Contract signing is one of the most critical phases of the contract lifecycle management process.
However, the conventional contract signing process is laden with bottlenecks, with many legal professionals struggling to get contracts signed promptly and correctly. This can be due to factors like complex regulatory requirements, delayed response from signatories, poor communication and coordination between stakeholders, and inadequate version control mechanisms.
These, if ignored, can result in delays, increased costs, legal vulnerabilities, and disputes.
In this guide, we have detailed some of the best practices you can leverage to sign contracts more efficiently and get the business ball rolling as soon as possible!
What is contract signing?
Contract signing is the process of adding signatures to a contract in acceptance of the terms and conditions outlined within its pages.
It is the process of formalizing a business partnership and consequently turning the contract into a legally binding document. By signing a contract, all parties acknowledge their understanding of established terms and obligations, demonstrate their intention to be bound by the agreement, and set the basis for legal enforcement.
Also read: A Quick Intro to eSignatures
How to effectively circulate contracts for signatures
Before a document becomes fit to be called a contract, every stakeholder must have a thorough look at the terms, acknowledge their obligations, and affix their signatures as a show of commitment.
That said, it is the contract manager’s duty to ensure that the contract gets to the right people, accelerate the signing process, and ensure that no stone is left unturned.
In this section, we’ll discuss practical steps you can take to effectively circulate contracts for signatures.
#1 Identify the signatories
The signatories, in this case, are stakeholders whose signatures are required to formalize the agreement. If applicable, you'll need to confirm details, like their full names, titles or roles, and contact information—email addresses and phone numbers.
In addition to this, it's essential to confirm that each signatory has the legal authority to sign the contract on behalf of their respective organization or entity. This might involve checking official documentation, such as articles of incorporation, powers of attorney, or any other relevant authorization documents.
Identifying the signatories and verifying their authority ensures that the appropriate individuals or entities sign the contract, further establishing its validity and enforceability.
#2 Determine the signing order
Having identified your signatories, you'll need to define the sequence the contract signing process will follow.
If there's a clear hierarchical structure, it may make sense to follow the structure when determining the signing order. In this case, higher-ranking executives or legal representatives may need to sign first, followed by other signatories.
Level of involvement is another yardstick you can leverage to determine the contract's signing order. Here, you'll consider each signatory's involvement, running the process from stakeholders with the most responsibility down to the ones with the least involvement.
Furthermore, you can simply plan the signing based on availability, taking into account the schedule and logistical considerations of each signatory. Ensure that the signing order aligns with the availability of the parties involved to avoid unnecessary delays.
Having your signing order planned properly facilitates a smooth and efficient workflow, leading to the timely completion of the signing process.
#3 Choose a signing method
The choice of contract signing method typically depends on factors like document type (paper-based vs. digital), legal requirements, convenience, and the preferences of the parties involved.
The three major contract signing methods used across industries include the traditional pen & marker method, generic electronic signing method, and digital (or cryptographic) method.
- Pen & marker method: Also known as the wet ink method, this system involves signing a printed copy of the contract using a pen or marker. The signed document is often then circulated among the parties through mail, courier services, or in person. Pen and marker have a long-standing historical and legal recognition, and some jurisdictions may require physically embedded signatures for certain types of contracts, like real estate contracts, wills and trusts, loan agreements, public sector contracts, etc.
On the flip side, the pen and marker method are typically time-consuming and logistically challenging, especially when dealing with signatories located in different geographic locations. Additionally, managing and tracking different versions of the document can be challenging with this signing method.
- Generic electronic signing: Electronic signing was the first upgrade from pen and marker, enabling signatories to recreate and embed their signatures electronically. Several electronic contract signing software exists that allows you to sign documents by simply typing your name or drawing your signature with a stylus or touchscreen.
Unlike traditional methods, electronic signatures (e-signatures) are convenient, fast, and efficient. They cut out logistical challenges, allowing signatories to sign documents remotely. Version tracking and control are also better with e-signatures, further enhancing auditability.
However, e-signatures aren’t universally accepted yet, as different countries and regions have specific rules pertaining to their legality and enforceability. Examples include the ESIGN Act of 2000 (for the United States), the eIDAS Regulation (for Europe), and PIPEDA (for Canada), among others.
- Digital signature: A digital signature can be described as an advanced e-signature characterized by a set of cryptographic technologies used to authenticate the identities of a contract's signatories and protect the integrity of the document. Digital signatures are typically embedded using specialized tools and are more secure and tamper-proof than generic e-signatures.
