which significantly reduces the chance of fraudulent transactions. It has the ability to immediately check a user’s official record (or official existence on correct data) upon entering details such as their national ID (as these IDs are unique to each person).
In a software that is built for contracting, incorporating Yakeen as a validation procedure omits the worries of proving the entities’ identity.
The benefits that an E-Contract can provide are many:
Enhanced Security
Signatures on the contract cannot be exposed or copied amongst parties outside the contract. All information is private and secure from unauthorised access.
Low Transaction Cost
Time-saving
Avoiding Errors
Ease of Use
Conclusion
Integrating an E-Contract system into your business will be beneficial not only in today’s pandemic but also for the period after. The quarantine has changed the way businesses process and this change will remain even after this dire period ends. Businesses will have adapted to operating techniques like E-Contract systems out of survival mode and your business will be the one left behind after the quarantine period finally ends.
If enough businesses resolve to using E-contracts, eventually you will be required to change your business model to adapt to these requirements too. Better now than later!
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