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In the modern digital economy, online transactions move fast. This means an ongoing need to make the online contracting process smooth and seamless. But as any legal department can attest, when has contract creation and negotiation ever been an efficient process? To maintain transaction speed, businesses need to adopt an Acceptance Mindset.
A clickwrap agreement is a technology tool that enables and is enabled by the Acceptance Mindset. This can have a huge positive business impact, while making life easier for the legal department.
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The Acceptance Mindset is a term coined by PactSafe as the ideal customer mindset for standard online contracts. It is the understanding that contracts no longer have to "signed" or follow the traditional steps in the manual process in order for the contract to be valid.
To understand it better, let's contract the Acceptance Mindset with the traditional contracting mindset - the Signing Mindset (or the Ink Mindset).
The Signing Mindset dates back to the pre-Internet world of contracts on physical paper, signed in ink. The process generally involves the following steps:
And the Signing Mindset does not only apply to physical paper contracts. Even a document emailed as a Word or PDF document gives a subtle hint to the recipient - this document is not final and the contract is open to negotiation.
With the Acceptance Mindset, on the other hand, the contract is presented as take-it-or-leave-it and acceptance is fast and easy.
This is the beauty of clickwrap agreements, which can be accepted through the simple click of a button, or check of a box, on a user’s computer or phone screen. The clickwrap format naturally puts the customer into the Acceptance Mindset.
Related Content: 3 Contract Acceptance Methods Defined and Compared
In order for modern companies to successfully operate online, they need to undergo a digital transformation of their contracting process. This does NOT simply mean handling transactions online. Nor does it mean switching to PDFs of paper contracts or e-signatures. It means implementing the use of digitally native contracts - software-based contracts that “live” online.
For many legal teams, this type of digital transformation goes against their fundamental way of thinking. How can Legal manage liability risk and ensure enforceable agreements without “formal” contracts that can be printed out and reviewed?
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Where the Acceptance Mindset has a real impact is on the company’s bottom line. Companies need customers to sign on quickly and frequently. The Acceptance Mindset accomplishes this by removing the time-consuming and burdensome elements from the contracting process.
Contract negotiation actually takes up a relatively small part of contracting time. An IAACM study of over 700 major organizations analyzed the time breakdown in the contracting process for standard, low-risk procurement or sales contracts. The results? Contract creation took up 30% of the time, contract review and approval 50% of the time, and negotiation a mere 20%.
So how can that 80% of contracting time devoted to contract creation, review and approval be shortened? Content creation can be streamlined with the use of standardized agreements and automation for common transactions. The review and approval step is an even bigger potential time-saver, since the Acceptance Mindset can cut it down to a simple button-click or box-check.
The process of redlining - inserting your revisions into the other party’s draft for their review, approval, or comment - may be a necessary part of contracting for certain unique and high-value agreements. But for standardized low-value contracts? Redlining is a time suck and waste of resources. For standardized agreements with a broad swath of potential signers, the terms can be presented as non-negotiable, as they are with a clickwrap agreement.
It has always been the legal department’s job to protect the company from legal risk. But nowadays, legal teams are often expected to be strategic business units that impact revenue and innovation, just like the product or sales teams.
So how can Legal use the Acceptance Mindset to wear these multiple hats?
The legal team needs control over contract terms for all types of contracts the company uses. Yet many legal teams rely on technical or marketing teams for contract publication or updates, which increases risk.
With digitally native contracts like clickwrap agreements, Legal can exert greater control over contract publication and updates, with systematic and automated processes. They can also exert greater control over contract terms, determining which terms in standardized agreements can or cannot be changed.
The key to minimizing liability risk is the ability to enforce protective legal provisions, such as arbitration clauses. When the Acceptance Mindset is implemented, the company must also be able to prove one basic fact - contract acceptance.
This is where clickwrap agreements come in, when paired with strong back-end records of acceptance for each individual customer. When the same strategy is followed for contract updates, the business will have the upper hand when legal disputes arise.
When the Acceptance Mindset accelerates the contracting process for low-value deals, the legal team can focus more of their efforts on high-value complex contracts that need to be tailored to one specific transaction.
To see all the ways clickwrap agreements can implement the Acceptance Mindset and help ALL company departments, and specifically help Legal reduce the cost of contracts and spend more time on high value deals, download our eBook, The Economics of Contract Design.