However, when using digital signatures, there’s a strong reliance on security capabilities, data protection practices, and the longevity of platforms and service providers. Also, the enforceability of a digitally signed contract varies by jurisdiction.
#4 Establish a timeline
Setting a clear timeline enables you to motivate the signatories to make proper arrangements for signing their contracts. This eliminates unnecessary delays and misunderstandings.
You may set a deadline for each signatory, considering the urgency of the contract and any external dependencies. You can also set reminders and follow up with signatories to know the progress and ensure they're aware of the imminent deadline.
It is important to give ample time for proper review and negotiation (if necessary) and keep your timeline flexible to accommodate any unforeseen circumstances.
By establishing a clear timeline for signing the contract and effectively communicating it to all parties, you ensure that everyone understands the expected timeframe, stays informed about key milestones, and is better equipped to meet the agreed-upon deadlines. This helps to maintain momentum, avoid misunderstandings, and facilitate a smooth and timely signing process.
#5 Manage document versions
Throughout the signing process, you’ll need to ensure that all parties have access to the latest version of the contract and clearly communicate any changes or updates. This helps maintain accuracy, consistency, and transparency throughout the signing process.
You can achieve this by manually maintaining a clear naming and labeling convention (for example, Contract_V1, Contract_V2, etc.) for all versions of the contract. Alternatively, you can leverage contract management software with version control and change tracking features to keep signatories aware of any changes made to the contract document.
This reduces the risk of working with outdated or conflicting information and helps maintain clarity and consistency throughout the signing process.
Also read: Ensuring Contract Version Control
#6 Ensure compliance
Verify that the signing process complies with all relevant legal and regulatory requirements, including those related to data privacy and e-signature.
Ensure that you're using a signing method legally recognized and enforceable within the jurisdiction of the business partnership. If you use e-signature, ensure you have a grasp of its validity within the boundaries of applicable laws, like the ESIGN Act and the eIDAS Regulation.
Also, if the contract contains sensitive data, ensure your signatories are aware of all relevant data privacy regulations and maintain adequate data security measures throughout the signing process.
Furthermore, you may need to maintain an accurate record of the signing process, including timestamps, signatory information, and any supporting documentation. This helps maintain an audit trail and provides evidence of the signing process if needed in the future.
Also read: The Ultimate Guide to Contract Compliance
5 Best practices for contract signing
So, you’ve successfully negotiated a contract, condensed every term and agreement into writing, and are ready to give it that legal juice with fancy signatures. While you may be basking in the excitement of closing a new deal, it is imperative that you’re fully aware of everything you need to get right at this point, as any missteps could prove troublesome down the line.
In this section, we’ve discussed some of the best practices you should follow to ensure your contracts are always signed the right way.
“We can and should do better by the business with contracts. If you agree with me that the highest and best value the legal department can provide is getting good contracts done faster, then in-house lawyers are likely not devoting enough time to making their contracts easier to sign.”
Sterling Miller, CEO & Senior Counsel, Hilgers Graben PLLC
Ten Things: Making Contracts Easier to Sign
#1 Make sure you’re signing the correct version
If the contract has gone through multiple rounds of revision or negotiation, there's a chance you might sign the wrong version if you're not careful. Verify that the document you're signing is the final, agreed-upon version of the contract. Compare it with previous drafts or negotiations to ensure that all changes have been incorporated accurately.
If you notice any discrepancies, quickly communicate this to your counterparties to obtain clarity or enforce the necessary corrections.
“In many cases, a particular version of the contract might be approved. But the required stakeholders might not have access to that version, and they work on older versions.”
~ Igor Poroger, Director of Legal, EMEA, Vectra AI
Counsel Corner: How CLMs Empower Legal Teams in B2B SaaS Companies
#2 Ensure that every signatory's capacity is correctly identified in the signature block
It is vital to ensure that every signatory signing a contract is duly identified by what they represent for the entity involved. For example, if a signatory is signing as CEO of a company, the signature block should look like this:
ABC Technologies, Inc.
This is important because you want to make sure that the person signing the contract is doing so in the right capacity on behalf of the entity. This will help prevent future claims that the signatory is only personally liable for the entity's obligations.
#3 Carefully review the termination and dispute resolution clauses
A termination clause outlines the conditions under which either party can end the contract before its completion. Ensure you carefully review this, taking note of valid notice periods and penalties for wrongful termination if applicable. Also, don't hesitate to request any last-minute revisions you consider critical.
