What is an Electronic Contract?

e-contract management system

In today’s fast-paced digital world, traditional paper-based contracts are gradually being replaced by electronic contracts, also known as e-contracts. An electronic contract is an agreement that is drafted, negotiated and executed entirely online. Electronic contracts can remove many of the costs associated with traditional pen-and-paper contracts while providing numerous other benefits. These digital contracts offer numerous advantages, streamline processes, and enhance efficiency. In this comprehensive guide, we will explore what an electronic contract entails, its advantages, how they are used, types of electronic signatures, creation and management of e-contracts, examples, legal implications, and effective contract management practices.

Electronic Contract Definition

An electronic contract or e-contract, refers to a legally binding agreement entered into electronically, without the need for physical paperwork or handwritten signatures. It is a digital representation of a traditional contract that encapsulates the same elements, such as terms, conditions, rights, and obligations. E-contracts are typically created, transmitted, and stored using electronic means, providing convenience and flexibility for parties involved.

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Are Electronic Contracts Legally Binding?

Yes, electronic contracts are legally binding. Electronic signatures in global and international commerce (ESIGN Act) and the Uniform Electronic Transactions Act (UETA) make electronic contracts just as legally binding as traditional pen-and-paper contracts. Both legislation state that e-Signatures, like traditional paper versions, are legal. Electronic agreements are legally binding in most jurisdictions, provided they meet certain requirements. These requirements may include:

Consent: All parties involved must provide clear and unambiguous consent to the terms of the express or implied contract.

Authenticity and Integrity: The electronic contract must be authentic and free from any unauthorized alterations.

Identity Verification: The identity of the signatories should be properly verified to ensure the validity of their signatures.

Electronic Signature Compliance: The electronic signatures used must comply with applicable electronic signature laws and regulations.

It is essential to consult with legal professionals familiar with the electronic contracting laws in your jurisdiction to ensure compliance and enforceability.

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Advantages of Electronic Contracts

Ease of use: E-contracts eliminate the need for physical document handling, printing, and shipping, resulting in significant time savings. Parties can draft, review, and sign contracts remotely, reducing administrative burdens and accelerating the CLM tools efficiency.

Low Cost: By eliminating printing, postage, and storage costs associated with paper-based contracts, e-contracts offer a paperless and cost-effective alternative. It reduces the expenses related to physical storage and maintenance of documents, as well as the need for courier services.

Saves Time: Electronic contracts provide greater accessibility as they can be accessed from anywhere, at any time, as long as an internet connection is available. This convenience enables parties in different locations to collaborate seamlessly, improving communication and expediting the contract creation process.

Enhanced Security: E-contracts offer robust security measures to protect the integrity and confidentiality of the document. Encryption, authentication, and audit trails ensure that only authorized parties have access to the contract, minimizing the risk of tampering or unauthorized alterations.

Easy Integration: E-contracts can be seamlessly integrated into digital workflows and business systems. They can be linked to other electronic tools, such as electronic signature platforms, contract management software, and customer relationship management (CRM) systems, streamlining processes and increasing overall efficiency.

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How to Create and Manage Electronic Contracts

Creating and managing e-contracts effectively is crucial for maximizing their benefits. Here are some key steps to follow:

  • Begin by drafting the contract using word processing software or specialized blockchain contract management platforms. Clearly outline the terms, conditions, rights, and obligations of all parties involved. Ensure that the contract complies with relevant laws and regulations.
  • Select a legal electronic signature solution that aligns with your needs and legal requirements. Consider factors such as security features, ease of use, integration capabilities, and compliance with applicable electronic signature laws.
  • Transmit the contract to the involved parties electronically, using email or a secure file-sharing platform. Each party can review the contract, electronically sign it using the chosen electronic signature method, and return it promptly. Ensure that all signatories have access to the contract and understand their obligations.
  • Once signed, store the e-contracts in a secure electronic repository. Implement a robust contract management system to organize and track contracts, key dates, renewals, and amendments. This streamlines contract administration, improves visibility, and simplifies compliance management.

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How E-contracts are Used?

E-contracts find application in various industries and scenarios, including:

Business Contracts: Companies employ e-contracts for a wide range of agreements, such as sales contracts, service-level agreements, non-disclosure agreements (NDAs), vendor contracts, and employment contracts. These contracts facilitate efficient business transactions and foster collaboration between parties.

E-commerce and Online Transactions: In the realm of e-commerce, e-contracts play a crucial role. They are used for online purchases, software licensing agreements, subscription-based services, and terms of service agreements. E-contracts simplify and secure online transactions, providing a seamless customer experience.

