Is a Quote a Binding Contract? A Primer for Small Businesses
A quote is not a binding contract. Under contract law, only offers are considered legally binding and a quote is not an offer. That said, accepting a quote can create a legally binding bargain under certain conditions. Each side must agree to give up something to form an enforceable bargain, according to USA Today.
In this article, we’ll cover:
Is a Quote a Contract?
A quote (or quotation) is not a binding contract.
Contract law says that a quote is not considered an offer and only acceptance of offers makes for a legally binding contract, according to Cornell Law School.
Here’s what needs to happen for a quote to turn into a contract:
- Supplier submits the quote to the client
- The client accepts the quote and issues an order
- The supplier accepts the order
- For example, a wedding photographer emails a written quote to a client for $2500 for 10 hours of photography. The client emails back saying they accept the quote and want to proceed with the order. The wedding photographer emails the client again to thank them and confirm that they will do 10 hours of work on a certain date for $2500. A legally enforceable contract has now been established.
The client can request that the supplier put their acceptance (see step three) in writing. Or, the supplier can accept by delivering the products ordered or doing a substantial amount of the work requested (if they’re providing a service).
Let’s say the supplier fulfills the quote i.e. delivers the products or performs the service in the quote. But the quote was never formally accepted by the client. This means no legally binding contract exists.
A client can also accept a quote but still change or cancel the order anytime before the supplier accepts the order.
- For example, a builder sends a quote to a homeowner for a project to remodel their bathroom. The homeowner can then decline the quote and the builder can withdraw his offer. Neither are legally bound to provide or accept the services included in the quote.
Writing an estimate instead? This article covers whether an estimate is legally binding. FreshBooks has online estimating software that makes creating and sending written estimates simple. Plus, a client can virtually accept the estimate right away.
Is a Price Quote Legally Binding?
A price quote (also known as simply a “quote”) is not legally binding. A legal contract exists when two parties make promises to each other, according to the Houston Chronicle. A quote is not a promise by a supplier to deliver goods or services and it’s definitely not a promise by a client to pay for these goods or services. So, a price quote cannot be legally binding.
That said, a legal contract does begin with an offer by a supplier to provide certain products or services via a quote. The client can then accept or reject the offer or ask for changes to the offer (a “counteroffer”).
A rejection or counteroffer doesn’t mean acceptance of the offer so a contract isn’t formed yet. And if either side is forced into acceptance thanks to fraud or any kind of coercion, the contract isn’t legally binding either.
Let’s say both parties agree to the quote willingly. A state may require further actions for a legally enforceable contract to be formed. For example, a state might require that both sides sign a written contract.
Once a legally binding contract is established, either party can take the other to court if one side doesn’t follow through i.e. the client doesn’t pay or the supplier doesn’t perform the services outlined in the quote. A written contract can make this easier as each party’s rights should be clearly detailed.
People also ask:
Is Accepting a Quote a Contract?
A client accepting a quote does not make the quote a contract. A contract is formed when the client accepts the quote and the small businesses agrees to provide the services outlined. Each side has to agree to their part.
- For example, a general contractor prepares a quote to install new cabinets in a homeowner’s kitchen. The general contractor needs to state an offer, such as: “I will install 10 cabinets for $25,000.” The homeowner then needs to accept the offer, such as: “I will pay you $25,000 to install 10 cabinets.”
If the homeowner replies with vague language like “that should be okay” to the offer, a binding contract isn’t created, according to USA Today.
The small business can ask the client to indicate their acceptance verbally or in writing (both are enforceable). The business can reply in writing too, though completing the work or even completing it to a substantial degree also indicates acceptance.
Is a Verbal Quote Legally Binding?
A verbal contract is just as legally binding as a written contract. That said, a quote is not a contract and merely delivering a verbal quote doesn’t make it enforceable.
For a verbal quote to become legally enforceable, there has to be a clear bargain made after the quote is delivered to the client, according to USA Today.
Three things need to happen to establish a legally binding contract: the supplier has to make an offer, the potential client has to accept it and each side has to agree to give up something.
- For example, a graphic designer tells his client over the phone: “I would like to design a logo for you for $500.” The client responds, “I agree to pay you $500 for the logo.” This makes a bargain as the client is contributing money and the designer is designing the logo. This bargain is a contract and is legally enforceable.
That said, a verbal agreement may not be held up in court if the client asks for a formal written agreement to finalize the contract. In that case, drawing up and signing a written agreement is needed to make the bargain legally binding, according to DBL Law.
A written agreement should include the parties’ names, date, payment terms and what each party is responsible for, according to the Houston Chronicle. Other terms can be included, if desired. Most important is outlining who’s responsible for what. Then if one party doesn’t fulfill these responsibilities, the other party can take them to court.
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