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Jun 11, 2023

Impact of Digital Signatures on the Future of Business Contracts

It is important to know that digital signatures are different from wet signatures that are scanned and pasted on contract documents. It is c

The business industry has been significantly impacted by the development of digital technology, affecting marketing, sales, HR, and even contract signing. Gone are the days of manually affixing wet signatures; now, the process has gone digital, thanks to digital signatures.

Understanding that digital signatures differ from scanned wet signatures pasted on contract documents is crucial. The term "digital signature" refers to the presence of a digital certificate embedded within it. This change brings several positive impacts on the future of contract signing. Curious about the impacts? Let's explore them below!

Increased efficiency in the contract signing process

In a contract document, ideally, at least two parties will give their signatures as proof of legal agreement. When done manually, the process of obtaining these signatures can be quite time-consuming. Of course, the more parties that have to sign, the longer the process will be. If the parties are in different companies or cities, it will take longer for the contract documents to be signed because you have to send them via post.

This is where a digital signature can change the future of contracts. Because it uses a digital signature, the contract documents are digital. This means you don't need to manually send contracts, as they can be done much faster via email. Once received, the related parties can immediately review the contract, sign it digitally, and then send it to the next party. Distance is no longer an obstacle to finalizing a contract.

Changes in the concept of “legality”

Legality is one of the most essential elements in a contract. Each party involved must agree to the contract's legality by affixing his or her signature. Nowadays, digital signatures also have the same validity in the eyes of the law - meaning that a digitally signed contract document fully legally validates what is contained within the document.

In Indonesia, the validity of digital signatures is regulated under Article 11 Paragraph (1) of Law Number 11 of 2008 concerning Electronic Information and Transactions. The use of digital signatures has legal force as long as it meets a number of requirements as stated in the law, namely:

  1. Digital Signature creation data relates only to the Signatory.

  2. Only the Signatory has authority over Digital Signature creation data during the digital signing process.

  3. Any changes to the Digital Signature that occur after the signing time are detectable.

  4. Any changes to Digital Information related to the Digital Signature after the signing time are detectable.

  5. There is a clear method used to identify who the Signatories are.

  6. There is a precise method to show that the Signatory has given consent to the related Digital Information.

Contract documents are safer and more protected

Compared to digital documents, physical documents tend to be more susceptible to the risk of being lost, whether stolen or misplaced. Not to mention the risk of damage to paper due to floods, fire, or other calamities. You can avoid these risks by using digital contract documents that are digitally signed. After all related parties sign a contract, you can immediately save it digitally and access it from anywhere, at any time. 

In addition, the risk of contract forgery or abuse can also be minimized. As mentioned earlier, digital signatures have digital certificates in them. The digital certificate acts as an encryption.

When a digital signature is affixed to a digital contract, the digital certificate will record the signature along with all important data listed, such as the identity of the signatory and the time of signing. The digital certificate also records any changes that occur in the digital contract. So if an outside party tries to sabotage the contract, you can easily track it down.

The switch from a wet signature to a digital signature positively impacts the contract-signing process. Apart from having full legality in the eyes of the law, digital signatures can also improve the efficiency of the signing process and the security of contract documents, primarily if you use a digital signature that is equipped with biometric authentication in the form of face recognition such as VIDA Sign. That way, the integrity of the contract signature will be maintained.

VIDA - Verified Identity for All. VIDA provides a trusted digital identity platform.

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