Similarly, review every dispute resolution mechanism outlined in the contract and ensure they align with your preferences and requirements.
#4 Take a breather!
Signing a contract gives it the power to make or break your business. So, you must ensure there's clarity and calm among signatories. Do not feel rushed or coerced into signing a contract, as you might end up making one or more critical mistakes.
Take your time to ensure that there are no unresolved issues. If verbal agreements were made earlier, feel free to bring them up and suggest putting them in writing.
#5 Maintain an original copy of the signed contract
Each party involved in the contract should have an original copy of the agreement and all supporting documents. This should include every version of the contract during revision and negotiation processes, along with the dates and details of modifications.
This will help you track obligations, monitor compliance, and address any disputes that may arise later.
Post-signing contract management
Now that you’ve finally signed the contract, execution is underway. But your work is not done. In fact, it is just beginning!
In this section, we have detailed some of the things you will need to do after the contract has been signed.
#1 Store the signed contract in a secure repository
A report by the Journal of Contract Management revealed that 71% of companies could not locate at least 10% of their contracts. A contract manager's inability or unwillingness to properly store their company's contracts is a terrible practice and may result in serious consequences down the line.
Keeping your signed contract securely stored is crucial for several reasons. It makes access and retrieval very easy for authorized parties, ensures the confidentiality of information, fosters collaboration, and enhances version control and audit trails, among others.
It is crucial to ensure that your contract storage mechanism maintains strict access control, has a backup system, and complies with data privacy and document retention standards.
Also read: Tips to Store Your Contracts Effectively
#2 Track obligations and performance
When the contract hits execution and activities begin, you must keep track of all contractual obligations and monitor performances. This ensures that all parties remain committed to fulfilling their end of the agreement within the boundaries of the contractual terms.
This may involve establishing Key Performance Indicators (KPIs), setting up tracking systems, and regularly reviewing progress against agreed-upon milestones.
#3 Manage contract renewals and terminations
Every contract outlines provisions for renewals and terminations, and it is your responsibility to ensure that you stay consistently aware of renewal and termination dates throughout the contract lifecycle.
If there's any need for renewal discussions, initiating them well before the expiration date is crucial to allow ample time for negotiation and decision-making. Also, if there are any changes in pricing, scope, duration, or other aspect of the contract during renewal discussions, you must document these to accurately reflect the updated agreement.
In cases where termination is the desired outcome, contracts often include specific provisions regarding termination procedures. It is important to adhere to these provisions and follow the agreed-upon process. This may involve providing advance notice, meeting specific conditions, or negotiating exit terms, depending on the content of the contract.
#4 Maintain a regular schedule for contract audits
A contract audit involves a comprehensive evaluation of crucial aspects of a contract, including compliance, performance, and financial elements, to ensure that everything is going according to plan and that potential risks are identified and mitigated.
You’ll need to establish your audit intervals based on factors such as contract complexity, risk level, contract value, and organizational requirements. This could be annually, biannually, quarterly, or any other interval that aligns with your specific needs.
Also read: 5 Best Practices for Contract Audit Success
3 Tools and technologies for contract signing
The world is gradually moving away from wet ink signatures, with forward-thinking legal professionals gravitating toward technology-driven contract signing for convenience, cost savings, security, and faster turnaround times.
In this section, we will look at the three major tools you can use to streamline your contract signing processes.
Electronic signature software
Electronic contract signing software is designed specifically for the purpose of helping users sign contracts digitally. With these platforms, you can upload your contract document, specify the signatories, and send out signature requests.
The signatories can then access the document online, review its contents, and sign it using digital signatures. This eliminates the need for printing, scanning, mailing, or hand-delivering contracts, saving time and reducing administrative burdens.
Electronic signature platforms also often offer features like document tracking, audit trails, and authentication measures to enhance security and compliance.
Popular examples include Adobe Sign, DocuSign, SignNow, Dropbox Sign (formerly HelloSign), and SignRequest.
Cloud-based document-sharing platforms
Cloud-based document-sharing tools play a crucial role in the contract signing process by providing a centralized platform for storing, accessing, and sharing contract documents.
These tools allow multiple parties involved in a contract to collaborate on the same document simultaneously, regardless of their geographical location. Users can upload contract files to the cloud storage, grant access permissions to specific individuals or groups, and track document changes and versions.
This enables efficient collaboration, real-time editing, and seamless communication during the contract negotiation and signing phases.
