Definition and Forms of Digital Contracts


Along with the development of digital technology in the last few decades, new inventions and innovations continue to emerge in almost all industrial fields. This development certainly brings so much benefits either directly or indirectly, such as improving business processes and making work more effective and efficient. One example is digital contracts, known as a type of agreement made and agreed over the internet without having to meet face-to-face. This digital contract is a new trend and many entrepreneurs and organizations are starting to use it in their business activities to replace conventional contracts which are still done in physical media. In this regard, these contracts are also known as electronic contracts or e-contracts.

What is the difference between a digital contract and a conventional contract? Apart from the digital and physical forms, there are several differentiating aspects between online contracts and conventional contracts, as seen below:

  • Availability of templates

Online contracts have many templates available on the internet, in which you just need to choose the one you want and customize the contract you need. Meanwhile, for conventional contracts, the entire content of the contract are written by the person concerned according to the agreement of the parties involved.

  • Easy to use

In making online contracts, you only need to choose a template, fill in the required information such as name, address, and others, and digitally sign the contract in an instant. As for conventional contracts, the parties involved need to meet regularly to discuss and evaluate the contract’s details until an agreement is reached.

  • Minimizes errors

The possibility of errors in these contracts due to human error can be majorly avoided because the entire process is carried out automatically without human intervention. This automation is unlike those in ordinary contracts that are made by humans manually and time-consuming.

  • Cheaper transaction fee

Online contracts only require electronic devices and an internet connection, whereas conventional contracts require paper, ink, and printer and more as well as multiple copies of the contract for all parties and more financial costs from the contract revisions.

  • Saves time

Conventional contracts require some time to hold face-to-face meetings, make schedules, and do frequent contract modifications. The case is highly different with digital contracts, which do not need to meet face-to-face to discuss contracts, as they only need to communicate online, digitally sign documents, and send copies to each related party straight through the internet.

  • Increased security

In a digital contract, you can attach a digital signature as a sign of agreement, with nowadays there are many software or applications that can authenticate signatures and monitor changes in each edit to avoid fraud and forgery. Whereas in conventional contracts, signatures are carried out on paper which is vulnerable to signature forgery and unauthorized document modification.

In electronic contracts, the parties involved do not need to meet face to face and do not even need to meet at all. In this regard, types of electronic contracts are divided into 2 types, namely:

  1. Electronic contracts that have objects in the form of goods and/or services that are physical or tangible.
  2. Electronic contracts that have a non-physical transaction object in the form of information or services.

Some of the electronic contracts that are often used in business agreements are as follows:

  1. An electronic mail contract (A contract legally formed through email communication. Offers and acceptance may be made via email or in combination with other electronic means of communication).
  2. A contract formed through a website and other online services, for example when a website offers goods or services, and then consumers can accept the offer by filling out the form on the monitor screen.
  3. Contracts that include direct online transfer of information and services. The website is used as a medium of communication and also as a medium of goods exchange.
  4. Contracts containing Electronic Data Interchange (EDI), an electronic exchange of business via computers belonging to trading partners.
  5. Contracts via the internet accompanied by a click wrap and shrink wrap application license downloaded via the internet. The license appears on the buyer’s monitor screen when the application will be installed for the first time and the prospective buyer is asked about his willingness to accept the terms of the license. Users are usually given the choice of “I accept” or “I don’t accept”. In this regard, a shrink wrap is generally a license that is sent in the form of a CD (compact disc).

Generally, a digital contract is considered valid if it fulfills the legal conditions. There are several conditions that have been regulated in Article 1320 of the Criminal Code regarding the legality of digital contracts, namely:

  1. There is an agreement between those who made the contract;
  2. Contracting parties have their respective legal capacity and authority;
  3. The object that is approved or agreed upon is clear; and
  4. A lawful cause of transaction.

In the end, we can conclude that digital contracts can be a new alternative that can greatly save time and costs and are more efficient than ordinary contracts. However, the legal process related to the law must not be avoided at all times to avoid potentials acts of fraudulence. With these benefits, it is no wonder more and more people are turning to these contracts.




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