Is an Estimate Legally Binding?

What’s the difference between estimates and contracts?

An estimate is a ballpark number for how much a job will cost. A contract is a legal document that binds you and the client to the terms of the written agreement. 

An estimate can be rejected or approved and can be provided verbally or on paper, while a contract must be in writing and include a digital or in-person signature from the client. 

Nonbinding estimates can change or be adjusted as the project scope or labor costs change during a job, but binding estimates act similarly to contracts and are non-negotiable once they’ve been signed.

READ MORE: Learn when, how, and why to charge for estimates

What is a binding estimate?

A binding estimate is an estimate that includes specific elements that make it an enforceable legal contract. For an estimate to become binding, it must: 

• Be in writing 
• Detail both parties in the agreement (you and the client)
• Clarify what you will provide to the client and what you will receive in return (for example, a $25,000 kitchen redesign)
• List the services you will provide, as well as what is and isn’t included (for example, countertops and backsplash are included but appliances are not)
• Clearly outline the maximum amount the client will pay at the end of the job, including additional charges such as taxes
• Include any estimate disclaimers or payment terms
• Be accepted by the client, either through a signature or digital confirmation

With a binding estimate, the price you provide to the client is the final cost they’ll pay, whether your costs go above or fall under that amount. 

For example, if a client signs a binding estimate for a $2000 job, that’s how much you’ll get, regardless if the work ends up being worth $1500 or $3000. 

You can also offer binding not-to-exceed estimates to your clients. This type of estimate ensures your client will pay no more than the maximum stated, but could pay less depending on the total job costs once it’s finished. 

A binding estimate can be used to pursue legal action if the client short-pays or refuses to pay at all.

Are verbal estimates legally binding?

Verbal estimates are only legally binding if you can prove that they exist and that the client agreed to the terms. 

Since this is nearly impossible to do without a recording or an impartial eyewitness, most verbal agreements are not legally binding. 

It’s best practice to create written estimates because: 

• If they include the right elements, they’re more likely to be legally binding
• They provide a paper trail you can refer back to
• They can act as proof in the event of a dispute
• They reduce the risk of misunderstanding or confusion

Is a signed estimate a contract?

A signed estimate only qualifies as a legally binding contract if it’s detailed enough. 

For example, a signed estimate that includes a breakdown of the total cost, services, and any terms or conditions may be considered valid. 

But a client’s signature next to an estimated cost on a piece of paper likely won’t count as a binding legal contract.

How to make legally binding estimates

When it comes to making legally binding estimates, you have two choices. You can either make them manually using a text editor like Microsoft Word or Google Docs or you can use software like Jobber. 

While you’ll have to customize the information you include in both options, like the job details and costs, Jobber ensures your quotes include the necessary elements to make them legally binding. 

Here’s what a binding estimate made using Jobber looks like: