Custom Digital Contracts
Utilizing Digital Contracts to Reduce Fraudulent Chargebacks & Streamline Your Operations
What is a Digital Contract?
Digital contracts are quickly replacing paper contracts and proving to be a superior method at delivering, tracking, and organizing necessary business agreements between two or more parties. A digital contract, sometimes called an e-contract, is a digital agreement between two parties acknowledged by a digital signature. Contracts typically written in plain language to ensure the customer comprehends the stated terms and conditions of the service and or product they are receiving. Once signed, both parties have agreed to the terms of the contract and have a duty to execute the contract as described in the contract.
Purpose of a Contract
The general purpose of a contract is to make clear the terminology, terms, conditions, exclusions, and inclusions of a business agreement. A contract helps to increase productivity of your business by creating a ‘checklist of items’ that needs to be followed and completed. A customer can reject or request changes before accepting a contract. After accepting a contract, the customer’s signature binds the two parties to the agreed
upon terms.
Types of Contracts
Lump Sum Contracts: the price of the project and or product is agreed upon up front. This kind of contract requires the business to take on additional risk since the customer is not obligated to pay more than the contract price. The use of contracts can result in a loss as the business is required to pay for all project expenses out of the lump sum.
Unit Price Contracts: typically used for repair and maintenance jobs. An auto mechanic, HVAC repair, or home improvement worker traditionally uses this kind of contract. Unit price contracts are easy to adjust should the scope of the job change; for example: while repairing a wheel bearing, an auto mechanic may discover that the wear on the bearing is caused by an unbalanced tire. With customer permission, the mechanic can amend the contract to include tire balancing.
Cost Plus Contract: contracts of this kind are useful for big jobs such as a construction project. Unlike a lump sum contract, the customer would bear the risk using this type of contract as they are monetarily expected to cover all project costs, and or any additional fees or percentage overages that may be needed to cover the business’s profit margin. Customers can often negotiate a cap on project cost to ensure the business keeps expenses under control.
Time and Materials Contract: these types of contracts are appropriate for smaller jobs, and require the customer to pay for all project costs as well as an agreed upon hourly or daily rate. A moving company might use this type of contract because the cost of the materials is mostly defined up front, but it is tough to estimate the time it will take to complete the project.
Use Cases
Fraudulent Charges: a charge the cardholder claims they did not authorize. With a signed contract a business can prove that there was an agreement between the two parties; with this proof a business can dispute the ‘fraudulent’ claim.
Service Not As Described: the cardholder claims a product or service was not as described. A contract can serve as a checklist for both parties, but it makes it easy for the business to prove the terms of the contract have been met or exceeded.
Price Disputes: the cardholder claims there is a breach of contract based on price. A contract used to confirm pricing details, including specifics on pricing or that a price may vary can be used to disprove any claimed breach.
Fighting Chargebacks with Contracts
If 81% of chargebacks are fraudulent then criminals know exactly what shortcomings in your operations or paperwork to identify so they receive a free move, HVAC system, or transmission. The problem is you don’t know who is looking to acquire your services free of charge, and therefore must treat everyone the same. By creating custom contracts that require additional signatures, this allows your business to confirm the terms of service up front. Therefore, reducing the risk a customer can dispute that the contract was not fully executed. By digitizing your contracts this eliminates clipboards, pens, paper documents, and rooms filled with file cabinets. With Sky, all of your documents are securely saved in a cloud environment for instant access!