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In this video tutorial on starting freelancing, the speaker explains the differences between contracts and proposals. They clarify that contracts are legal documents that focus on the terms of the deal, outlining responsibilities and obligations, while proposals serve as sales documents aimed at convincing the client to agree to the deal. Proposals typically include project details, costs, and payment terms, and can often function as contracts themselves. The speaker emphasizes that this information is intended as advice from a freelancer's perspective, rather than legal guidance.