Template Tuesday: Use Contract Assumptions to Protect Your Deal and Profit

Good Morning!

1. Feature: Template Tuesday: Use Contract Assumptions to Protect Your Deal and Profit (4 min)

2. From the Archive: Your LLC Is Growing In Other States—Now What About Sales and Income Tax Nexus? (Read it here)

Wishing you all a productive Tuesday!

-TCoL

Missed our last feature article? Product First or Business? Product (Read it here)

Every business owner has faced the same scenario. A client insists that a task was included in your pre-project discussions. You never intended to include it in your work, yet you are left deciding whether to swallow the cost or argue. Disputes like these rarely start with bad faith. They start with assumptions that were never written down.

That is why well-drafted proposal and contract assumptions, better referred to as Material Assumptions, are worth your time. They define the ground rules that make your scope and price possible. When set out clearly, they prevent misunderstandings that can drain your profit.

Why Material Assumptions Matter

Contracts should not only cover what you will do. They should also cover what conditions must exist for you to do it. Those conditions are often where projects break down.

For example, a consultant may expect the client to provide data within a week of kickoff. An HVAC contractor may expect the site to have sufficient power available for testing. A marketing agency may expect the client to give timely approvals. A contractor may expect a city to process permits within a reasonable time.

If those expectations are missing or delayed, the schedule and price may no longer hold. Labeling them as Material Assumptions signals that they are essential to your agreement.

The Five Core Elements of a Deal

A strong proposal, statement of work, or contract should always include these elements:

1. Material Assumptions
The conditions that make your price and timeline valid. They cover access, client responsibilities, scope limits, approvals, and what happens after completion.

2. Project Description
A plain, short statement of the work you are taking on. The clearer this is, the fewer disputes arise.

3. Plans and Specifications
If designs, drawings, or technical specs exist, attach them. Everyone needs to work from the same playbook.

4. Project Schedule
A realistic timeline that includes the possibility of delays outside your control.

5. Payment and Billing Schedule and Compensation
Specific terms for deposits, progress payments, final amounts, and billing. Vague payment and billing language is an invitation to cash-flow trouble.

Broad Examples Across Industries

Here are examples of Material Assumptions that apply in many different businesses:

• Access and Scheduling: Work will be performed only during normal business hours unless otherwise agreed.

• Customer Responsibilities: The client will provide all utility work on time.

• Scope Boundaries: Changes to design, specifications, or deliverables require a written change order and may affect pricing and schedule.

• Approval Process: The client will review and sign off on milestones promptly.

• Post-Completion Work: Damage repair or new work requested after project completion will be billed on a time and materials basis.

These assumptions may look simple but each one draws a clear line. They protect against hidden costs and shifting expectations.

How Assumptions Protect Profit

Imagine a consultant who bids $25,000 to deliver a market study, assuming the client will supply the raw data. The data never arrives, and the consultant is asked to gather it. That extra work could take weeks. Without an assumption in writing, the consultant either absorbs the cost or risks the relationship. With it, the consultant points to the assumption provision and issues a change order.

The lesson is universal. Every project is built on conditions. When you define them, you protect your margin. When you leave them unsaid, you invite disputes.

Tips for Drafting Material Assumptions

1. Keep the language clear. Use numbers or bullet points to keep each assumption clear and separate. Avoid legal jargon.

2. Group assumptions by category. Access, responsibilities, scope, approvals, and post-completion deserve their own heading.

3. Tailor them to each job. A real estate developer’s assumptions differ from a creative agency’s. Develop your standard set of assumptions over time and develop new ones from your mistakes.

4. Be fair. Assumptions are not excuses. They are boundaries that both sides can accept.

5. Add a priority clause. Always close with language such as: In the event of a conflict between these Material Assumptions and any other part of the agreement, these Material Assumptions will govern.

Your Bottom Line

Profit is not protected by price alone. It is protected by paperwork. Material Assumptions are the part of the proposal and contract that quietly keep your project on track and your margin intact. They prevent scope creep, manage expectations, and shield you from conditions you cannot control.

This week’s Premium template includes a sample Contract Assumptions Rider you can follow and customize for your proposals, statements of work, or contracts. It organizes assumptions into categories and closes with a priority clause. Upgrade to Premium to get today’s template and access to our ever-expanding Template Library. 

Once you begin developing and using Material Assumptions, you will see that they are not filler language. They are the most valuable words in your deal.

Have an interesting business question and need a free bit of advice? Send your question to [email protected]. No confidential info, please!