A Signed Quote And Unsigned Terms: What Actually Forms The Contract?

There’s a difference between a customer signing a quote and agreeing to your business Terms and Conditions.

It’s easy to assume that once a customer signs a quote, the contract is settled and all of your usual terms apply too. In reality, it can be a little more complicated than that.

A quote will usually set out practical details such as the work, price and timing. Your Terms and Conditions often go further, covering things like cancellations, liability, intellectual property and what happens if something goes wrong.

So, what happens if the quote is signed but the separate Terms and Conditions aren’t?

Signing a quote may create a contract, but it doesn’t automatically do so in every situation. And even where a contract has been formed, the signed quote may not be the only document that matters.

Separate Terms and Conditions can sometimes form part of the same agreement even if they weren’t separately signed. Whether they do can depend on what the documents say, when and how the terms were provided, what the parties did afterwards and the law of the relevant state.

If the transaction involves goods, the relevant state's version of Article 2 of the Uniform Commercial Code (UCC) may also come into play.

Does Signing A Quote Create A Contract?

Sometimes, but not automatically.

Calling a document a “quote”, “estimate” or “proposal” doesn’t necessarily decide its legal effect.

A quote may amount to an offer capable of being accepted, or it may simply provide pricing and other information before the parties enter into a contract. What matters is the wording of the document and the circumstances around it.

Depending on the situation, a signed quote might itself form an agreement, form one part of a wider contract or simply be one step in the contracting process.

For example, imagine a quote clearly sets out the work being provided, the price, timing and payment arrangements. The customer signs it, pays the deposit and the business starts work. Those facts could point towards the parties having reached an agreement.

In another situation, the quote might expressly say that it is only an estimate, is subject to further approval or won’t become binding until another agreement is signed. The outcome could be quite different.

Conduct can matter too.

Perhaps the paperwork wasn't perfectly completed, but the customer paid, the supplier delivered the work and both parties continued performing for months. That conduct may help establish that the parties understood themselves to have a contractual relationship.

For transactions involving goods, the relevant state's version of UCC §2-204 generally recognizes that a contract can be formed in any manner sufficient to show agreement, including through conduct by both parties recognizing that a contract exists.

However, showing that the parties entered into a contract doesn't necessarily answer the next question: what terms did they actually agree to?

That becomes particularly important if the signed quote deals with the price and work, while your cancellation rights, liability limits or IP provisions appear somewhere else.

If A Contract Was Formed, Were Your Terms And Conditions Part Of It?

A contract doesn't necessarily have to sit in one neatly signed document.

Separate Terms and Conditions can sometimes form part of the same agreement even if the customer didn't sign that particular document. One way this can happen is through incorporation by reference.

Essentially, one contracting document clearly states that another identified set of terms also forms part of the agreement.

There can be an important difference between saying:

“Terms and Conditions available on our website.”

and clearly stating that:

“This Quote is subject to and incorporates our Terms and Conditions available at [link].”

The exact wording and the applicable state law matter.

A Florida case provides a useful example of how incorporation by reference can go wrong.

In BGT Group, Inc. v. Tradewinds Engine Services, LLC, BGT sent a quote for turbine parts stating that its quotations, invoices and orders were subject to attached Terms and Conditions. However, those terms weren't actually attached during the negotiating process.

After the buyer sent a purchase order and a dispute later arose, BGT tried to rely on an arbitration clause contained in the separate terms.

The court found that the Terms and Conditions hadn't been properly incorporated into the sales contract. Among other things, the separate document hadn't been sufficiently described and wasn't provided during negotiations.

The exact requirements for incorporation can vary by state, but the case shows why businesses shouldn't rely on a vague reference to Terms and Conditions that the customer was never properly given.

Your quote, proposal and Terms and Conditions should clearly work together so the customer can understand what they're agreeing to.

Were The Terms Provided Before The Contract Was Formed?

Timing can make a big difference.

Imagine you send a customer a quote on Monday. They sign it on Tuesday, pay the deposit and you start work on Wednesday.

Then, on Friday, you send your standard Terms and Conditions for the first time.

If an agreement had already been formed before the customer received those terms, it may be difficult to argue that the later document automatically became part of the original deal.

Compare that with sending the quote and Terms and Conditions together before the customer accepts, with the quote clearly stating that those terms form part of the arrangement.

As a practical rule, your position is much stronger if the applicable Terms and Conditions are provided or made clearly available before the customer accepts the deal.

The same issue can arise where your terms sit online.

Simply having Terms and Conditions somewhere on your website doesn't necessarily mean every customer has agreed to them. How the customer was directed to those terms, whether they could access them before accepting and what the other contracting documents said can all be relevant.

It's also worth keeping track of which version of your online terms applied at the time.

If you update your Terms and Conditions six months later, you don't want to find yourself trying to work out which version a particular customer was supposedly agreeing to when they signed their quote.

