12 key insights into proposals and contracts

9 Min Read

Contracts

Scope of Work

Invoices

CJ Haughey

CJ Haughey is a creative copywriter and self-confessed digital marketing nerd. This shaggy-haired Irishman is currently shaking off the last of the travel bug in his adopted home of Colombia. In his spare time he tries to avoid being sick at kickboxing training.

Landed a new client but aren’t sure about the agreement template? Are you worried about a client not paying up? Are you considering a retainer?

Many freelancers spend a great deal of time seeking out new clients. But even when you find a promising new relationship, you must ensure everything is bonafide before diving in headfirst. It’s a perpetual worry on the minds of many freelance workers, and unfortunately, a lot of people learn some hard lessons before discovering solutions as good as Bonsai's freelance contracts tool.

It’s not uncommon for novice freelance workers to invest considerable time on a project upfront, only for the client to vanish when payment is mentioned. If this happens to you, there’s not much you can do without an agreement template or a contract template, which brings us to a common query:

Is a proposal similar to a contract?

Proposal templates, quote templates and contracts are intertwined, but they are certainly not one and the same thing. Understanding the differences and relation between a proposal and agreement of terms is vital when entering any new business relationship.

In this article, we’ll explore the proposal vs contract situation, and give you the answers you need to start every new working relationship with confidence and security.

3 Key benefits of a proposal

For newcomers to the freelancing world, the whole concept of a proposal may be a little murky at first. Bonsai’s guide on how to write a proposal delves into this in greater detail, but here are a few reasons to reach out to new prospects with a proposal.

1. Stand out from your competition

If your potential new client is really worth landing, chances are you won’t be the only one trying to grab their attention. A hard-hitting accounting services proposal template or an architecture proposal template, for example, will be short and sweet, but with all the impact needed to make a lasting impression on the recipient.

Wondering is a proposal a contract and need a quick answer? Well, here it is. The short answer is no – a proposal is your elevator pitch. If you do it right, the contract will surely follow.

2. Emphasize the value

While there are some similarities between a proposal and contract, the differences between a proposal and a resume can scarcely be starker. A great lead generation proposal template or a winning photography proposal template focuses on the specific needs of your potential client and then offers a tailored, customized solution. Highlight the benefits of your skillset and services and convey the value that you provide. Ideally, your proposal will make the client see that you are the best fit for the role.

3. Set expectations about timeframe and payment

A proposal that is carefully thought-out and methodically structured will be crystal clear and can answer a lot of questions before the client even asks them. As 29% of freelancers are paid late, it’s a smart move to explain your work process, rates and strategy for this project so the client gets the big picture of a working relationship with you. This is much better than some generic, vague pitch that doesn’t relate to the project at all.

How proposals and contracts are related

It’s easy to get immersed in a contract vs. proposal debate, however, the reality is that the two have close ties, and can work in tandem. Together, both parties in a freelance work agreement can gain a lot from using proposals and contracts, or even scope of work templates.

1. Contracts and proposals provide clarity of vision

From a freelancer’s point of view, pouring your blood, sweat, and tears into an assignment only to be told that it’s not what the client wanted is a disaster. By outlining everything in writing from the outset, all second-guessing is eliminated. Instead, you and your client can lay the foundations of a great working relationship by spelling out all project specs so that everyone is on the same page.

When writing graphic design contracts, you need to make sure that your clients know how many revisions you can offer them. This is important so you won't end up with endless revision requests. Whereas a software development proposal template for example allow freelancers to lay out their basic strategy for the project, contracts drill down deeper to clarify the details.

2. Proposals and contracts prevent against financial disputes

Early in their career, many freelancers make the mistake of putting their trust in the wrong client. A winning proposal might earn them the gig, but without a contract in place, you’re taking a risk. You can choose to create one in just a few minutes using a contract generator app.

If they decide to drop off the grid after you submit your work, you might find it impossible to get paid. Even if you track them down, they might argue against paying you, which makes a contract a powerful asset to have if the worst case scenario ever happens.

While a proposal outlines the workload and your rates, it won’t provide the same amount of protection as a formal contract. Once you have the contract, you can refer to it if any disputes about money arise down the line. With a written proposal and agreement that your client has signed, freelancers will have a lot more leverage to ensure they get paid.

What are the essential elements of a contract?

So, now you understand the benefits of using a proposal and contract. However, if you’re still pondering is a proposal a contract, then you need to understand the integral differences between them. To secure your business with a freelance contract, you need the following aspects:

1. An offer or proposal

A freelance proposal is the foundation of a contract. It is the essential offer, where one party proposes a service that the other party needs. The initial terms of the agreement may be laid out in any influencer marketing proposal template or mobile app development proposal, for example.

