As with so many things in small business, there is a right and a wrong way to execute a contract. While contract execution may seem to be the pretty simple, easy step of getting your contract signed and launching into a partnership, there are a few traps.
Executing a Contract with Electronic Signatures
The horror stories about eSignature tool failures are everywhere and many small businesses come to us having already tried multiple tools that failed them. Now that many of us are working remotely, what was once a nice-to-have has become an everyday necessity. And it speeds up signing by several days on average! eSignature tools can be great for executing contracts but there are a few things you should know.
Before embracing electronic signatures for your contracts, make sure to look up the law in your state. As New York law firm Baker McKenzie points out, while the US and Canada both have a framework for the legality of electronic signatures, states differ in their approach based on:
- The contract’s governing law
- Whether the parties have previously agreed to e-signature processes
- What the contract is for
- Whether the signer has authority, and
- The rules of a government agency if the contract must be filed there
Setting Up Your eSignature Software for Success
Once you’re ready to go digital, you should spend a bit of time getting to know your eSignature tool. I know what you’re thinking: I didn’t get into business to become an IT expert. And you don’t have to be, but understanding the principles of how your eSignature software works will help you avoid an error at this crucial stage of contract lifecycle management.
Step 1: Find Out Who Will Be Signing and Get Their Agreement
Companies all have different policies about who signs contracts. Since eSignatures are tied to accounts that in turn are connected with individual email addresses, you should find out first who will be signing the contract on behalf of your partners – so you can invite them into the eSignature process.
You also need to get their agreement to sign, send, and store the contract electronically.
Step 2: List All Additions to the Contract
Next, you want to identify the information that needs to be added and catalog it – including signatures. If your contract has many pages or multiple parties, it’s a good idea to set up a table of inputs that shows where in the contract it is, who needs to add information, and what information is required. If Cherisa and Dimitry were the two signers, you might end up with a table like this:
|Party||Information to be added||Page|
|Dimitry||Initial the provision for special ordering||7|
|Dimitry||Add name and job title of receiving officer||12|
Step 3: Create Fields in Your eSignature Tool
Once you have this sketched out, it will be much easier to go through the contract in your eSignature tool and identify the places information needs to go.
Just draw around the spaces and tell the tool what should go there. You can assign the fields to individual signers and even restrict the kind of information that can be added, to avoid mistakes.
Step 4: Invite Contract Signers
Give some thought to which order you want your contract signed, and whether you need to set up automatic reminders or whether a high-touch approach is more appropriate. Think about the message you want to send with your invitation and whether you want to have a phone call beforehand.
Though the invitation will be coming from your eSignature tool, it will seem to your partners like a communication from you – so treat it with as much care as you would a phone call or email.
Make it Easy to Execute Your Contracts Electronically
You might be asking: What’s the big deal? So what if the signing isn’t complete – all parties signed the contract so we have a deal right?
Imagine you’re running a company that builds and ships tiny homes to order. You have negotiated a new contractor with the supplier of siding boards, a primary component in your work.
But after a few months, the relationship goes sour and the supplier’s legal team starts looking for holes in your contract. It was signed all right, but in your haste you neglected to add a compulsory eSignature field for initials on one page. Now the supplier can claim the contract was never properly signed and should therefore be annulled.
Annulment is not the same as breach – it basically means you never had a contract. The problem now is that you have taken multiple orders – and payments – from would-be homeowners and you don’t have the materials to build them!
So the best way to avoid mistakes is to understand how the eSignature flow is different from a wet signature and embrace the capabilities of this technology. Get an eSignature tool that you trust and that works for the way you do business.
Anapact is a contract lifecycle management platform that includes an eSignature capacity that was built for contracts, not as an afterthought. Make Anapact work for your business.