Being able to process and sign contracts quickly can be a competitive advantage for businesses as slow contracting can result in a loss of momentum, revenue and opportunities. For example, sales contracts which aren't signed quickly can collapse if buyers are promoted, loose budget or change their mind over the course of the contracting process. As a result, technology has been introduced in the signing process to make the contract signing process faster. In particular, electronic signatures have gained widespread adoption as a way of taking friction away from the signing process. Whilst electronic signatures can help accelerate the contract signing process, businesses shouldn't optimise their contracting process around the time it takes to sign contracts. This article explains how businesses can sign better legal documents and quickly by optimising the readability of their agreements.
Why should contracts be signed quickly?
A legal contract is only valid if it has been signed by all the parties involved in the agreement. As a result, the obligations described in a contract don't need to be performed until the contract is signed. As a result, all the involved parties can still walk away from the contract at any point in the contracting process. For example, a client or an employee can change their mind before the contract is signed. This is one reason parties usually wish to sign contracts quickly to prevent this from happening.
Signing contracts quickly also means that the terms can be executed and parties such as suppliers can be paid faster. However, signing contracts quickly doesn't mean moving away from paper documents to electronic signatures or imposing a short signature deadline. Trying to get a contract signed too quickly can lead to errors and bad terms.
Why are contracts not signed quickly?
The obligations described in a written contract need to be followed once the contract is signed which is why all the parties take the contents of contracts very seriously. Moreover, contracts provide a framework to deal with liability when the terms of the contract are broken which is why the terms must be understood and clearly defined.
Whilst a signed contract can be amended or terminated by mutual agreement, unless there is a specific mechanism to do so, a party might not agree to make the amendment to the terms. It therefore takes a lot of legal expertise to understand a contract and check that the legally binding terms are acceptable. However, legal resources are scarce and time poor which is why contracts are not signed quickly. For example, sales contracts are not usually signed quickly because buyers want to protect themselves should the supplier's service cause them damages or a loss of business.
This process can be delayed further when decision makers are time poor and the agreement is not their number one priority. As a result, the negotiation of this legal risk management framework is the main reason the contract process can be slow.
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What should the contract process be optimised for?
Contracts which are easy to read are signed faster because the parties don't need to sift through the terms to understand what they mean or if they are fair. This is important because parties what to understand what they are signing before they sign a contract. Making documents easy to read doesn't only mean making the language of the contracts simple.
Contracts need to highlight the key terms of the contract on the same page so that it frames the rest of the agreement. Presenting the key terms as well what each term means and could be is important for helping signatories understand what the contract means for them. Being open and transparent about the key terms sets the contract process up for success and removes friction. Simplifying and summarising contracts also makes it easier for sales teams and contract managers to follow up with clients and signatories as they know what the points of negotiation are.
How to make contracts more readable
In order to make your electronic documents easier to read at scale, the key terms and elements of the contract need to be machine readable. Machine readable contracts automatically surface these terms and offer signatories the ability to answer questions about their contracts. Moreover, machine readable contracts help businesses save time and money post-signature because they can connect the data contained in contracts with the systems businesses rely on to operate their business. A sales process which includes machine readable contracts allows deals to be closed faster because buyers understand their legal obligations faster. Employees who are hired with machine readable contracts are given a great first impression of their employer because they clearly understand their rights and obligations. If you are interested in creating machine readable contracts, sign up to Legislate today.
Legislate is a contracting platform where business owners can create contracts to help grow and develop their business. Legislate's employment contracts and offer letters are key in protecting your IP and Legislate's NDAs are crucial to ensure you can have conversations and partnerships to help develop your business and brand. Book a demo or sign up today to put the confidence back into contracting.