Is a Quote a Contract?

Businesses often offer a quote to clients when they first offer a service. Why is that? By doing this, the client will get a better idea of the cost of the service, which will help to manage potential client expectations and help them decide whether the service is worth the cost.

How can you determine whether a price quotation is legal under the law?

When a quotation is drawn in the form of a contract (which we will explore in the subsequent sections), it will be considered legally binding quotations. 

One thing to keep in mind, though: relying solely on the offer itself is not enough to create a legally binding agreement. Also, the client needs to understand that the contract they are entering into is a legally enforceable contract involving several legal obligations which are enforceable against them.

When offering clients a quote, fully disclose your intentions and legal obligations. A more advanced way to send a quote to the client is by employing an estimating software like InvoiceOwl. 

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This article examines what makes quotations legally binding for your clients.

What is a Quote Contract?

A quote contract becomes legally binding between you and a customer when both parties sign it.

To be legally binding, a contract, or an offer, must include what is known as a consideration for it to be legally recognized. A party’s consideration is the benefit they will receive from the other party.

For example, a service provider charges a client for the service they receive.

A legally binding quotation must comply with the following requirements:

• Let each party know what they’ll do for the other.
• A confirmation email or signature from the customer is an excellent way to get formal acceptance.

A contractor’s obligations to the client are either fulfilled on the same day the client accepts the order or by responding to the client’s acceptance.

You and the client can cancel the agreement before it is completed, but it’s important to remember that both can do so. 

In other words, clients who cancel jobs before starting aren’t legally bound to pay you more than a nonrefundable deposit.

Is a Quote a Legally Binding Contract?

Cornell Law School points out that quotes do not constitute offers and only acceptances result in legally binding contracts.

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For a quote to become a contract, these steps must be taken:

1. A quote is submitted to the client by the supplier.
2. The client issues an order after accepting the quote.
3. Suppliers accept orders.

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Let’s understand with an example:

If one of the music bands for the function party emails a client a written quote for $2500 for 10 hours of photography. 

The process will be somewhat like this: As soon as the client receives the quote, they indicate they accept it and are ready to proceed with the order. 

In a follow-up email, the music band responds with a thanking email to the client and confirms that they will work for $2500 for 10 hours on a specific date. The contract is now legally enforceable.

Clients can request written acceptance from suppliers. If the supplier provides a service, they can accept it by delivering the requested items or performing a significant portion of the work requested.

We will assume that the supplier fulfills the quote by delivering the products or providing the services specified in the quote. However, when the client does not formally accept the quote, the contract is not legally enforceable.

Even after accepting a quote, the client can still alter or cancel the order before the supplier accepts the order.

For example:

• In the case of a home renovation project, a builder may send a quote to the homeowner. However, the builder can withdraw his offer, and even the homeowner can decline the quote. The services quoted are neither legally obligated to be provided nor accepted.

Is Price a Legal Binding Contract?

As far as pricing is concerned, a price quote (sometimes called a “quote”) does not have a legally binding effect. 

The Houston Chronicle has reported that legal contracts exist when two parties commit to each other regarding things that are extremely important to them. An offer of goods or services does not represent a promise by a supplier to deliver them, nor does it reflect a pledge by a client that they will pay for them. Thus, it cannot be said that a price quote has legal force.

Despite this, a legal contract begins with a quote offered by the supplier to provide certain products and services. The client can accept, reject or change an offer (a “counteroffer”).

As long as the offer is not rejected or countered, there is no contract. Furthermore, a contract cannot be legally binding if either party is forced to accept it through fraud or other means.

Why Is it Important to Legally Bind a Quotation?

There are several reasons why binding quotes are essential:

• Maintain a consistent and predictable cash flow.
• Work with clients to encourage commitment.
• Make your business appear more professional.
• Material and supply orders should be placed only for confirmed jobs that have been confirmed.

In the event of a dispute, it is essential to have proof of the agreement.

The use of binding quotations can also benefit the accounting processes within your organization.

Providing your clients with a formal quote will help to ensure that you bill your clients accurately so that you are paid on time. Clients who clearly understand what they can expect regarding their budget and cost are more likely to pay you on time and with full payment.

Is a Verbal Agreement Legally Binding?

As far as legal binding is concerned, verbal contracts are just as effective as written contracts. As such, a quote is not a contract, and simply giving a verbal quote does not give it the force of law nor make it binding.

It has been consistently observed that a verbal quote delivered to a client becomes legally enforceable as soon as an apparent bargain is made between the parties.

As part of the negotiation process, three phases need to take place for a legally binding contract to be formed:

• The supplier must make the offer.
• The client must accept it.
• Both parties need to agree to give something up in the process.

If we take an example of a graphic designer selling a logo for $500 over the phone to his client, he will get a great deal since the client will be contributing money and the designer will be designing it. This negotiates a good deal since the client contributes money, and the designer will design the logo for $500. Contracts are legally binding and enforceable.

Having said that, if the client requests a formal written agreement to finalize the contract, a verbal agreement may not be able to stand up in court if a document does not back it up. According to DBL Law, the parties must draw up and sign a written agreement before the bargain can legally be binding.

According to the Houston Chronicle, it is possible to include a written agreement with the parties’ names, the date, payment terms, what each party is responsible for, and what is expected of them. In addition to the above terms, other conditions can also be included at your discretion. What’s most important is clearly defining responsibilities. It is then possible for the other party to sue if one party fails to fulfill these responsibilities.

Conclusion 

As stated by the Houston Chronicle, a quotation contract should include the parties’ names, dates, payment details, and their respective responsibilities. The inclusion of any number of terms is permitted. The most important part is defining who is responsible for what. Court action is then possible if one party fails to fulfill its responsibilities.