What is an upfront contract? Well, contracts come in many different shapes and sizes, each serving a slightly different legal and/or business purpose.

This page focuses on the meaning and applications of the “upfront contract”—a term which you won’t find referred to in any specific piece of legislation, but which is nonetheless imperative to high-stakes business proceedings.

We explain its core elements and how you can use it to protect your organization’s best interests.

Key takeaways:

  • Upfront contracts are largely informal agreements.
  • They outline the expected scope and outcome of a business meeting.
  • Business development and sales teams find them especially useful.
  • Creating an upfront contract is easy with contract management software.

What is an upfront contract?

An upfront contract acts as a precursor agreement to formal business discussions.

It outlines the scope of what will be discussed in a meeting, ensuring each party is on the same page prior to any actual contract negotiations.

A lawyer will tell you that upfront contracts exist to set the stage for fruitful and productive business endeavors.

A slightly more pessimistic interpretation (or realistic, depending on how you look at it) is that it serves as protection against time-wasting.

To understand this, we need to go back to the origin of the phrase.

The term was originally coined by a sales training agency, whose founder detested what he called the “mutual mystification” of business meetings.

This occurs when both parties are confused as to the intentions of the other side, due to ambiguous terminology, overly technical jargon, or unclear party agendas.

As it turns out, it’s incredibly difficult to agree on a subject matter you don’t fully understand with a business partner you can’t make sense of.

And, if you do sign a contract after all of this confusion, it may not even be valid!

That’s because contracts require clear intent from both sides to enter into the agreement, so if one side claims they didn’t understand the terms, it undermines the enforceability of it.

Obviously, this is bad for business development and sales, which both rely on clear communication.

As such, lawyers began encouraging these departments to agree on ‘upfront contracts’ before entering business discussions.

Upfront contracts are designed to be informal. They can be written or verbal.

All they’re meant to do is speed up business negotiations and prevent either side from throwing a curveball into the mix.

It’s the finalized contract that contains the real meat of the agreement: its terms, scope, deliverables, timelines, dispute resolution, etc.

The key elements of an upfront contract and how to create one

We know an upfront contract is meant to establish a clear understanding and agreement between two parties at the beginning of an interaction.

How then does this translate to pen and paper?

Or, if you don’t have time to write and sign a written document, how can an upfront contract be created verbally?

To answer these questions, we first need to understand what criteria are necessary for a contract to be valid and enforceable in law.

Offer

One party presents a proposal with clear and specific terms.

Acceptance

The other unequivocally agrees to the proposal, indicating their readiness to be bound by the stated terms.

This can be anything from a handshake to a verbal “Yes” to a written or electronic signature.

Consideration

There must be an exchange of something of value between the parties. Typically, one party makes a payment while the other provides goods or services.

Even a token gesture, such as a $0.01 transaction, will suffice.

Capacity

Both parties must possess the legal capacity to engage in a contract.

This necessitates that they’re of sound mind and have reached the legally required age in their jurisdiction (usually 18 years old).

The contract’s purpose must be lawful according to statutory legislation.

Out of fairness, the law will strike down contracts made under the guise of coercion or misrepresentation.

Now, it’s worth saying that upfront contracts are not a legally defined type of contract.

By design, they’re meant to be informal, and it’s exceedingly rare for someone to face a lawsuit for breaching their terms.

Rather, they tend to act as a communication strategy in the context of business negotiations.

They shape conversations and inform each party about whether a meeting will be worth their time.

What we’re saying is that it’s not crucial for an upfront contract to include all the above criteria (which you’d expect from a finalized business contract).

With this in mind, it’s a good idea for an upfront contract to cover the following subject matter:

  • The general purpose of a meeting, contact, or business action.
  • The parties’ agendas for that meeting and their broad assurances.
  • The time, place, and duration of the meeting.
  • Its expected outcome.

Creating an upfront contract can be as simple as sending a business email, LinkedIn message, or letter to another party.

This might say something like “We’re interested in your services for our new venture. Here’s what we need. Here’s our budget. Are you available for a meeting next Monday?”

Contracts are, essentially, just agreements. They shape how we interact with one another. They outline red lines, boundaries, and expectations.

Until you get to finalizing a business deal, they don’t have to be complex mechanisms.

In fact, it’s very common for an upfront contract to be an implied contract.

There may have been no discussion prior to the meeting, but if two parties meet in a boardroom with all their relevant notes and papers, it seems obvious that they’re prepared to make a deal.

The more prepared they are, the smoother things will go.

That’s how you should think of an upfront contract.

