Proposal vs Contract — What Are the Main Differences?

Proposal vs Contract are the two moments of a company that is engaged in commercial activities. These names are often perceived as synonyms. Nevertheless, these concepts have differences. In the first case, a signature is not required. The file is sent to the client for more details. In the second, it is signed by two parties. All of these points are binding.

Proposal vs Contract: Definitions 

A business proposal is a document with a detailed offer of the company, which is sent to a “cold” or “hot” client. In the first case, the text specifies the maximum details. In the second, adjustments are made based on the wishes of a particular person. The document most often includes four components:

  • total amount of work;
  • execution of all stages;
  • the exact number of revisions;
  • the deadline for completion of the order.

When sending an offer to sales representatives, you should not forget about your offers. Therefore, you need to make the text so that it stands out among similar ones. 

It is an informal agreement that can be made verbally. It is often compared to a handshake. Advantages include:

  • speed of conclusion;
  • informal nature;
  • maximum flexibility.

Contact is another type of document. It is a binding agreement that is made between two or three parties. It is a written document that outlines the obligations, duties, and responsibilities of the parties. Legal aspects are used when drafting it, which are then taken into account when going to court. The main elements include:

  • commercial proposal;
  • its acceptance;
  • consideration by all parties;
  • agreement with the text.

In complex transactions, every nuance is described in detail. If something goes wrong, each participant is protected. The risk of disputes is minimized. All terms and conditions are made clear in the text. More often than not, the buyer considers the item he is purchasing to be valuable. When it is considered, the amount in which it is valued is stated. Another important point is legality. Otherwise, any text becomes null and void. 

When drafting the contract, the region is taken into account. The text must not contradict current laws. Therefore, companies hire in-house lawyers. The text mentions the amount that the buyer must transfer to the seller. Options for resolving financial disputes are listed. When using ready-made templates, the text is drafted as quickly as possible. The standard templates are given a look that is suitable for use in a particular company. 

The document can only be signed by capable persons (otherwise it loses its legal value). They must have a good understanding of the conditions that are prescribed in the text. It is impossible to do without mutual consent. Before signing, negotiations may be held to eliminate points that the buyer does not like. Sometimes they take place in several rounds.

The Difference Between an Offer and a Contract 

A proposal can be compared to a presentation. It is used to promote the goods or services you are selling. No clear rules are specified. The potential customer decides whether he or she will make a purchase. A contract is synonymous with a commitment. In this case, it is easier to determine reimbursement when litigating disputes. The offer (informal agreement) specifies only the value of the goods. It does not publish information about the date of payment that was last made. There is also no penalty for late payment.

By signing an offer, the company loses the advantages that arise when the contract is signed. For example, if disagreements arise. This text is not considered binding. It has a recommendatory nature.

What are the Benefits of the Pandadoc Site

Pandadoc sells quality CPQ software with ready-made templates. There are both offers and contracts. There are articles on the site where recommendations are given to business representatives. For example, to increase sales. If you follow them, it is easier to turn a proposal into a contract. It is enough in the former to clearly spell out the terms of the latter’s conclusion.  

The customer should have a reason for signing. Using a special application, it is possible to send two documents by email. In this case, the other party will read them immediately. The future contract can be edited, receiving comments from the client.


How is a proposal different from a contract? There is no second party signature and it is not binding? It can be developed using ready-made templates, which are present in specialized programs with electronic signatures. They are selected from an extensive library. They are pre-checked by experts (lawyers and consultants). If you want, the buyer (the other party) can request a contract to sign. That is why it is essential to use such tools in your business to create a real profit.