Proposal vs. Contract: What's the Difference and When to Use Each

One of the most common questions new freelancers ask is: do I need a proposal, a contract, or both? The answer is almost always: both — but understanding why requires knowing what each document actually does.

A proposal is a sales tool. A contract is a legal tool. Confusing them — or using the wrong one at the wrong time — is one of the most common and costly mistakes freelancers make.

What Is a Proposal?

A proposal is a formal offer to do work for a client. It describes what you'll deliver, how you'll approach the project, your timeline, pricing, and the terms under which you'll work together. Its job is to win the project.

Think of a proposal like a sales pitch in document form. You're not just naming a price — you're telling the client why you're the right person for the job, what they'll get, and what it will cost. A good proposal does the selling for you before you even get on a call.

Proposals are typically sent during the sales phase — before the client has committed, while they're still deciding whether to hire you. The goal is to get them to say yes.

A proposal is generally not legally binding. It's an offer — and offers can be declined. Once the client formally accepts the proposal (in writing, by signing, or by paying a deposit), you can move into a formal contract.

What Is a Contract?

A contract is a legally binding agreement between you and your client. It defines the terms of your professional relationship with enough specificity that it can be enforced in court if either party breaches it.

If a proposal is a sales conversation, a contract is the handshake — except this handshake can be taken to a judge if someone breaks their word.

Contracts are typically sent after the proposal is accepted — once the client has agreed to hire you, you formalize that agreement with a contract. The contract locks in the scope, payment terms, timeline, and legal protections.

Key Differences: Proposal vs. Contract

| | Proposal | Contract |

|---|---|---|

| Purpose | Win the project (sales) | Formalize the agreement (legal) |

| When used | Before client commits | After client accepts |

| Legal binding | Generally no | Yes |

| Tone | Persuasive, sales-oriented | Formal, protective |

| Key focus | Value, approach, deliverables | Rights, obligations, protections |

| Revision policy | Not typically included | Should always be included |

| IP rights | Not typically covered | Should always be covered |

| Cancellation terms | Not typically included | Should always be included |

When to Use a Proposal

Send a proposal when you're actively pitching for work. Use it in these scenarios:

New client, new project. Any time a new client wants to hire you for a significant project, start with a proposal. It sets expectations, demonstrates professionalism, and gives the client everything they need to make a decision.

Large or complex projects. For projects over $2,000 or spanning more than a few weeks, a proposal is essential. It documents the scope and prevents the "I thought it would include X" conversations later.

Competitive situations. If a client is comparing you against other freelancers or agencies, a well-structured proposal is your competitive advantage. It shows that you're organized, thoughtful, and worth hiring.

When the client asks for a quote. If a client says "Can you send me a quote?" — send a proposal instead. A proposal provides context, builds value, and typically wins more work than a bare price.

When to Use a Contract

Send a contract when you've won the project and need to formalize the legal relationship. Use it in these scenarios:

After proposal acceptance. Once a client accepts your proposal, follow up immediately with a contract. Don't start work without a signed contract — ever.

For any project over $1,000. At this threshold, the financial stakes are high enough that you need legal protection. A contract gives you recourse if the client doesn't pay, tries to expand scope without budget, or steals your work.

When working with a new client. New clients are an unknown. A contract protects you from the types of situations you can't predict yet.

For ongoing or retainer relationships. If you're working with a client over months or years, a contract sets the baseline terms for the entire relationship, with scope and pricing handled in separate statements of work.

The Typical Freelance Workflow: Proposal → Contract

Here's how the two documents work together in practice:

Step 1: Send the proposal. A prospective client reaches out about a project. You respond with a proposal that outlines the project scope, approach, timeline, pricing, and terms. The proposal makes your case for why you're the right choice.

Step 2: Client accepts. The client replies, typically by email: "Love the proposal, let's do it." This is informal acceptance — enough to move forward, but not yet a legal contract.

Step 3: Send the contract. Once you have verbal or written agreement, send the contract. This formalizes the legal terms of the engagement: scope of work, payment schedule, revision limits, IP rights, cancellation terms, and more.

Step 4: Client signs. Once the contract is signed (digitally or physically), you have a legally binding agreement. Work can begin with confidence on both sides.

Step 5: Deliver the work, send invoices. As work progresses, you send invoices per the payment terms in the contract. If scope changes, you issue a change order or new contract — never just "figure it out" without a paper trail.

Common Mistakes Freelancers Make

Using a proposal where a contract is needed

This is the most common and most costly mistake. A proposal is not a legal document — if a client accepts a proposal but then refuses to pay, or changes scope dramatically, you have limited legal recourse unless you have a signed contract. For any project with real money at stake: always follow up a winning proposal with a contract.

Not being specific enough in the proposal

Vague proposals lead to scope creep. If your proposal says "I will design a website" and the contract says nothing more specific, the client can reasonably ask for unlimited revisions, a complete redesign, or work that wasn't discussed. Be specific in both documents.

Skipping the contract on "good" clients

You'd be amazed how often good clients turn difficult — usually when money is tight on their end, or when they have a new manager who wasn't part of the original conversation. A contract protects you from this. Never skip it because the client seems trustworthy.

Using the contract template from the internet without customization

Generic contract templates are a starting point, not a finish line. Your contract should reflect your specific services, your state's laws, and your business's tolerances for risk. Consider having a freelance attorney review your template once.

How Eonebill Handles Both

Eonebill is designed around the proposal-to-contract workflow:

1. Generate a winning proposal in 60 seconds — describe the project in plain English, and Eonebill's AI creates a complete, professional proposal document.

1. Send the proposal and track responses — Eonebill lets you send proposals directly from the platform and tracks when clients view them.

1. Convert to a contract with one click — once the client accepts, convert the proposal to a contract. Scope, timeline, and pricing carry over automatically. Add the legal clauses (revision limits, IP rights, cancellation terms) and send.

1. Get it signed — Eonebill's Pro plan includes e-signature. The client signs digitally, and you have a fully executed contract without leaving the platform.

1. Invoice against the contract — create invoices tied to contract milestones. When the contract is complete, you've been paid.

Start using proposals and contracts the right way. Try Eonebill free today and generate your first proposal in under 60 seconds.