Is an Estimate Legally Binding?

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Contract, bid, and written estimate are the three important terms in any deal, and they can be misunderstood easily. Estimation is the first step that consists of an approximate value of the project, which is indeed essential information in many ways.

It just includes roughly close numbers for the actual outline of the project delivery forms but no terms, conditions, details, or firm commitments, which keeps it away from legal binding. After the estimation, a formal bid can be made, and then a final contract. However, the initial estimation step can be skipped if the client or company wishes to bid directly.

The one biggest benefit estimation can add is that it can be prepared in a shorter time and can provide a rough idea of the project, which is why most professionals prefer to present it before the bid. So, let’s continue reading this blog and get an answer to your question – is an estimate legally binding.

When and How an Estimate is a Bid?

Just an estimate can be a bid under two circumstances: when the company itself is proposing a binding estimate as a bid and when a company submits a bid under an estimation title out of some unawareness.

  1. When a Company is Knowingly Offering a Bid:

    • In this case, the company is sending an estimate as a bid which leaves no room for changes if a client wants to accept it.
    • For instance, if a client is looking for a contractor to rebuild his garage then he may receive estimates explaining the different new costs involved in the material, labor, and equipment. The small company that is providing an estimate will only name it as a bid if the figures and content are totally exact from their side.
    • In this, it is up to the company or contractor of the construction industry whether they want to prepare a basic estimation and then give a final price or directly want to send their final offer and fixed price without investing further time.
  2. When the Estimation is Misunderstood as a Bid:

    • Small businesses and independent contractors sometimes don’t follow the formal procedure and send a preliminary estimate reflects that says bid in the title box or a bid that says original estimate in the title box.
    • So, in this case, the lack of clarity in the document becomes the main issue.
    • That’s why the company needs to understand the market and the valid language for professional communication before submitting a professional estimate.
    • Nevertheless, a contractor can withdraw the bid anytime and try for another one with correction.
    • Any error in writing or understanding can cause such a false bid, but it can be amended before both the parties sign it and make it a contract, be it verbal or written.

estimate associated legal problem

As already discussed, estimation is not a legally binding estimate contract document, but it can bring legal issues to other legally documents, such as legally binding contracts.

Role of Estimation in Legal Concerns:

  • Estimation is supposed to include every detail and factor that is going to take part in the final project. Therefore, legal disputes can also happen when sudden and significant changes arise in the actual project execution.
  • Estimation itself is not claiming anything affirm as it is just giving an abstract of the project timeline surely without any false or unnecessary information. Nonetheless, because it will become the foundation for bidding and then for contract, it does bring some rules and limitations that both parties are supposed to respect.
  • When some work is done or material is used which is not mentioned in the estimation of the legal contract, both parties can get into legal trouble if they fail to solve the dispute verbally.

For these kinds of issues, an estimation is supposed to include norms and provisions for accidental works. Most estimators always keep such concerns in mind while developing an estimate, but small businesses can sometimes ignore them.

Important Advantages of Estimate

Taking estimation as a first step can provide several benefits in order to build a transparent and satisfactory contract estimate document between two parties. Estimation is a quick move and much more flexible than an accurate bid.

With estimation, the company can buy some extra time to come up with a more accurate financial analysis and feasible legal agreement. In addition, estimation allows a company to make multiple changes and formats in different parts, such as primary estimate, intermediate estimate, and final estimate. This nature of estimation certainly makes both the parties manipulate the details however they like.

Another advantage of an estimated cost is a great help in planning. With an approximate financial layout, engineers and designers can surely decide more fairly on material, timeline, and other crucial factors.

Estimation surely helps the company to put more thought into the determining factors and come up with a solid and definitive contract. Moreover, it helps the employees to design and plan the right project with minimum trials and cost plus contracts is perfectly suitable for both parties.

How to Avoid Legal Claims Related to Estimates

The estimation helps both parties schedule and design the project further once the outline is acceptable. However, it surely has some limitations and can only reflect a certain level of accuracy. Therefore, the true nature, objective, and use of the estimation should be completely clear in the client’s mind to avoid legal disputes from his side.

What Should Be Done to Avoid Legal Claims:

  • The estimation document should be professionally written with the construction industry or any industry-accepted language that allows both parties to get the right context of the details.
  • It should include truthful statements that can prevent clients’ unreasonable and disadvantageous use.
  • The matter of changes, fluctuating market, and accidental additions should be in the document to make the terms clear.
  • For safer practice, an estimation can be sent in different levels of accuracy. Then a final estimation can be included in a bid to go toward the conclusive contract law procedure.

Like any other formal document, an estimation file just needs a secured explanation of every legal and technical detail which can protect it from being used as a legally responsible document when something goes wrong in the final project as a legal responsibility.

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Conclusion

With a bid, you get exact figures and elements of the deal and that requires it to be accepted or rejected by the client. On the contrary, an estimation is merely a simple document that tries to give a perspective on the project to determine the future.

The client can ask for estimations from multiple different companies in order to check if his requested project is falling under his presumed budget limit or not. It is a very beneficial step because the client can decide what changes he might make to his requirements? What are the possible final costs of his project? And which company should he select?

Many meetings, negotiations, and discussions can happen in the professional world before signing any legal document. So, by estimating software online for contractors, possibilities of changes and negotiations are highly associated as it is more like an initial financial layout of the project for both parties.

Once the company’s final bid is submitted, both parties are supposed to sign a fully detailed contract law to officially start the work, making them legally obliged for all the terms and conditions mentioned.

Author Bio
Jeel Patel
Jeel Patel
Founder

Jeel Patel is the Founder of InvoiceOwl and is the main curator & writer of the content found on this site. With ideals of quality, commitment, and perseverance, he believes in creating lasting business relationships with the clients.

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