Is a Quote a Contract?: Tips for Legally Binding Agreements
In order for a quote to be considered a contract, it needs to include clear terms and signatures from both you and your client. These are the elements that make your quote legally binding.
Without them, a quote is simply an estimate of how much a job will cost, leading to potential disputes and misunderstandings between you and your client down the road. Which is why it’s so important to have a written and signed contract for every job.
Protect your service business and keep yourself in the clear by learning how to make legally binding quotations in this guide.
⚠️ Disclaimer: This content is for informational purposes only and should not be considered accounting, tax, or legal advice, or a substitute for obtaining such advice specific to your business. Please refer to an experienced lawyer in your jurisdiction for particular information on how to write legally binding terms and conditions.
What is a binding quotation?
A binding quotation is when a quote for a job becomes a legal contract between you and a customer.
For a price quotation to become a binding offer, it must:
- Clearly describe the services you will provide in as much detail as possible.
- Include formal acceptance from the customer, such as an email confirmation or signature.
- Explain how each party will benefit from the agreement (which is referred to as “consideration”), meaning the services you provide to a client in exchange for payment.
When is a quote legally binding?
Whether or not a quote is legally binding depends on a few different factors. Typically, a binding quotation needs to be both:
- Accepted by the client (preferably in writing)
- In writing
Sending a price quote to a client that they never accept or confirm does not create a legally binding contract between you.
Keep in mind that a client can also respond with a counteroffer or questions. This doesn’t count as acceptance. Instead, you’ll need to figure out whether the quote needs to be adjusted and resent based on their requests.
On the other hand, if you provide a written quote to a client detailing a job and they provide an electronic signature to confirm their acceptance, a formal legal contract has been established.
This acts as proof that your client agreed to your service terms and helps protect your business in the event of a dispute or non-payment.
It’s important to note that written estimates aren’t usually legally binding, so this information is only applicable to detailed quotes and not ballpark numbers.
READ MORE: Proposal vs quote: Which one should you use?
How to make legally binding quotations
The best way to ensure a quote is legally binding is to use a quote template that outlines and documents:
- The services you will provide
- How much the client will pay you and your payment terms
- A signature area for both parties to sign for formal acceptance
Even if you discuss these details in-person, you should always follow up with a formal quote to reiterate what you talked about so that both you and your client have a record of it.
Using software to create, send, and confirm quotes is a great way to keep things above board and ensure you have a paper trail to follow in the event of a dispute.
It’s also important to avoid common quoting pitfalls such as:
- Handshake agreements and verbal contracts
- Casual estimates and ballpark numbers
- Making assumptions about a client’s acceptance without confirmation
Otherwise, you risk having an unsatisfied customer at best, and a legal dispute at worst.
Are verbal agreements and offers binding?
While the answer to this question is technically yes, verbal quotes are only binding if you can prove they took place, which, without a recording, is very difficult.
This is because you have little proof that an offer was made or accepted outside of your word and the client’s, which may not be the same. Not necessarily because a client is lying (or claiming that you are), but because it’s easy to mishear, misunderstand, or misconstrue information delivered over the phone or during a casual conversation.
For these reasons, it’s recommended you use job quoting software that covers every step of the process, from initial offer to formal acceptance. That way you have a documented paper trail for every job you complete, protecting you and your small business from any disputes.
Why are binding quotes important?
Making sure your quote is a binding contract is essential in helping you to:
- Plan for consistent, predictable cash flow
- Encourage clients to commit to work
- Look more professional
- Order materials and supplies for confirmed jobs only
- Have proof of an agreement in the event of a dispute
- Provide accurate bills to clients
Binding quotes protect your service business, communicate important information to clients, and make your administrative life easier. If you aren’t using them already, get started with job quoting software that does the heavy lifting for you.
Originally published in February 2022. Last updated on July 11, 2024.