Quotations – are they legally binding?
We have several clients unsure about quotations and their place in business, whether they are important, what happens if they need to be changed, how and when to implement them. All important to get correct in the course of your businesses every day running.
Estimates vs quotes
In our initial consultation we have many clients say that they don’t give out quotes as that ties them into a specific price, instead they give estimates to their customers with a rough idea of costs. Your customers should always have agreed to a specific scope of works and you should stick to this, otherwise you may end up in hot water when it comes to getting paid. Where prices are likely to change there is a few ways that you can change this even where you have called the price and scope of works a quotation. In essence a quotation, an estimate or even a proposal are all the same thing, telling your customer what you are going to provide, and at what price – except if variables change.
Changing the price given in a quotation
So you’re wondering now if you had given a quotation rather than an estimate, how you change the numbers. One way some people like to do this is to build in some contingency fee to their quotations, an allowance for variables that may or may not be added to the works, however this doesn’t always work best for every business especially where they are in competition over price.
There are a few different other ways of doing this depending on the reason for the change. If the changes are due to changes in the works that you are doing then you can of course change your price because that is not what you had quoted. Whether is it a variation to just a colour change, an extra part or if they want entirely different services, you are able to change your quotation. Some businesses like to add an additional quote for the extra works, restocking expenses or other costs incurred, others prefer to update their previous one to reflect the new works that will be completed. Regardless of how this is changed you should always have the customer’s approval before doing any changes.
If your costs and expenses genuinely change then it won’t always be cost-effective to stick to your initial quotation and you may end up losing out. In this case it is acceptable to change your quotation provided it is done in the correct way. If your costs only change relatively rarely, such as an annual price increase, then it may be easiest to simply limit the time your quotation is able to be accepted for, possibly for 30 days or so in order to ensure that the quotation is not accepted after the price rise. If the job is smaller and you are able to fix a price with your suppliers then you may be able to limit your quotation to the same time you have fixed your suppliers pricing for. If the job is longer and supplies may change from time to time throughout it is best to state this up front and notify your customer as and when they change so that they can agree to such before you make the expenditure.
What if I can’t always stick to the quotation?
Sometimes you may not be able to always offer a fixed offer to be accepted by your customers. This may be because of price changes or stock availability; in these cases you can change the way the contract is formed. The typical format of a quote is that is an offer that is able to be accepted, which is when the contract is formed. However, you may wish to send a confirmation of the details once you are sure they are willing to go ahead – in this situation your quotation would not be the offer, rather their acceptance of the quote becomes your offer and your confirmation the acceptance. This needs to be made abundantly clear within your terms and conditions.
What’s included in your quotation?
it is important to ensure your scope of works is clearly defined within your quote, and any specific exclusions or limitations are clearly laid out. This may be things such as the amount of tweaks and fixes you have included, or what tools and materials you will supply as opposed to what your customer has to arrange. You don’t want to rip out a bathroom to find your customer hasn’t ordered the skip you needed! Additionally, it is important to make clear what the quote is based on, if the customer hasn’t given you the full picture or not told you about underlying conditions which affect you doing the works, you don’t want to be fitting the bill for these. If your quotation isn’t clear from the start, there could be ambiguity which allows them to argue it should be included.
Add your t&cs!
The most important part when quoting for any job is to ensure that they are fully aware of any terms or conditions that apply to the works! Some businesses like to add an inference to their t&cs, others like to attach them or even print them on the back – the only essential thing is that they know that they apply and are given the opportunity to read before they agree to them. If you don’t have a full set of t&cs or you have particular ones you wish to highlight you may even be able to add them to your quotation itself.
Will a purchase order cancel out your quotation?
The answer sometimes is yes, a purchase order usually contains pricing information and a scope of works and if these are different to what you have quoted then you must be careful which takes precedence. Sometimes a purchase order may need to be accepted to make a separate binding contract, and your customer may even have their own terms which they use for purchasing. You must always ensure that if you are presented with a purchase order that you check it through thoroughly for small print. If purchase orders contain a reference to their t&cs then you must either ask to check over these or push back on this and ensure your terms are the ones which your customer is bound to. It is also important that if you are to work on their terms/purchase order, that your scope of works takes precedence and is what you are working to. If they issue a purchase order different to your quotation but you accept then you are liable to produce the works they asked for, whether or not it is possible or cost-effective.