The topic of digital signing has been around for years, but was not declared priority 1 in many companies before the pandemic. The last two years have seen a strong push towards digitalization in companies. The focus has been on digital collaboration between colleagues and with customers and thus maintaining the ability to work despite contact restrictions and working from home. For this reason, digital signatures and contracts are now a decisive factor in digital collaboration.
Added to this is the media discussion on the topic of paper shortages, which is increasingly focusing on paperless processes. Digitalized processes can be the answer not only to the decline in paper production and the sharp rise in paper prices, but also to issues of sustainability and resource conservation. After all, it is neither ecological nor economical to send and sign documents back and forth in paper form. One example of this:
A company with 250 employees uses around 195,000 sheets of A4 paper per year (source: docusign.de). With the thickness of a sheet of paper being approx. 0.1 mm, this results in a stack of paper almost 20 metres high, which is roughly the height of a tree. The paper industry obtains approx. 8,500 sheets of A4 paper from one tree (source: watson.ch), which means that with 195,000 sheets of A4 paper per year, almost 23 trees are consumed by this one company alone.
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What expectations do customers have today?
The booming e-commerce sector is leading the way. When you order something online today, all documents relating to transactions, including the invoice, arrive digitally in your e-mail inbox. A simple process without media discontinuity, which we would also like to see for other contract processes. For medium-sized companies that sell more complex products and projects with extensive contracts, such an end-to-endprocess is rare.
In most cases, semi-digital processes are established in which contracts are written electronically, exchanged between the processors as PDFs by email and finally reach the customer. If contract management software is used, digital contract templates and text modules are used. This is usually followed by a break: the PDF sent is printed out and signed. Finally, the signed document is scanned again and sent back as a newly generated PDF and saved in the application's digital file. This does not fulfill the vision of complete digital contract management.
In addition, the scanned PDF as a copy offers no security in terms of the obligation to provide evidence. The original must therefore also be archived in analog form. This is a key reason why contracts are still printed out, signed and sent by post, both nationally and internationally. This method of signing PDFs, printing them out several times and sending them by post not only takes up a lot of time, but also a considerable budget and is extremely harmful to our environment. Why not complete the process digitally and sign the contract digitally?
When is a digital signature legally binding?
Anyone who thinks that scanning their own signature and inserting it into digital documents is still sufficient for day-to-day business is mistaken. Legislation stipulates certain forms for contracts and their validity.
Specifications on the subject of digital signatures
Since June 2016, the elDAS Regulation (Electronic Identification And Trust Services for all EU member states and all additional states of the EEA) has regulated the types of and valid requirements for digital signatures. The regulation defines the technical conditions for digital transactions and thus for digital signatures.
The eIDAS Regulation defines 3 forms of digital signatures:
- The simple electronic signature
- The advanced electronic signature
- The qualified electronic signature
Differences between the 3 types of signature
In short: the distinction relates to the level of security, the inalterability of the validation process* and the data as well as the identity of the signatory.
(*Validation process = provision of documented proof that a specific process continuously produces a product that meets the previously defined specifications and quality characteristics)
When are digital signatures legally valid?
That depends entirely on what exactly is being signed. Is it a form-free agreement that is not subject to strict legal regulations? Then the so-called advanced electronic signature (FES) is generally sufficient.
If, on the other hand, it is a document that requires the legitimized identity of the person signing it, then only the qualified electronic signature (QES) should be used, which completely replaces the written form on paper. In this way, you can digitally sign any document and be sure that the digital signature will be recognized in court.
How does a digital signature work?
The Federal Network Agency recommends suitable procedures for encryption. Every year, it publishes a list of minimum requirements for cryptographic algorithms and the generation of qualified electronic signatures. Digital signatures are normally created using public key cryptography, whereby each person has their own private key and their own public key pair.
Electronic signing - using the Docu Sign solution as an example
You receive the document to be signed by e-mail, as a link to a Word or PDF file. When you click on the link, the system automatically directs you to the places in the document where you need to sign. Signing on a smartphone or tablet is as simple as touching the touchscreen with your finger, while on a PC you can enter the name using the keyboard. The whole process only takes a few seconds.
The decisive factor here is the prior verification of the user via their email address. This identifies the person as an authorized user and makes the signature legally valid.
If a higher level of security is required, the user authentication factors can be increased. A qualified electronic signature (QES) is made possible, for example, by a video identification procedure or by checking the IP address used to access a document. As soon as the signatory confirms their signature, the system informs the creator of the contract. The latter has previously determined who has to sign the document, when and where. This means that the application always knows exactly what needs to be done in the next step and when a contract is considered approved.
How secure are electronic signatures?
Signing something digitally means adding a signature or mark or attaching a unique identifier (ID) to it. The advantages of digital signatures overhand written signatures include
- They can be verified immediately.
- They cannot be forged.
- They can be easily shared over networks.
- They can be stored electronically
What are the benefits of digital signing and digital contract management?
We live in a globalized world in which companies from different countries and regions have to work together on a daily basis. In order to comply with supply or production chains, coordination must function as smoothly as if all players were sitting at the same table in the same place, speaking the same language and subject to the same laws. However, as this is not the case in reality, we need tools that help us to emulate this situation as closely as possible.
This is where modern contract management solutions, also known as contract lifecycle management, come into play. A contract can be sent to the next recipient for signature within seconds, regardless of whether this person is just one room away or on a completely different continent.
The qualified digital signature offers a legally secure form of signature for your customer contracts. The benefits are obvious: you can create an unambiguous expression of intent in the digital environment that will be recognized as fully valid in court.Contract software offers further advantages in terms of legal certainty: individual steps can be traced at any time and from any location. This means, for example, that changes to content can always be traced back directly to the respective user.
A system for digital contracts and signatures even knows at what time a change was made. It also helps employees to create a smooth workflow for contracts: as soon as you have signed, the software knows who the document needs to be sent to in the next step and what this person needs to do. This helps to avoiddelays, especially when forwarding contracts.
Digital contract management in Gedys CRM
No matter what industry you work in, the Contracts module of the Gedys CRM software supports the entire life cycle of a contract: from contract entry to contract creation, deadline and task monitoring through to controlling. In the digital contract file, all associated documents, information and attachments can be found quickly by all parties involved. This means that the information is always consistent and up-to-date. Defined workflows support and accelerate coordination between specialist departments and the legal department.You also have approval processes with version and template management, deadlines, terminations or extensions under control.
If you are interested, please give us a call: TEL:+49 531 123 868 4201.
