What is a quotation?
A quotation is a formal offer to supply goods or services at a stated price, for a stated scope, valid for a stated period.
The three “stated”s are what distinguish it from a casual price given over the phone. Each one is doing legal as well as commercial work.
What makes it a quotation rather than a chat
Three elements:
- A defined scope. Without it, neither party knows what the price covers.
- A fixed price. Not a range, not “around”. If you cannot fix it, you are issuing an estimate.
- A validity period. This is what lets you decline to honour it later without appearing unreasonable.
A price given verbally with none of these is still capable of creating expectations, which is the practical reason to put quotes in writing even for small jobs.
Is a quotation legally binding?
Broadly: a quotation is an offer. Once the customer accepts it, that acceptance generally forms a contract at the quoted price for the quoted scope.
That is why the validity period and the exclusions matter so much. They are the two mechanisms that keep the offer bounded — one in time, the other in scope. A quotation with neither is an open-ended commitment.
An estimate, by contrast, is not an offer of a fixed price and does not bind you the same way — provided you have labelled it as an estimate.
Quotation, estimate, tender and proforma
| Document | What it is | Typical context |
|---|---|---|
| Estimate | An approximation on limited information | Early enquiry, scope unclear |
| Quotation | A fixed-price offer for a defined scope | Most commercial sales |
| Tender | A formal bid against a published specification | Government and large-organisation procurement |
| Proforma invoice | Confirmation of what will be charged, after agreement | Export, advance payment |
When you would issue one
- A customer asks what something costs and the scope is knowable.
- You are competing against other suppliers and need to present professionally.
- The work involves materials or subcontractors you must commit to.
- The customer needs a document to obtain internal approval or funding.
- You want a written record of scope before starting.
What happens after acceptance
An accepted quotation should flow into the rest of your paperwork without retyping. Typically: quote accepted, deposit invoice issued, work performed, balance invoice issued, receipt issued on payment.
Keeping those documents linked — same customer record, cross-referenced numbers — is what lets you answer “what did we agree?” months later without reconstructing it from email.
Frequently asked questions
What does quotation mean in business?
A formal offer to supply goods or services at a stated price, for a stated scope, valid for a stated period. All three elements matter both commercially and legally.
Is a quotation legally binding?
A quotation is an offer. Once the customer accepts it, that generally forms a contract at the quoted price for the quoted scope — which is why validity periods and exclusions are important.
What is the difference between a quotation and an estimate?
A quotation is a fixed price and binds you while valid. An estimate is an approximation given on limited information and does not bind you the same way, provided it is labelled as an estimate.
What is the difference between a quotation and a tender?
A quotation is a price offer you issue in response to an enquiry. A tender is a formal bid submitted against a published specification, typically in government or large-organisation procurement.
Do I need a validity period on a quotation?
Yes. Without one the offer stays open indefinitely, and declining to honour an old price looks like bad faith rather than ordinary commercial practice.
What happens after a customer accepts a quotation?
Typically a deposit invoice, then the work, then a balance invoice and a receipt on payment. Keeping those linked to the same customer record is what lets you evidence what was agreed.