Government and Public Sector: Governments and public sector entities embrace e-contracts for procurement contracts, public-private partnerships, grants, and licensing agreements. Electronic contracts enable streamlined processes, transparency, and efficient management of public resources.

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Effectively Manage Your Electronic Contracts

To effectively manage electronic contracts, consider the following best practices:

Centralize Contract Repository: Maintain a centralized and secure repository for all your electronic contracts. Implement a contract management system that allows easy access, retrieval, and tracking of contracts.

Automate Reminders and Renewals: Set up automated reminders for key dates, such as contract expiration, renewal, or important milestones. This ensures that you stay on top of contract obligations and can take necessary actions on key elements of contract management in a timely manner.

Version Control and Audit Trails: Implement version control mechanisms to track contract redlining changes and revisions made to contracts over time. Maintain comprehensive audit trails that capture all activities related to the contract, including modifications, approvals, and signatures.

Contract Search and Retrieval: Utilize robust search functionality within your contract management system to quickly locate specific contracts or types of clauses in a contract. This saves time and ensures efficient retrieval of information when needed.

Collaboration and Workflow Management: Enable collaboration among stakeholders involved in the contract lifecycle. Implement workflow management tools to streamline contract approval processes, allowing multiple parties to review and provide input in a structured manner.

Compliance and Reporting: Ensure the contract compliance process with legal and regulatory requirements by regularly reviewing and updating your contracts. Generate reports to gain insights into contract performance, risk management, and compliance metrics.

Contract Analytics: Leverage contract analytics to extract valuable insights from your electronic contracts. Analyze contract data to identify trends, risks, and opportunities, enabling data-driven decision-making and contract optimization.

Security and Data Privacy: Implement robust security measures to protect your electronic contracts and sensitive data. Employ encryption, access controls, and user authentication mechanisms to ensure confidentiality and prevent unauthorized access.

Regular Reviews and Updates: Conduct periodic reviews of your electronic contracts to assess their relevance, effectiveness, and alignment with evolving business needs. Update contracts as required to reflect changes in legislation, market conditions, or business strategies.

Legal Expertise: Seek legal advice from professionals specializing in contract law and electronic contracting. They can provide guidance on legal requirements, jurisdiction-specific regulations, and best practices for managing electronic contracts.


Electronic contracts have revolutionized the way business agreements are created, signed, and managed. They offer numerous advantages, including efficiency, cost-effectiveness, accessibility, and enhanced security. Understanding the different types of electronic signatures and following best practices in creating, managing, and storing electronic contracts is essential for maximizing their benefits.

Did you find this Legitt article worthwhile? More engaging blogs about smart contracts on the blockchain, contract management software and electronic signatures can be found in the Legitt Blogs section. You may also contact Legitt to hire the best contract lifecycle management services and solutions along with free contract templates.

FAQs About Electronic Contracts

What are electronic contracts examples?

Examples of electronic contracts include software licensing agreements, freelance services agreements, and online retail purchase agreements. These contracts are created, signed, and stored electronically.

How do I set up an electronic contract?

To set up an electronic contract, you need to follow a few steps. First, draft the terms and conditions of the contract. Then, choose an electronic signature solution to facilitate the signing process. Finally, transmit the contract electronically and securely store and manage the signed contract.

What is the difference between a contract and an e-contract?

The difference between a contract and an e-contract lies in the medium of execution. A contract is traditionally executed on paper, while an e-contract is created, signed, and stored electronically using digital tools and platforms.

What must an electronic contract have?

An electronic contract must have clear and comprehensive terms and conditions that define the rights and obligations of all parties involved. It should also include the consent of all parties, authentic electronic signatures, and compliance with relevant electronic signature laws and regulations.


eCONTRACTING refers to the process of conducting contract-related activities electronically. It involves creating, negotiating, signing, and managing contracts using digital tools and platforms. eCONTRACTING streamlines the contract lifecycle and eliminates the need for physical paperwork.

What is the validity of electronic contracts?

The validity of electronic contracts varies depending on the jurisdiction and compliance with electronic signature laws. In most jurisdictions, properly executed electronic contracts are legally binding and hold the same legal effect as traditional paper-based contracts.

How are electronic contracts formed?

Electronic contracts are formed through the exchange of electronic communications between parties. This can include emails, online forms, or electronic signature platforms, where parties reach an agreement on the terms and conditions of the contract.

What are the basic requirements for an electronic contract?

The basic requirements for an electronic contract include obtaining the consent of all parties involved, ensuring the authenticity and integrity of the contract, verifying the identity of the signatories, and complying with applicable electronic signature laws and regulations. Meeting these requirements helps establish the legality and enforceability of the electronic contract.