5 Risks to Negotiate Contracts by Email

5 Reasons It’s Risky to Negotiate Contracts by Email

Intellectually, we all know that email security is a problem. After all, earlier this year, it was reported that information from 550 million Yahoo accounts was stolen in 2014. Yet the vast majority of companies continue to trust email and use it as a primary tool to negotiate contracts.

Is an email contract legally binding?

You may be wondering, “does an email count as a contract?” The short answer is yes. Emails are considered legally binding by the courts. As with any valid contract, for an email to be a legally binding agreement, consideration, and a meeting of the minds. Even though the language used in email agreements may seem casual, and there’s never incorporation of key terms, the parties can still be held accountable for what they informally negotiate in conversations via email. However, regardless of their legality, there are significant security risks when entering an agreement using email.

How do you sign an email contract?

There’s a common misconception that you can’t be bound to an agreement if you haven’t signed a document. However, recent cases have upheld that an email is a legally binding contract if it’s authenticated through the online signature of the guarantor. For example, if a person puts their name in an email to show that they’re taking responsibility for its contents, it will be considered an email contract signature. Therefore, they will be bound to whatever they stated or agreed to.

Contract negotiation via email

What gets emailed? Strategies, business plans, financial information and comments to specific contractual clauses. When there’s an email security breach, this confidential data can become public information.

Security during contracting

Even though an email is a legally binding contract, it should not be your preferred way to enter formal business arrangements. Emails lack the security measures that other forms of virtual contracts offer to their users.

Instead of using emails to create contracts, here are some essential security measures to take to uphold the privacy of your information:

  1. Store your documents in a central repository

Email contracts are often saved and stored in shared folders across multiple locations, or even worse, kept directly in an inbox. However, you can take control of your contract security management when you store your documents in a password-protected and cloud-based repository. Not only does a centralized repository offer optimized organization, but it also keeps your information safe from malicious individuals.

secure contract drafting in business
  1. Implement role-based security to your contracts

When you utilize a secure repository to store your contracts instead of email, you can create role-based permissions for greater security. This feature lets someone read or edit certain agreements but denies them access to one’s that are out of their assigned duties. Additionally, it prevents prying eyes from seeing private contract details. 

  1. Ensure that your data is encrypted

One of the most crucial ways to protect your business agreements is to encrypt all of your data, which is something you can’t do with emails. To ensure maximum privacy, you will want to ensure that all your information is encrypted both at rest and in transit using the latest technology. 

  1. Utilize eSignatures

As mentioned earlier, email agreements don’t technically need to be formally signed since your name takes on the role of a signature. When you utilize a platform with eSignature capabilities you can be sure that you don’t accidentally bind yourself to an arrangement. Additionally, eSignatures boast their own set of security features. They keep a record of who, when, and where someone signed an agreement to ensure authenticity.

5 very real dangers of using email in the contracting process

Here are five very real dangers of using email in the contracting process.

1. Data Breaches Can and Do Compromise Email Accounts

In 2014, Sony Pictures Entertainment’s computer system was hacked, compromising emails, personal information, salary information and entire unreleased movies.  The hacking exposed the entire inner workings of the company, including its internal communications.

When data is hacked on this scale, the company is placed at a competitive disadvantage for future contracts  Hackers and scam artists don’t care that everyone signed an NDA.

2. Your Own Employees are a Security Risk

Perhaps you’ve heard about the controversy surrounding Hillary Clinton’s private email server? For corporations, the lesson behind the news stories is that executives and employees don’t always follow the company’s security protocols. You may have the most secure email server in the world, but as soon as someone uses a hotel computer and a personal email account for company business, your email isn’t so secure anymore.

negotiate contracts security risks

When they’re on the road or at home, employees can find it quicker and easier to use something other than the company email. Personal mobile devices can be lost and hacked.

You may have the most secure email server in the world, but as soon as someone uses a hotel computer and a personal email account for company business, your email isn’t so secure anymore.

3. The People on the Other Side of Negotiations are a Bigger Security Risk

If you’re negotiating contracts with, say, the U.S. Department of Defense, you can be pretty sure they’ve got some security protections built into their emails. But what if you’re negotiating a contract with a small-batch coffee roaster in Idaho? Or a manufacturer in China?

businesman makes contract online

You may be a big company with top-notch email security features, but many of your contracts may involve smaller businesses that don’t have the capital for sophisticated email security, or that rely on internet email services like Gmail or yahoo mail. Yahoo was already hacked on a spectacular scale, and there’s no reason to believe it can’t happen again.

4. It’s Easy to Screw Up with Word’s Track Changes Feature

Most companies use Word for contract drafting, and they then circulate drafts and collect comments through Word’s Track Changes feature. The thing about Track Changes is that it’s not always easy to tell when it’s on. If an employee neglects to accept or reject all proposed changes and delete all comments, you can disclose confidential information to the opposing party.

This can reveal all sorts of confidential data, from business and negotiating strategy to financial information. In some cases, it can disclose confidential attorney-client.

5. Human Error Is Always a Problem

Who hasn’t hit “send” on an email and then realized the email went to the wrong person? Or that you hit “reply all” when you meant to reply only to the sender?

Businesswoman looking through a magnifying glass to contract

But what happens when “reply all” sends a confidential internal negotiation document to the other party to a proposed contract? Or when a clerical employee inadvertently sends out the wrong version of a contract for signature? In our fast-paced, multitasking world, these things can and do happen, and they can compromise confidential information, increase the cost of contracting, and place you at a business disadvantage.

At Parley Pro, we have an alternative to chaotic and insecure email negotiations. Our contract negotiation software provides greater security, more transparency, and better control over your contract negotiations than you’ll ever get through email.

Let us show you how it works. Contact us to schedule a demo.

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