2. Consideration or something of value

Should the other party make an offer in return for the services proposed, then this is known as consideration. For example, a client may offer you $1,000 to design their new company website. Typically, consideration precedes a contractual agreement, but before it can, both parties must be satisfied that there is significant value for them.

3. Clear acceptance and mutual agreement

When a proposal has been made, and something of value has been discussed, both parties can work out the terms of the agreement by negotiating the contract. The contract can still be rejected by either party, or they can make counter-offers if they aren’t satisfied with the terms. Once there is a mutual agreement, a formal contract can be prepared and signed by both parties, making it a legally-binding document.

‍4 Tips for drafting your next contract

In order to protect yourself from a tricky situation with prospective new clients, make sure you lay the groundwork early in the relationship. That way, everything will be much smoother going forward.

1. Don’t be vague, clarify everything

From your initial proposal, aim to be transparent and professional. Use your initial proposal to set expectations of what is to come, outlining your strategy and offer in precise detail. Anticipate questions and concerns the client may have, and think about potential pitfalls ahead of time.

2. Create a termination clause

The nature of freelance work is that there are often periods of flux. You could find yourself inundated with work one week, then twiddling your thumbs idly the next. If a regular client suddenly announces that they have no more work for you, this can spell disaster for your finances.

Without a contract, it’s likely you won’t be able to do anything about the loss. However, if you have a “kill fee” clause written into the contract, you can bill your client for another month’s retainer if they cancel the agreement without due notice.

3. Highlight expected payment details

Clients may be busy, but that’s no excuse to keep freelancers waiting to be paid. You can eradicate any nonsense like this from the beginning by using the contract to determine how you are paid. If you want to be paid 50% up-front, and receive the rest within 3 days of the invoice, then spell that out in the contract.

4. Get all proposals and contracts hand-signed

If you end up in a corner with a bad freelance client, a hand-signed contract can be your saving grace in the courtroom. It may take a little extra effort to print, read, sign, scan, and then send documents back and forth, but it will be worth the hassle.

Even if you never end up in front of a judge, a formal, signed contract provides peace of mind for all parties and officially secures your working relationship with the degree of professionalism that you should strive for with all business matters. Here's our guide on how to digitally sign a PDF and how to insert a signature in Word that you can follow when signing the contract.

You need both a proposal and contract

Freelancers should consider their proposal as their foot in the door, as it is simply the offer you make to a prospective client. Using Bonsai’s freelance proposals software can help you get more new clients, however, it’s important to understand that a proposal cannot be enforced in the same way as a formal contract can.

To have the security of a contract, both parties must mutually agree on the terms of your proposal. Once your offer has been accepted and mutual agreement on important aspects such as deliverables, payment, and deadlines have happened, you have a contract. Get it signed to make it official, and don’t forget to protect yourself with some useful clauses.

By taking these added steps, you protect yourself and your business with every new relationship, and also present yourself in a professional way, which earns the respect of your client, and ultimately, will strengthen your reputation and brand as time goes on. Get onboard with Bonsai today to take your freelance career to the next level.

What Defines a Verbal Contract?

A verbal contract (formally called an oral contract) refers to an agreement between two parties that's made —you guessed it— verbally.

Formal contracts, like those between an employee and an employer, are typically written down. However, some professional transactions take place based on verbally agreed terms.

Freelancers are a good example of this. Often, freelancers will take on projects having agreed on the terms and payment via the phone, or an email. Unfortunately, sometimes clients don't pull through on their agreements, and hardworking freelancers can find themselves out of pocket and wondering whether a legal battle is worth all the hassle.

The main differences between written and oral contracts are that the former is signed and documented, whereas the latter is solely attributed to verbal communication.

Verbal contracts are a bit of a gray area for most people unfamiliar with contract law —which is most of us, right?— due to the fact that there's no physical evidence to support the claims made by the implemented parties.

When is a Verbal Agreement Legally Binding?

For any contract (written or verbal) to be binding, there are four major elements which need to be in place. The crucial elements of a contract are as follows:

Offer and acceptance: An offer is made and accepted by another party involved in the agreement;
Consideration: The involved parties must exchange something of value (money, a service, time, etc), this is known as consideration;
Intention and certainty: All parties must fully understand the terms of the contract and intend to make a legally binding agreement freely; and
Capacity: The parties must have the capacity to legally enter into the contract; they're above age and of a stable mindset.

Therefore, an oral agreement has legal validity if all of these elements are present. However, verbal contracts can be difficult to enforce in a court of law. In the next section, we take a look at how oral agreements hold up in court.

How strong is a verbal agreement in court?

