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With the rise of the digital era and advances in technology, we have seen and will continue to see growth in the use of electronic contracts to conclude legal agreements between parties. While there are advantages in terms of speed and remote access, there are also security risks. So, do the advantages outweigh the disadvantages? And can you use them for all your legal needs?

What is an electronic contract?

Electronic contracts are, under English law, legally binding contracts which are concluded digitally. Such contracts can, with the consent of both parties, be created, signed, and stored electronically too.

While an electronic contract may rely on technology, like software and cloud-based storage solutions, they still need to properly capture the intentions of each party to enter into a legally binding arrangement. It must for example abide by the basic premise of contract law: offer and acceptance of terms.

Advantages and disadvantages of electronic contracts

Compared to traditional paper-based contracts and in-person requirements for the signing of contracts, the benefits of using electronic contracts for your business may include the following:

• they are fast and efficient to send, particularly at a time when postal services are not always reliable;
• they are typically easier to receive, negotiate and sign, especially for international deals as this can all be done remotely with a secure internet connection; and
• printing will normally not be required.

However, electronic contracts do come with some disadvantages, such as:

• it is often easier to discuss and resolve issues that arise during contract negotiations at in-person meetings – these meetings can also help build relationships;
• electronic contracts do not work with every single area of law (discussed below) and so traditional contracts will still have their place; and
• in the event of a security breach of any sort, the electronic contract could be tampered with, destroyed with no back up, or used for fraudulent purposes. There is for example a risk of non-authorised individuals signing or accessing these types of contracts.

Where electronic contracts may not be the best choice

As the law around the use of electronic contracts continues to evolve, it is advisable to seek guidance and advice on where your business could benefit from the use of electronic contracts, and where it is more prudent to stick with the use of traditional contracts.

It is for example generally advisable to complete deeds, wills, and financial instrument documents such as leases, guarantees, loans and documents associated with a more complex transaction which is either high value or considered a high fraud risk in paper form.

How we can help

As more business is done digitally, we will see a greater use of electronic contracts, either on an exclusive basis or as a hybrid with traditional hard copy contracts.

We can assist you in making the right choice for your business by helping you understand how electronic contracts work, the pros and cons, as well as providing advice on the correct way of implementing these contracts.

For further information, please contact one of Commercial Contracts experts.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.