Examples include Google Drive, Dropbox, Microsoft OneDrive, SharePoint, and Adobe Document Cloud.
Contract Lifecycle Management (CLM) software
A CLM is built to help you manage every aspect of your contract lifecycle, from the initial drafting to the signing, execution, and post-execution stages.
Usually an all-in-one platform, a CLM offers all the tools you need to streamline your contract signing processes. For instance, some CLMs come with an inbuilt electronic signature tool or integrate with third-party solutions, allowing users to initiate signature workflows directly from within the software.
It also offers a repository for contract storage, making it easy to store, search, retrieve, and analyze contract data, improving collaboration, compliance, and decision-making.
Furthermore, a CLM allows you to send automated notifications and reminders to signatories to keep them aware of the established schedule for contract signing. That way, they won’t miss their deadlines.
How can SpotDraft help you improve your contract signing process?
As an all-in-one CLM, SpotDraft comes with everything you need to make every aspect of your contract management process more efficient. With respect to contract signing, SpotDraft streamlines the entire process for you in so many ways.
Let’s look at the major ones below:
#1 Securely stores your contract in one place
SpotDraft lets you pull all your organization's contracts into one central and secure repository, allowing you to create one single source of truth for all your contracts.
It employs functionalities like metadata and advanced search filters, which allow you to quickly search and find contract documents when needed.
With role-based access control, SpotDraft ensures that only the right stakeholders get access to specific documents.
Through its central repository, SpotDraft enhances collaboration between parties, offering transparency and accelerating the contract signing process.
#2 Simplifies contract signing with electronic signature
SpotDraft has an advanced electronic contract signing tool that allows you to seamlessly collect legally-binding signatures for your contracts.
The e-signature tool is compliant with major regulations, including ESIGN (US), eIDAS (EU), and ECA (UK).
SpotDraft's e-signature tool ensures you can collect signatures in various ways—Hand drawn, text box, etc. It also lets you auto-add signatures for bulk contracts like offer letters, NDAs, and MSAs.
Furthermore, every contract document you sign, store, or share using SpotDraft is end-to-end encrypted.
Also read: A Quick Intro to eSignatures
#3 Eliminates bottlenecks with automated workflows
With SpotDraft, you can automate a large portion of the contract signing tasks, consequently accelerating the process.
For example, it allows you to set automated approvals for contracts that meet specific requirements (say, contracts worth less than $5000).
“There is a stratification based on the contract value [at my organization]. We have set monetary thresholds. When the contract value exceeds that number, the contract goes through a strict review and approval process, and only certain authorized signatories can approve that contract."
~ Nadia Louis Hermez, Legal Ops Manager, Next Insurance, Inc.
Counsel Corner: Building a Robust Legal Ops Function
Once approved, the documents are automatically sent to the relevant signatories in sequential order for signing. This process is made more efficient using SpotDraft’s automated notifications and reminders, ensuring that all signatories deliver the required signatures according to the established schedule.
Additionally, SpotDraft allows you to set automated signing for certain basic, standard contracts, like non-compete agreements, terms of service, and NDAS.
#4 Supercharges your workflow with integrations
SpotDraft comes with a REST API that allows you to connect all your existing business tools to its infrastructure. If you already have an e-signature tool, a cloud storage service, or a CRM, you can easily connect them to your SpotDraft account.
That way, you can unify your workflow within a single, intuitive interface.
#5 Version control and audit trail
SpotDraft allows you to maintain different versions of a contract throughout its lifecycle. Whenever a contract is edited or updated, Spotdraft automatically assigns a label to the new version. That way, you can identify the modified agreement and make comparisons before signing.
SpotDraft also offers an automated audit trail for each version of the contract, detailing every change that has been made and the party that made the changes.
This fosters transparency while ensuring everyone is working on the latest version of the contract document.
“Using old agreements is dangerous, primarily because existing agreements likely contain negotiated terms and the company probably gave on certain issues (maybe even far more than it normally would). If you use an old agreement, you have already “negotiated” away those terms without ever talking with the other side. In other words, you’re losing.”
~ Sterling Miller, CEO & Senior Counsel, Hilgers Graben PLLC
Ten Things: Minimizing Risks in Commercial Contracts
Having well-defined mechanisms for contract signing is crucial as it ensures that the contract is executed with no hassles.
By implementing the best practices discussed above and leveraging the right technology, you can rest assured that you will close more deals, record fewer disputes, and ultimately help your organization scale.
Want to see how SpotDraft caters to your unique contract management needs? Request a personalized demo.