22 e-contract legal and security risks

A contract is the defining document for cementing the relationship between the business and customer. Not only does it establish the parties’ intentions and expectations on what goods and services have been offered and accepted, the contract should also set out the road map to resolve difficulties if something were to go wrong, for whatever reason.

It goes without saying that the contract must have integrity and be enforceable, if necessary.

This includes e-contracts.

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E-contracts – contracts signed electronically- still have the same legal requirements (an offer, acceptable, consideration, intention… etc) as their paper cousins; they are simply a little bit more complicated to define because of the use of technology to create and deliver them.

So, if you are considering using e-contracts in your business here’s my top 22 legal and security risks you need to discuss with your board directors, project teams and lawyers.

Unenforceable e-contracts?

• 1. The time that an e-contract has been formed may be uncertain;

• 2. The place where an e-contract has been formed may be uncertain;

• 3. The authority of an individual to enter into a contract on behalf of another person or entity may be uncertain.

• 4. Electronic communications may not satisfy statutory requirements for certain contracts to be in writing;

• 5. Electronic communications may not satisfy statutory requirements for certain contracts to be signed.

• 6. Depending on the terms of a contract, it may be uncertain whether electronic communications are effective to amend the contract.

• 7. Depending on the terms of a contract, it may be uncertain whether electronic notices are valid.

• 8. Disruptions to the availability of a project collaboration system may cause interference with the project.

• 9.Incompatible technology may be used by the various contracting parties.

• 10. Disputes may arise between the provider of an online collaboration system and the contracting parties in relation to the use of the system.

• 11. Disputes may arise between the contracting parties regarding the use of the system.

• 12. Disputes may arise in relation to the ownership of intellectual property associated with the project.

• 13. The confidentiality of electronic records may be compromised during communication or retention.

• 14. Electronic records created and maintained by a system may not be admissible in court as evidence in the event of a dispute.

• 15. Electronic records created and maintained by a system may not be given the same evidential weight as paper records.

• 16. There may be difficulty proving the time at which an electronic record has been communicated.

• 17. The identity of the contracting parties may not be able to be authenticated.

• 18. The process of disclosing relevant documents in the event of a dispute may be unmanageable as a result of multiple communication and record-keeping methods.

• 19. Parties may be in breach of their duty to preserve evidence if electronic records are not preserved.

• 20. Parties may be in breach of their statutory obligations to maintain records if electronic records are not archived appropriately.

• 21. Where a third party service provider is used, the contracting parties may not have access to electronic records after completion of the project.

• 22. There is a risk that the statutory record-keeping obligations of government agencies may be breached by using an online collaboration system.

Want to find out more?

Subscribe to E RADAR to discover more resources on e-contracts. Or visit our E Adoption Risk Ladder page.

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22 e-contract legal and security risks