A Proposal Makes a Poor Contract
Updated: May 17, 2020
Catherine’s consulting business routinely provides written proposals to prospective clients. Her practice is to have clients accept the proposal by signing it. Catherine then proceeds to do the work. Is Catherine’s accepted proposal a contract with her client? Maybe. The proposal might be a contract if it contains all the elements the law requires. Or, it might not be a contract, if it lacks any of those elements.
Even if an accepted proposal constitutes a contract, it’s probably a poor one. Rarely do I see proposals that contain all the necessary provisions of a contract. The language of a proposal also is different than the language of a contract. A proposal is written to sell, not bind to legal obligations. A proposal's language may be too ambiguous to be enforceable. It also might inadvertently make implied promises the contractor never intended. In addition, it might lack important provisions, such as those addressing intellectual property ownership and transfer. You expose yourself to lots of risks if you rely on proposals as contracts.
The better practice is to build into your proposal the requirement that a prospective client must sign your client contract when it accepts the proposal. You should provide your prospect with a copy of your contract (e.g., as an Exhibit to the proposal) when you deliver the proposal so it can review the contract at the same time it considers your proposal. Expect some negotiation to the contract as part of the process.
If you want to learn more about good practices for contracting with clients, check out my book, Before You Leap: What a Lawyer Wants You to Know About Starting a Gig Economy Business, by following this link to Amazon: https://www.amazon.com/Before-You-Leap-Starting-Business/dp/1686557078/.