Most business professionals are wary of entering into contracts orally because they can difficult to enforce in the face of the law.

If an oral contract is brought in front of a court of law, there is increased risk of one party (or both!) lying about the initial terms of the agreement. This is problematic for the court, as there's no unbiased way to conclude the case; often, this will result in the case being disregarded. Moreover, it can be difficult to outline contract defects if it's not in writing.

That being said, there are plenty of situations where enforceable contracts do not need to be written or spoken, they're simply implied. For instance, when you buy milk from a store, you give something in exchange for something else and enter into an implied contract, in this case - money is exchanged for goods.

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When are verbal agreements not enforceable?

There are some types of contracts which must be in writing.

The Statute of Frauds is a legal statute which states that certain kinds of contracts must be executed in writing and signed by the parties involved. The Statute of Frauds has been adopted in almost all U.S states, and requires a written contract for the following purposes:

The sale of real estate or vehicles
Real estate leases lasting longer than one year.
Property transfer following the death of the owner.
The case of a party agreeing to pay debt for someone else.
Any contract that requires more than a year to fulfil.
A contract involving and exceeding a specified amount of money (which varies by state).

Typically, a court of law won't enforce an oral agreement in any of these circumstances under the statute. Instead, a written document is required to make the contract enforceable.

Contract law is generally doesn't favor contracts agreed upon verbally. A verbal agreement is difficult to prove, and can be used by those intent on committing fraud. For that reason, it's always best to put any agreements in writing and ensure all parties have fully understood and consented to signing.

How are Verbal Contracts Enforced?

Verbal agreements can be proven with actions in the absence of physical documentation. Any oral promise to provide the sale of goods or perform a service that you agreed to counts as a valid contract. So, when facing a court of law, what evidence can you provide to enforce a verbal agreement?

How can you prove an oral contract?

Unfortunately, without solid proof, it may be difficult to convince a court of the legality of an oral contract. Without witnesses to testify to the oral agreement taking place or other forms of evidence, oral contracts won't stand up in court. Instead, it becomes a matter of "he-said-she-said" - which legal professionals definitely don't have time for!

If you were to enter into a verbal contract, it's recommended to follow up with an email or a letter confirming the offer, the terms of the agreement , and payment conditions. The more you can document the elements of a contract, the better your chances of legally enforcing a oral contract.

Another option is to make a recording of the conversation where the agreement is verbalized. This can be used to support your claims in the absence of a written agreement. However, it's always best to gain the permission of the other involved parties before hitting record.

Written vs Verbal Contracts: What's the Verdict?

Fundamentally, most verbal agreements are legally valid as long as they meet all the requirements for a contract. However, if you were to go to court over one party not fulfilling the terms of the contract, proving that the interaction took place can be extremely taxing.

So, ultimately, the question is: written or verbal agreements?

Any good lawyer, contract law firm, or legal professional would advise you to make sure you formalize any professional agreement with a written agreement. Written contracts provide a secure testament to the conditions that were agreed and signed by the two parties involved. If it comes to it, a physical contract is much easier to eviden in legal circumstances.

Freelancers, in particular, should be aware of the extra security that digital contracts may provide. Many people choose to stick to executing contracts verbally because they're not sure how to write a contract, or they think writing out the contract terms is too complicated or requires expensive legal advice. However, this is no longer the case.

"@bonsaiinc is probably my all time favorite freelance tool. hands down. the team is super responsive and accessible when i have questions."

David Urbinati

Motion design / animation

Say hello to digital contracts

Today, we have a world of resources available at our fingertips. The internet is a treasure trove of invaluable information, platforms, and software that simplifies our lives. Creating, signing, and sending contracts has never been easier. What's more, you don't have to rely on a hiring a lawyer to explain all that legal jargon anymore.

There are plenty of tools available online for freelancers to use for guidance when drafting digital contracts. Tools like Bonsai provide a range of customizable, vetted contract templates for all kinds of freelance professionals. No matter what industry you're operating in, Bonsai has a professional template to offer.

Benefits of written contracts

A written contract makes the agreement much easier to prove the terms of the agreement in case something were to go awry. The two parties involved can rest assured that they're legal rights are protected, and the terms of the contract are sufficiently documented. Plus, it provides both parties with peace of mind to focus on the tasks at hand.

Create Professional Contracts with Bonsai

Bonsai's product suite for freelancers allows users to make contracts from scratch, or using professional templates, and sign them using an online signature maker.

With Bonsai, you can streamline and automate all of the boring back-office tasks that come with being a freelancer. From creating proposals that clients can't say no to, to sealing the deal with a professional contract - Bonsai will revolutionize the way you do business as a freelancer.

Why not secure your business today and sign up for a free trial?