What is, legally, a proposal?
A proposal and its issuing is legally an offer. By means of a proposal, a customer or prospect is made an offer which is accepted or not. There is only an offer if the offer is definable. This means that a proposal must contain all key clauses. Core clauses are essential elements with which the agreement is concluded later. A proposal shall contain at least the following information:
- the name and address of the customer or prospect
- the details of the party offering (name, address, Chamber of Commerce number)
- a proposal number
- a date
- a description of the service, product or project
- the total price excluding VAT, the VAT with the percentage and the price including VAT
- an instruction on how to approve the proposal
- the reference to the general terms and conditions
As soon as the customer agrees and confirms this by signing or confirming e-mail referring to the proposal, the proposal becomes a legal agreement.
Without obligation or with a period of validity
There are non-binding proposals and proposals with a period of validity. If no period of validity is stipulated (either in the proposal or in the general terms and conditions), a customer or prospect can decide when he agrees, even one year or more after the proposal date. In the meantime, a lot may have changed such as increased purchase prices, material or labour costs. A non-binding proposal is not binding for both parties. Only if both parties give final agreement, the offer will be considered as an agreement and therefore binding. According to the law, revocation may take place afterwards but this must be done immediately after acceptance and according to a number of obligations. It is therefore advisable to work with a period of validity. If a customer or prospect does not respond within the validity period, the proposal expires. If a customer or prospect wants to place the order or order at a later date, it is up to the bidding party to agree, to make a new offer or to refrain from the order or order.
As a rule, a proposal is more than a proposal. For the bidding party it is an opportunity to convince a customer or prospect that he/she is the best candidate or supplier. The offer is therefore elaborated with concepts or solutions. To prevent a customer or prospect from coming up with these concepts, you have the option to have a non-disclosure agreement signed in advance, for example during the interview.
Is there any specific methods or products that are used more frequently? Then the provider is legally safest off with a patent. With a, the bidding party/provider has the exclusive right to offer a product or method commercially for a period of up to twenty years. Companies with a patent then have the exclusive right to, in addition to commercially offering a product or method, also be able to rent or trade it, for example.
Agreement of proposals
The approval or acceptance of proposals can take place in different ways. Oral, written and digital. An oral agreement is valid but is not recommended unless an order confirmation is sent directly. A written or increasingly popular digital agreement is preferable. In the event of a written signature, the bidding party shall send two versions of the offer. The bidding party has already signed these proposals. The customer signs both documents, one copy of which is for him and the other for the offerer.
- An email, as described at the beginning of this article, is also possible. Nowadays, online signing is widely used. Three types of signatures are distinguished, namely:
- an electronic signature consisting of electronic data linked to a digital document (online proposal)
- a digital signature where cryptographic mechanisms are applied to the content of a proposal document for authentication
- a digitised signature consisting of image made from a scanned, paper signature.
The general terms and conditions
Always send these with you. Referring to general terms and conditions that have been filed with the Chamber of Commerce is not legally sufficient. Send them along and refer to them in the proposal. For example, at the bottom of the proposal, by mentioning 'Attachments: general conditions' or in a sentence such as 'Our general terms and conditions (see annexes) apply to this proposal.
Tip: have general terms and conditions regularly screened by a lawyer. Over time, business activities may change. If a service company starts a webshop, then additional conditions apply. The present conditions will no longer be in line with all the risks involved. Naturally, the law is also subject to change or expansion. Don't save on this, after all better safe than sorry!
This article was written in Dutch from the aspect of Dutch law. Make sure to check what the legal requirements are for your country.