Digital signing is what makes digital contract management complete
The topic of digital signing has been present for years, but was not made a priority 1 in many companies before the pandemic. The last two years have seen a strong push for digitization in companies. The focus was on digital collaboration among colleagues as well as with customers and thus maintaining the ability to work despite contact restrictions and home office. For this reason, digital signatures and contracts are now a critical factor in digital collaboration.
Added to this is the media discussion on the subject of paper shortages, which is increasingly directing attention to paperless processes. Digitalized processes can be the answer not only to declining paper production and the sharp rise in paper prices, but also to questions of sustainability and resource conservation. After all, it is neither ecological nor economical to send documents back and forth and sign them in paper form. One example:
A company with 250 employees consumes about 195,000 sheets of DIN A4 paper per year (source: docusign.de). With the thickness of a sheet of paper of about 0.1 mm, this results in a stack of paper almost 20 meters high, which is about the height of a tree.
The paper industry extracts approx. 8,500 sheets of A4 paper from one tree (source: watson.ch), which means that at 195,000 sheets of DIN A4 per year, almost 23 trees are consumed by this one company alone.
1. 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, right up to 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-end process rarely exists.
In most cases, semi-digital processes have been established, in which contracts are written electronically, which pass between the processors as a PDF via e-mail and finally arrive at the customer. If contract management software is used, digital contract templates and text modules are used. After that, the break usually occurs: the PDF sent is printed and signed. Finally, the signed document is scanned again and returned 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 does not provide any security in terms of the proof requirement. So the original must be additionally archived in analog form. A major reason why contracts are still printed out, signed and sent by mail, nationally and internationally. This way of PDF signing, multiple printing and postal mailing not only eats a lot of time, but also a considerable budget and it harms our environment immensely. Why not work through the process digitally to the end and sign the contract digitally as well?
2. How can I sign digitally?
After receiving a PDF, you open the document with digital signature software and sign it online in real time, giving it a Signature certificate and a timestamp. and is thus considered a legally valid signature.
So legally valid digital signatures in PDFs are not magic, but the modern standard for both companies and private individuals.
Small difference: The terms digital signature and electronic signature are not identical in content!
When is a digital signature legally binding?
If you think that scanning your own signature and inserting it into digital documents is still enough for everyday business, you’re wrong. The legislator specifies certain forms for contracts and their validity.
Digital signing guidelines
Since June 2016, the elDAS regulation (Electronic Identification And Trust Services for all EU member states and all additional states of the EEA) regulates 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 specifies 3 forms of digital signature:
Differences of the 3 signature forms
In short, the distinction refers to the level of security, the unforgeability of the validation process* and data, and the identity of the signatory.
(*Validierungsprozess = Erbringung eines dokumentierten Nachweises, dass ein bestimmter Prozess kontinuierlich ein Produkt erzeugt, das die zuvor definierten Spezifikationen und Qualitätsmerkmale erfüllt)
1. Simple electronic signature
It is the weakest and least secure form of digital signature and is therefore best suited for transactions with the least legal risk. Therefore, only a few requirements are placed on this type of digital signature. For example, it serves to:
- den Absender einer Nachricht zu identifizieren. Ein Beispiel hierfür ist eine Standard-E-Mail-Signatur, die den Absender als Angehörigen eines Unternehmens ausweist.
- ein Dokument mit einer gescannten Unterschrift zu versehen (Beispiele: Sie geben einem Paketboten Ihre Unterschrift auf seinem Scan-Gerät oder Sie verwenden bei formlosen Vereinbarungen Ihre selbst eingescannte Unterschrift).
The electronic signature thus serves the same purpose as a handwritten signature on paper documents. There are various forms of electronic signature; however, even a simple electronic signature is usually legally binding. A prerequisite for their validity is the agreement of all parties.
