I think the heart of the issue is whether to use a contract or not.
If you are dealing with smaller more skittish clients on small projects, then, yes, a contract may scare them off. However, for large assignments, it is industry standard to have a written agreement across all markets and industries.
For large paying projects, to proceed without a contract, I think, would make you look unprofessional, especially to an ad firm that knows what they are doing.
On top of that, it is always good to protect yourself.
Not to mention it clearly states, in written form, what is to be expected from both parties. They can take the contract and hang it on their fridge if they want to; there's no what-ifs or ambiguities.
Same sort of thing when it comes to saying you price. Never ever say your price until you have a written proposal in front of them. It just looks more professional, it gives you the opportunity to explain what will be done, justify your price. Plus people always assume it is easier to negotiate a number down that is said then that is written.
P.S.
On Friday last week, I had a major flooring company reach out to me about purchasing a license for 6 images I had shot for the architect 5 months ago. I drafted a proposal and a contract for those images and got it to them by Tuesday. With no problems what so ever, they signed it, got it back to me yesterday, got the images today, and I just got payment through Paypal. On top of that, it was written in my contract that credit card payments would be subject to additional merchant fees, so they were not surprised when the Paypal invoice was 3% higher then what was originally proposed.
Overall, they are very pleased, love the images and felt I was very professional to deal with.