Contract execution is the most important phase of contract management. From contract signing to initiation, this process should be simple. But for some, it can be quite challenging, especially for the complex ones.
However, the emerging use of technology has proven to be beneficial as it speeds up and streamlines the process. All of these while ensuring that the handling of contracts is also accurate and cost-effective.
In this article, we will walk you through the basics of executing a contract. Also tackled are the benefits, risks, and things you can do to simplify this process.
What Is Contract Execution?
Contract execution is fulfilling the obligations outlined in a legally binding agreement between two or more parties. Terms and conditions of such agreements can include activities such as:
- the delivery of goods or services;
- payment of money;
- transfer of ownership or property rights;
- performance of other agreed-upon actions.
In the context of smart contracts, contract execution is the automatic execution of the contract’s terms using technology. Smart contracts are self-executing agreements with their terms written into code. They facilitate the automatic fulfillment of the contract’s provisions without intermediaries or manual intervention.
When certain conditions are met, these contracts automatically enforce the actions specified in the agreement. This makes the execution of contracts faster, more efficient, and less prone to errors.
What Does an Executed Contract Mean?
An executed contract is a legally binding agreement between two or more parties that has been fully put into effect. This means that all parties have signed the agreement, indicating their acceptance and willingness to abide by its terms.
Once a contract has been executed, it is enforceable in a court of law. Hence, it can be used to resolve any disputes between the parties. The terms of an executed contract are binding and cannot be changed without the agreement of all parties involved.
When Is a Contract Executed?
A contract is executed when it has been fully implemented and carried out. All parties have taken the necessary steps to make the agreement legally binding. This usually involves the following steps:
- Offer and Acceptance: One party makes an offer and the other party accepts it. The acceptance must be unconditional and in accordance with the terms of the offer.
- Signature: All parties involved sign the contract, illustrating their agreement to the terms outlined and their commitment to following them.
- Delivery: The signed contract is delivered to all parties involved. This may involve the exchange of physical copies of the agreement or the use of digital signatures.
- Consideration: Consideration involves exchanging something valuable between the parties, such as monetary compensation, goods, or services. The exchange must be mutually agreed upon and accepted by all parties as a part of the contract terms.
Once these steps have been completed, the contract is considered executed and is now legally binding. At this point, the parties involved must perform their obligations outlined in the agreement.
Note that the process of executing a contract may vary depending on the jurisdiction and terms.
Why Is Proper Contract Execution Important?
Proper contract execution is vital for several reasons such as:
- Legality: By properly executing a contract, you can rest assured that the agreement is enforceable in a court of law.
- Clarity: Proper contract execution guarantees that all parties comprehend the terms and stipulations of the agreement, eliminating potential misunderstandings.
- Compliance: It also ensures that all parties involved abide by the terms of the agreement and relevant regulations. This helps avoid conflicts and promotes a positive outcome.
- Trust: Proper execution of a contract fosters trust between the involved parties. It demonstrates a commitment to fulfilling the obligations outlined in the agreement.
- Efficiency: Proper execution streamlines the contract process, minimizing the risk of delays or errors. It also enables the parties to move forward with their obligations.
What Are the Risks of Executing a Contract Incorrectly?
There are many risks involved when a contract is wrongly implemented such as:
- Legal disputes: Incorrect execution of a contract can lead to disputes as stipulated in the agreement’s terms. This can also result in costly and time-consuming legal proceedings.
- Loss of trust: Incorrect contract execution can erode trust between the parties involved. You do not want the partnership’s relationship to break down and reduce the chances of future agreements.
- Compliance issues: This can also result in non-compliance with relevant regulations, resulting in legal penalties and other consequences.
- Financial losses: A wrongly executed contract can lead to financial losses for one or more parties involved, as they may not receive the benefits or compensation outlined in the agreement.
- Reputational damage: Incorrect contract execution can damage the reputation of one or more parties involved, which can negatively impact future business prospects.
This is why it is important to take steps to ensure that contracts are executed correctly. A properly executed contract eliminates these risks that could set back the process. One ideal solution to this is automation.
The Benefits of Automating Contract Execution
When automation is introduced to the execution process, several benefits will arise. This includes:
- Increased efficiency: The use of automation in contract execution streamlines the process, saves time, reduces effort, and enhances efficiency in the process.
- Enhanced accuracy: Automated contract execution reduces the risk of errors that are done manually. It assures that contracts are executed in accordance with the terms and conditions specified.
- Improved compliance: This also helps to enforce compliance with the agreement by all parties which lessens the risk of conflicts.
- Reduced costs: As you automate the process, you also digitize everything related to it. This means that you also save money allotted for manual printing, mailing, and reviewing contracts.
- Increased transparency: With automated contract execution, there is a clear and transparent record of the execution process. This makes it simpler to track and monitor contract performance.
- Enhanced security: Automation tools provide an added layer of security in the contract process. This protects sensitive information, safeguarding your contract from the threat of data breaches and other security risks.
Tools in Automating the Execution of Contracts
Integrating automation when executing a contract allows the use of technology to enforce its performance. Some tools that businesses can employ are:
Contract Management Software
An automated contract management platform is valuable for businesses as it streamlines the process from start to finish. The software can help:
- address risk and compliance concerns;
- streamline negotiations;
- facilitate the use of electronic signatures; and
- manage signed agreements.
This eliminates the need to assign an individual to handle repetitive tasks like tracking contract deadlines and organizing physical records. This automation allows businesses to redirect their employees toward more critical and strategic initiatives.
Electronic Signature Solutions
To initiate the implementation of a contract, electronic signature apps may be the optimal solution you’re looking for. This automation tool streamlines the signing process by streamlining the gathering of signatures.
Utilizing a legally binding eSignature tool like Fill guarantees that all parties can sign the contract within the allotted deadline. Also, electronic signatures enhance security by eliminating the need for physical delivery of contracts for signatures.
Through eSignature software, contracts can be stored in secure cloud storage, with security measures in place to safeguard the documents. An audit trail feature also provides visibility into the history of the documents. This enables tracking of who made changes and what was modified in the contract.
Document Management System
One of the main benefits of using a Document Management System (DMS) is its capacity to automate document storage and retrieval. This means that documents can be stored, organized, and retrieved easily without needing manual searching or organization.
A DMS also enhances collaboration and document sharing. With this, contracts and agreements can be securely shared with stakeholders, speeding up the contract review and negotiation process.
Moreover, this system can also integrate with eSignature software, enabling efficient contract execution through electronic signatures. eSignatures can help save time, cost, and effort in contrast to traditional signature processes.
Workflow Automation Tools
Workflow automation tools in contract management automate manual and repetitive tasks. This includes contract review and approval, document routing, and the execution itself, streamlining processes and saving up time. Plus, it reduces errors and frees up resources for more strategic tasks.
By enforcing consistent processes and standards, this tool ensures that contracts are reviewed, approved, and executed consistently. And also, while being in accordance with the organization’s policies and procedures.
Streamline Your Contract Execution Process With Fill
Fill is a software that provides an all-in-one solution for executing a contract properly and efficiently. We have developed a tool that can create, sign, request, and track contracts in just a few clicks. This digital solution also allows for:
- quicker contract signing;
- streamlined document workflow;
- real-time collaboration;
- seamless integration with applications
What’s more, Fill adheres to all laws and regulations regarding electronic signatures, guaranteeing the legal validity of contracts. It has robust security measures through its signer ID verification and military-grade encryption features.
Execute a contract without any hassle, anytime and anywhere. Start using Fill for free.
