View Full Version : Are you bound to your estimate price?
05-22-2007, 05:22 PM
I email a short estimate to potential customers. The form says "estimate" at the top but in the bottom is a place for them to accept the estimate. When the customer signs that estimate and returns it, am I now bound to that price?
05-22-2007, 05:32 PM
Boy, that really depends on what you have set up with your customer & the language of your estimate. By the word alone it is an estimate of cost, but what does that mean? What are you estimating? The highest possible cost, the lowest possible cost, the average if everything goes perfectly cost, etc. It is vague. In my experience most customers expect that number to be close to the final number and, if I haven't explained the details, I think they assume that is a firm top price.
If you don't already, I would include a detailed explanation of what you mean by "estimate" and all of the factors that may change that number, & how you and the client will address situations that will change that number.
In other words, yes, you are bound to your estimated price. It is up to you to define what may or may not change that price, and how accurate that price is. You are the one that is offering it as a part of a contractual agreement (even if it is a little vague).
05-22-2007, 08:14 PM
ruby doo, where are you located? and what do you do? and remember how you feel when you take your vehicle in for repairs and it is a heck of alot more than you expected... areyou happy. same thing for your customers, keep it close to the estimate even if you have to bite the bullet some times. it makes the customer come back happy for referrels and not pissed of. fill out your profile... do onto others as you wish to be done upon.... good rule of thumb, if you haven't cut it off yet in the saw....:)
05-22-2007, 08:57 PM
The form says "estimate" at the top but in the bottom is a place for them to accept the estimate.
The legal key is "offer and acceptance" creating a bilateral contract, since your form has legal language allowing the customer to accept then your "estimate" is more than a simple estimate, it is an offer capable of acceptance. In this situation you are bound by the owner's acceptance; in the future, if you want to keep your estimates to just rough estimates, remove the "acceptance" language from the bottom. To clarify so that a customer doesn't return your estimate with the words "accepted" and signed scrolled on the bottom, put "Rough Estimate Only" on the top.
05-22-2007, 08:57 PM
The word "estimate" sure tells me that you are unsure about the project.
You are the pro. You should be submitting a PROPOSAL for a specific scope of work. Sure, there are unseen things that can arise, but you note them in the proposal and say what they might be. The only way I ever change wording to "Estimate" is if I don't want to waste time on a tire kicker and throw out a ballpark price. I put in big, bold letters "THIS IS NOT A BINDING CONTRACT OR PROPOSAL."
05-22-2007, 09:23 PM
The legal key is "offer and acceptance" creating a bilateral contract,
I send out a proposal / contract. It arrives to the customer as a proposal and leaves as a signed contract. I really try to not discuss price until I know complete scope of work and my costs - then I may call with a price range if I think the customer will not want to pay the price or are just 'shopping' before I do to much leg work on an estimate - otherwise they get the complete proposal, where I do not just compete with another by a single numerical comparison, but a complete package.
Seems like Greg and I do it the same...
05-22-2007, 09:29 PM
Good idea. I like the idea of calling it a proposal. Same basic thing as an estimate without the clarity of purpose (by which I mean an estimate is a proposed cost before the details have been finalized into a contract).
05-22-2007, 10:23 PM
A proposal can also be construed to be an offer, whether it's labeled a "proposal" or an "estimate" doesn't make any difference, the legal test is if it can be accepted. Offer and acceptance are the the keys to the formation of a bilateral contract. A unilateral contract is not too different, the acceptance in a unilateral contract is performance, so if you offer to build a room on a house by sending him a proposal and one of the terms of the proposal is that he give you the keys to the house, if he gives you the keys a unilateral contract is formed.
The Statute of Frauds doesn't apply to construction work (unless it's going to take longer than one year to perform by it's terms), so the contract doesn't have to be in writing to be a valid contract (unless state law requires it to be in writing). An offer to purchase real estate does fall within the Statute of Frauds, and it does have to be in writing (like a promise to marry). BTW, the Statute of Frauds has nothing to do with fraud, only specifies which contracts must be in writing, evidently to prevent fraud.
05-22-2007, 10:51 PM
What about the e-mail issue. I have been under the impression that faxes and e-mails are not binding or at least not accepted in court. I have had to send proposals on bid day via fax but it is always with the stipulation that the signed original be sent certified mail immediatly. I have assumed this is because faxes and reproductions were not allowed in court. Can you clear that issue up?
05-22-2007, 11:32 PM
I haven't followed the digital signature thing, I'm aware that they are working on it, Adobe has a digital signature thing on it's latest PDF files, but I don't know whether it will hold up in court yet.
05-23-2007, 09:39 AM
I think it also depends on weather the client asked you to send a proposal, bid or estimate. If they asked you to send a bid or propoal, even if you don't include the accaptance section at the bottom , it would be binding. I don't see this as a big problem in the residential construction where you are dealing with the owner of a house. But in commercial construction where a developer or general contractor is relying on your proposal/estimate, it is legally binding. When they say they used your estimate to put together their numbers and send you a contract to sign, if you don't sign it, they can sue you to pay the difference between your proposal and the next lowest bid.
05-23-2007, 10:23 AM
At first I wondered where you were coming from and was going to ask you for some legal authority, but after reading your entire paragraph I see. There is a difference between a person asking you to send them your estimate in a residential setting, and a commercial setting where you know that the general contractor is going to be using, and relying upon, the lowest estimate in his bid. Just mailing an estimate to a person does not make it capable of acceptance unless it can reasonably be construed as an offer. In the situation you describe the subcontractor knows that the general contractor is going to be relying upon the lowest bid in his bid, but you do bring up a good point.
The legal basis of your commercial scenario is called "Detrimental Reliance", the general contractor relied to his detriment on the subcontractor's bid, and Detrimental Reliance can even become a substitute for consideration. I would suppose a case could be made that that a homeowner asked the contractor to submit a bid to him, he then took that bid to the bank and obtained a loan based upon that bid, if you then refused to enter into a contract based upon that bid, he could bring an action against you based upon his detrimental reliance upon your bid. A good reason to make it clear that it is only a rough estimate.
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