Running the Business · Part 2
Estimate vs. quote vs. bid: the legal difference, and the moment a number becomes a contract
Contractors use "estimate," "quote," and "bid" as if they were the same word with different levels of confidence. In law they are different things, and the difference is whether the number can be held against you. An estimate is an approximation and says so; a quote is an offer to do defined work for a fixed price; a bid is a quote submitted in competition, and in California a subcontractor's bid to a general contractor becomes binding the moment the GC relies on it. This lesson gives the legal definition of each, the words that make a number one or the other, how long an offer stays open, and how the home improvement contract law folds the estimate into the contract itself.
What the full lesson covers
- An estimate is an approximation of cost with no promise to do the work at that number. Say so on the document: "Estimate. Approximate. Not an offer. Final price on written contract."
- A quote is an offer: defined scope, fixed price, stated validity period. When the customer accepts it unconditionally, there is a contract (Civil Code 1550, 1585), and the price is the price.
- A bid is a quote in competition. A subcontractor's bid to a GC binds the sub once the GC relies on it in the prime bid (Drennan v. Star Paving), even before the GC formally accepts. Bid numbers are checked twice and never revised down after the GC has used them.
- An offer can be revoked before acceptance, and it lapses after its stated period or a reasonable time (Civil Code 1587). Put the period on the quote: 30 days is common.
- On a residential job the number ends up on a 7159 contract as the contract price, or as an estimated amount on a time-and-materials contract that cannot be exceeded without the customer's written authorization. Every quote and bid carries the license number (7030.5).
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