What is Contract Execution?

A contract moves through many stages before it goes into effect. Generation, negotiation, and routing all have to happen before a contract can be executed.

But what is contract execution? Read on to learn about this crucial step in the contract lifecycle.

This blog post is offered for general information purposes only. It does not constitute, and is not a substitute for, legal advice.

What is contract execution? 

Once all negotiations have been concluded, the contract moves to the execution stage. Contract execution is the process of all necessary parties signing a finalized agreement. Once signed, the contract is fully executed and enforceable and all parties are obligated to carry out the terms agreed to in the contract. 

Who should sign a contract?

When an organization enters into a contract, the person signing must have the authority to execute a contract on the organization’s or legal entity’s behalf. If the signer or signers do not have the authority to sign on behalf of the organization, those signatures are not valid and the contract cannot be enforced. 

Is a contract enforceable if it hasn’t been signed?

In most cases an unsigned contract is an unenforceable contract. But not always. For instance, suppose you never signed an actual contract, yet the other party allowed you to fulfill the terms of the proposed contract anyway. That contract may be considered enforceable.

Another example of an unsigned but enforceable contract is when two parties have previously fulfilled similar agreements without a fully executed contract.  

Is there a difference between an executed contract and an executory contract?

Yes. An executory contract is a contract that’s in the process of being executed. Once the executory contract is agreed to and signed by all parties, it becomes an executed contract.

Can I use an electronic signature to execute a contract?

Electronic signatures are valid in the US for most common contracts and are granted the same legal status as pen-and-paper “wet ink” signatures. And because best in class electronic signature solutions use tamper-proof sealing, user authentication, and a digital audit trail, they provide stronger court admissible evidence than wet signatures.

Electronic signatures are also considered legal and enforceable across the world. Have questions about using electronic signatures in a specific country? Find answers in our eSignature Legality Guide.

While there are many methods of executing a contract, using a best-in-class electronic signature service provides the most safeguards. However, before signing any document, it is important to make sure the jurisdiction in which the contract will operate allows electronic signature for the type of contract being signed. 

What should I consider before executing a contract?

Before executing a contract, closely examine the terms of the contract so that you can clear up any discrepancies. The goal is to have a clear understanding of what is being agreed to before signatures are added to the contract. Once the contract is executed, the process of amending the terms can be time consuming and costly.

To expedite the contract review process, many organizations are turning to AI risk scoring to analyze the text of the contract and automatically generate a risk scorecard based on the organization’s policies. This streamlined process can empower organizations to negotiate better agreements, faster.

Where does contract execution fit into the contract management process?

Separating your contract management process into definitive stages can help you identify broad trends. By distinguishing each stage, you give yourself the ability to drill down into each step and identify opportunities for improvement throughout your contract management process.

The five stages of the contract management process are:

  1. Generation
  2. Negotiation
  3. Routing
  4. Approval/signature
  5. Storage

Although all stages relate to the process of executing a contract, the actual execution occurs at stage four: approval/signature.

Secure contract execution with Docusign eSignature

The most secure way to sign any document is by using state of the art electronic signature technology. Docusign eSignature will ensure all parties can be confident in the security and legality of their signatures, while at the same time providing a fast and simple signing process.

Learn more about Docusign eSignature or try it for yourself with a Docusign free trial.