Upfront contract best practices

Upfront contract best practices infographic

Since upfront contracts are informal agreements, we can think of their best practices as basic business etiquette.

They often come at the start of proceedings, so it’s important to make a good first impression at this stage.

Let’s explore five of the things you should be doing.

Be clear and explicit in your communications

The purpose of an upfront contract is to remove “mutual mystification” from business meetings.

This means you have to be forthright in your approach, explaining exactly what your business is looking for, what your budget is, and why you’re requesting a meeting.

There’s no need for flowery language or technical contract terminology at this stage; keep things basic and focus on reaching a simple agreement.

Tailor the upfront contract to the situation

Not all business meetings are created equal.

Depending on the formality and scope of an expected agreement, it makes sense to put proportionate effort into constructing your upfront contract.

In general, try to offer more information to important clients/partners to maximize your chances of securing a meeting.

Invite feedback

Meetings are a collaborative process, and you should treat upfront contracts in exactly the same way.

If one party is dominating the field at this stage, it naturally means the other side’s voice isn’t being heard.

When this happens, it increases the likelihood of a deal breaking down.

Send follow-up messages

Upfront contracts don’t carry the same weight as other types of business agreements, which means they have a tendency to be overlooked or forgotten.

To avoid this, one best practice is to send follow-up reminders before a meeting is scheduled to happen.

Even if they were going to remember anyway, doing so builds trust and accountability with the other party—foundational qualities in a business relationship.

Be flexible in your approach

The business landscape is often fast-moving, and sometimes one party won’t fulfill their obligation to attend a meeting on time.

While upfront contracts provide a general structure for how things should go, it’s best to be adaptable at times like these.

Furthermore, if an additional provision outside the scope of an upfront contract comes up, don’t just shoot down the proposal.

Curveballs in negotiations don’t typically arise out of malice; it’s more likely the other party sees value in the developing relationship with your business.

At the very least, listen to what they have to say—this shows a willingness to find a mutually beneficial solution.

Upfront contract examples and techniques

The beauty of upfront contracts is that they can be agreed upon via any medium: in-person or over video call, in writing or in conversation, with a major client or a new hire.

Let’s explore some techniques you can use for different upfront contract examples.

Business meetings

Perhaps the most obvious use of an upfront contract is prior to a business meeting.

This gives both parties the chance to decide whether they’ll seriously consider the proposal before getting into the nitty-gritty of negotiations.

At this stage, it’s a good idea to suggest the scope of the intended deal: what services you require, how much you intend to spend, and how long it will continue.

It’s also worth mentioning a timeline—as in, how quickly the other party could deliver on your expectations.

Sales presentations

Upfront contracts can also be used for pitching a presentation e.g. when making a large sale, as is often the case with mergers and acquisitions.

This clearly informs the other party as to your agenda, meaning you won’t be hearing any shock refusals during the actual meeting.

Just as an upfront contract for a business meeting would include the general scope of an expected agreement, one technique prior to sales presentations is to highlight the unique selling points of your products or services.

This will make securing a slot more likely.

Job interviews

In the interest of clarity and transparency, upfront contracts can be used prior to hosting job interviews too.

This serves a mutually beneficial purpose, informing the prospect of why your company would be a worthy consideration and informing the employer of why the candidate might be a good fit.

As a rule of thumb, an upfront contract here should say what will be discussed in the interview and what qualifications/experience are necessary.

In turn, you should ask the prospect what their salary expectations are.

Conflict resolution

An upfront contract also has its uses as a precursor agreement for moving forward with resolving a dispute.

It’s informal, meaning no one is tied to any obligations, but signals an intention to reconcile your differences.

Your best bet here is to plainly say what the topic of the meeting will be (i.e. the issue or breach that has arisen) and what the ensuing resolution process will look like.

It’s worth inviting opinions from the other side if only to shape your bargaining position.

Use upfront contracts to streamline your sales process

To wrap up, upfront contracts have become an indispensable business process for modern companies, especially for business development and sales departments.

Even if you haven’t used the term before, it’s likely you’ll have encountered this framework when gathering information on a prospect at an industry event or booking a meeting over LinkedIn.

The beauty of an upfront contract is that it can be agreed upon in almost any setting, without the hindrances associated with more formal legal documents.

That said, in busy sales environments, it becomes understandably difficult to stay on top of the dozens of prospects and meetings you may be juggling at any one time.

That’s precisely why sales automation software like PandaDoc is a popular choice for removing or lessening your manual workload.

You can create beautiful business proposals in seconds from our selection of templates, integrate with your CRM for ease of use, and even automatically request eSignatures from inside your documents.

Get started today with 14-day trial.