Business proposals and legal contracts are two important documents that businesses use to outline their intentions. 

If you’re wondering whether you need a proposal or a contract to seal the deal with a potential customer while you’re discussing the details of a project, then don’t worry. You’ve come to the correct spot.

In this post, we’ll help you recognize the difference between contracts and proposals, explain the characteristics that set them apart, and demonstrate how to create a legally enforceable contract and business proposal.

What’s a proposal?

A proposal is a document that outlines a plan of action for achieving a specific goal. It is an offer to the recipient, usually from a business or individual, to provide goods and services in exchange for payment. 

Proposals can be sent in response to requests for proposals (RFPs), or they can be unsolicited, meaning they are not requested by the recipient but are instead sent out as part of proactive marketing efforts. The purpose of a proposal is to persuade the recipient that what you are offering is the best solution for their needs.

A proposal provides detailed information about the cost, timeline, and key deliverables of the project or service being offered. It also includes an overview of why the potential client should choose your company over other competitors in the market. 

When you submit a business proposal, you frequently face competition from other freelancers and organizations for the same job. So make sure to do everything you can to set yourself apart from the competition.

What’s a contract? 

A contract is a legally binding agreement between two or more parties that outlines the rights and obligations of those involved. It sets out what each party agrees to do, how they will do it, and when they will do it.

A contract needs to have four important elements in order to be considered legal and valid. These are offer and acceptance, consideration, capacity, and intention to create legal relations. 

• For an offer to be eligible, it must be clear and unequivocal – meaning there can’t be any confusion as to what the other party is agreeing with. 
• The acceptance of the offer needs to meet this criterion too so that there is no misunderstanding on either side. 
• Consideration is when both parties give something in exchange for the promise being made; this could either mean goods or money (or both). 
• Capacity refers to both parties having the ability to understand what they are agreeing with due to their age or mental capabilities; if this isn’t present then a contract cannot become valid.

Contracts are often used in business relationships such as employer/employee arrangements, contractor/client agreements, and supplier/buyer arrangements. They can also be used to purchase goods or services or even for personal purposes such as marriage contracts. 

A contract ensures that all parties understand their responsibilities and rights under the agreement so that there is clarity on the expectations of both sides. Contracts provide an enforceable legal document that can be used if a dispute arises between any of the parties involved in the agreement.

What’s the difference between these two?

A contract and a proposal are two different things, but they are related in some ways. A contract is an agreement between two or more parties to do (or not do) certain things. Contracts generally involve the exchange of goods, services, or money for something of value. It includes all terms and conditions that must be followed by both sides in order to ensure the success of the contract. 

On the other hand, a proposal is an offer to do something for either money or other consideration. It can be written or verbal and it states what services will be provided, the cost of those services, and any deadlines or payment terms that must be met by both parties involved. 

The most important difference between contracts and proposals is that contracts become binding upon both parties once they’re signed while proposals may be accepted or rejected without consequence either way. 

That said, it’s also important to note that some proposals can include clauses that can make them legally binding if accepted. For example, if the client accepts it without asking for a counterproposal or a change to the deadlines or the type of work being performed, then a proposal could become a legal document.

Nevertheless, our suggestion would still be to keep these two documents completely separate. Here is the justification behind it,

• Contracts are a vital part of any business relationship, offering protection to both sides and clarifying expectations. 
• In comparison to proposals, contracts provide more security and greater legal safeguards. For any project where the parties involved are seeking an ongoing relationship, it is essential that they enter into a contract rather than relying on a proposal.
• A proposal outlines what will happen in the future whereas contracts can detail past history, current events, and future obligations for all persons entering into the agreement. 
• Contracts also offer far more robust protection in terms of dispute resolution and liability allocation should something unforeseen occur during the course of the project or partnership. 
• Contracts also help ensure that required services or goods are delivered as expected by committing each party to specific performance dates or service standards within clearly defined parameters.

How to convert a proposal into a contract?

Okay, now let’s say that you see the value of having a separate business proposal and legal contract but yet desire to convert a proposal into a contract. In that case, the following is our suggestion: specify the contract terms within the proposal.

Include as many details as possible

When a business deal is made, it is important to make sure that all of the details are documented and agreed upon. Writing down these details as part of a proposal helps both parties involved in the agreement to have clarity and understand any future actions needed. A proposal can be converted into an official contract when all the necessary information is included. 

A comprehensive proposal should include basic elements such as a clear description of services being provided, deadlines for work completion, fee structure including payment terms and conditions, the scope of work with specific responsibilities outlined for each party involved, detailed project timelines with milestones identified, confidentiality clauses related to proprietary information from either side, dispute resolution processes if needed and other applicable legal provisions.

It’s also important to include contact information for both parties in case any additional questions or changes arise during the course of the agreement.

Create a termination clause

When it comes to business agreements, a termination clause is an important component for turning a proposal into a contract. Such clauses serve as protection for either party should the terms of the agreement not be met or a dispute arises. The termination clause should include details about who can terminate the agreement, how it should be terminated, and what consequences will occur if either party terminates it prematurely. 

When writing such clauses, it’s important to consider potential risks that may arise from the early termination of contracts. Depending on the type of contract and its terms, some form of compensation may need to be included in case one party decides to terminate before the completion of contractual duties or services. Furthermore, notice periods for termination should also be specified in order for both parties to have enough time to prepare if either side fails to comply with their obligations.

How to create contracts and proposals in minutes?

Creating professional contracts and proposals can be a daunting task, but with Fresh Proposals, it doesn’t have to be. Fresh Proposals helps streamline the process by allowing you to construct contracts and proposals quickly and easily in minutes. Instead of spending hours on paperwork, proposal software helps save time and energy while creating high-quality documents that are sure to impress potential clients.

It provides templates you can customize with your company’s logo or brand colors, along with user-friendly features like drag-and-drop elements. You also get options for including media such as photos or videos, adding dynamic pricing tables that update automatically based on changes in your products or services, as well as other tools like automated reminders so you’ll never miss an important deadline again!