2. Advanced electronic signature (FES)
The requirements for the advanced electronic signature are higher. This type of digital signature makes it possible to verify the authenticity of the signed data. The advanced electronic signature must:
- dem Unterzeichner zugeordnet werden können (Authentizität),
- eine eindeutige Identifikation des Unterzeichners ermöglichen (Nichtabstreitbarkeit),
- mit Mitteln erstellt werden, die unter der alleinigen Kontrolle des Unterzeichners stehen
(z. B. mit eigenem PC oder Tablet)
- nachweisen, dass das Dokument nicht nachträglich verändert wurde (Integrität).
3. Qualified electronic signature (QES)
The qualified electronic signature is largely equivalent to the handwritten signature on paper required by law. Qualified signed documents cannot be denied. In court, they are thus recognized as original and can only be challenged by “substantiated facts”, similar to the handwritten signature.
When are digital signatures legally valid?
That depends entirely on what exactly is being signed. Is it a Informal agreementthat is not subject to strict legal requirements? In this case, the so-called advanced electronic signature (FES) is generally sufficient.
If, on the other hand, the document requires the legitimate identity of the person signing it, then only the qualified electronic signature (QES) should be used, which completely replaces the written form on paper. This way, you can digitally sign any document and be sure that the digital signature made will be recognized in court .
However, there are currently still use cases that must continue to be handwritten, such as the termination of employment.
3. 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 usually created using the Public Key Cryptography where each person has their own private key and public key pair.
Electronic signing – using the Docu Sign solution as an example
You will receive the document to sign by email, 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 place the signature. On a smartphone or tablet, signing is as simple as using your finger on the touchscreen; on a PC, the name can be entered via the keyboard. The whole process takes only a few seconds.
The decisive factor here is the prior verification of the user via his email address. It identifies the person as an authorized user and makes the signature legally valid.
If the level of security is to be higher, the factors used to authenticate users 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 signer confirms his signature, the system informs the creator of the contract. This person has previously defined who, when, at which points of the document must set a signature. This way, the application always knows exactly what needs to be done in the next step and when a contract is considered released.
4. How secure are electronic signatures?
Digitally signing something means adding a signature or mark or attaching a unique identifier (ID) to it. The advantages of digital signatures over handwritten signatures include:
- They can be verified immediately.
- They cannot be faked.
- They can be easily shared across networks.
- They can be stored electronically.
5. What are the benefits of digital signing and digital contract management?
We live in a globalized world in which companies from a wide variety of countries and regions have to work together every day. In order to comply with supply or production chains, coordination must function as smoothly as if all the players were sitting at the same table in one place, speaking the same language and subject to the same laws. But since this is not the case in reality, we need tools that help us mimic this state as best we can.
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 in seconds, whether that person is sitting just one room away or on a completely different continent.
For your customer contracts, the qualified digital signature offers a legally secure form of signature. The benefit is obvious: you can create an unambiguous statement 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 directly back to the respective user.
A system for digital contracts and signatures even knows at what time a change took place. It also supports employees in creating smooth workflows for contracts: as soon as you have set your signature, the software knows to whom the document must be sent in the next step and also what this person has to do. In this way, delays can be avoided, especially in the forwarding of contracts.
6. Digital contract management in GEDYS IntraWare CRM
No matter what industry you work in, the Contracts Module of the GEDYS IntraWare CRM software supports the complete lifecycle of a contract: from contract entry, contract creation, deadline and task monitoring to controlling. In the digital contract file, all associated documents, information and attachments can be quickly found by all parties involved. This ensures that the information is always consistent and up-to-date. Defined workflows support and accelerate coordination between departments and the legal department. You also have approval processes with version and template management, deadlines, terminations or extensions safely under control.
If you are interested, please call us: TEL: +49 531 123 868 420.
Conclusion: With the introduction of qualified electronic signatures and digital contract management, you not only gain legal certainty, but also save a lot of paper and time. Set an example for sustainability and save resources: Use digital signing!