Do you know the difference between a quote and a binding offer?

Before a person provides services to another, they will often give a quote estimating or fixing a price for the services. Caution is required when using the term ‘quote’ because it may be construed as an offer by one party which, if accepted by the other, would create a binding contract between them.

In Megalift v Terminals [2009] NSWSC 324, the Supreme Court of NSW held that an estimate provided by one commercial party to another may be an offer capable of acceptance that creates a binding contract requiring a party to provide services for the cost of its estimate.

This is an important message for contractors (and subcontractors) who do not intend for an indicative or estimated price for services to be legally binding. If you do not intend to be legally bound to a cost estimate for services then it is recommended that the quote expressly provides that it is not a binding offer.

In each case, the commercial context of the negotiations as well as the circumstances in which a quotation was discussed will be important in considering whether there was a quotation of price only or an offer to sell that created a binding contract.

If you have any further queries or questions or would like more information regarding contracts and quotes, please do not hesitate to contact our Commercial Law team at wmd@wmdlaw.com.au or on 9525 8688.