The practical point is to think about the whole contracting process, rather than treating the quote, emails and Terms and Conditions as completely separate pieces of paperwork.

Does It Matter Whether You Sell Goods Or Services?

Yes, because the legal framework can be different.

State enactments of Article 2 of the Uniform Commercial Code generally govern contracts for the sale of goods.

A contract for services, on the other hand, will generally be governed by the contract law of the relevant state rather than UCC Article 2.

Some transactions involve a combination of both. For example, a business might supply equipment and also provide installation, training or ongoing support.

How a mixed arrangement is treated can depend on the applicable state law and the nature or main purpose of the transaction.

This distinction becomes particularly important where the parties have exchanged different sets of standard terms, because Article 2 contains specific rules that can apply to sales of goods.

So, there isn't one nationwide rule that answers every dispute involving a signed quote and unsigned terms. The type of transaction and the state law governing it can both affect the outcome.

What If You Both Sent Different Terms?

Sometimes the problem isn't that one set of Terms and Conditions wasn't signed. It's that both sides have sent their own terms.

For example, a supplier might send a quote stating that its Terms and Conditions apply. The customer then responds with a purchase order containing its own purchasing terms.

The supplier's terms might limit its liability, while the buyer's terms don't. One document might require arbitration while the other allows disputes to go to court.

For sales of goods, this can raise what is commonly called the battle of the forms.

The relevant state's version of UCC §2-207 can apply where an acceptance or written confirmation contains additional or different terms.

Between merchants, certain additional terms may become part of the contract unless, for example, the original offer limits acceptance to its own terms, the new terms materially alter the agreement or the other party objects.

The parties' conduct can also establish a contract for the sale of goods even where their written documents don't otherwise create one.

There isn't a simple rule that whichever business sent the last document automatically gets its way. State law can affect how conflicting terms are treated, particularly where the documents contain different, rather than simply additional, terms.

If two sets of standard terms conflict over something important - such as liability, warranties, indemnities, payment or dispute resolution - it’s worth getting legal advice rather than assuming your version applies.

What If The Term You Need Is Only In The Unsigned Terms?

Often, nobody questions which documents formed the contract until something actually goes wrong.

The quote may be perfectly clear about the work and the price. The problem arises when the clause you now need - perhaps a cancellation fee, liability cap or IP provision - sits only in your separate Terms and Conditions.

For example:

Cancellation fees
The customer cancels after you've booked resources or started preparing the work, but your cancellation fee appears only in the separate terms.

Limitation of liability
A customer makes a claim and you want to rely on a liability cap that isn't mentioned anywhere in the signed quote.

Intellectual property
The quote explains what you're creating, but your Terms and Conditions contain the provisions dealing with who owns the finished work.

Late payment provisions
The customer hasn't paid on time, and the rules around interest or late fees appear only in your standard terms.

Warranties and indemnities
An issue arises and one party wants to rely on protections that weren't set out in the signed document.

At that point, simply saying “these are our standard terms” may not be enough.

Before you can rely on the clause, you may first need to establish that the document containing it actually formed part of the agreement.

This is why contract problems can stay hidden for quite a while. Both sides can agree about the price and the work being done, only to discover later that they have completely different views about the rules that were supposed to apply around it.

If an important clause only appears in separate Terms and Conditions and its application is now in question, it’s worth getting legal advice about whether those terms actually formed part of the agreement rather than assuming the clause can be enforced.

How Can You Avoid A Dispute Over Which Terms Apply?

The easiest time to deal with this issue is before the customer accepts anything.

If your business uses quotes alongside separate Terms and Conditions, make sure the documents are actually designed to work together.

Your quote should clearly identify the Terms and Conditions that are intended to apply, and customers should have access to those terms before they accept.

It's also worth making the acceptance process clear.

Does the customer accept by signing the quote? Paying a deposit? Clicking an online acceptance button? Signing a separate agreement?

Your documents should make that process clear rather than leaving the parties to work it out after something goes wrong.

If your terms are online, keep track of the versions you're using. If you regularly update them, you should be able to identify which set was presented to a particular customer at the relevant time.

Your other documents should line up too. A quote, proposal, purchase order, invoice and set of standard terms shouldn't all contain different rules about the same transaction.

For more substantial or ongoing customer relationships, it may also be worth asking whether a short quote plus generic Terms and Conditions is the right contracting setup at all.

A properly drafted Service Agreement, Supply Agreement or other commercial contract can bring important terms - such as scope, fees, payment, IP, liability and termination - into a clearer framework.

If you're already using quotes, proposals and separate standard terms, a Business Contract Review can also help identify inconsistencies or gaps before they create problems.

Sprintlaw can help with Contract Drafting and Contract Review to make sure your contracting documents clearly work together and reflect how your business actually deals with customers.

Key Takeaways

There are two separate questions to think about: did the parties form a contract, and if they did, which terms formed part of it?

Signing a quote can sometimes create a contract, but it doesn't automatically do so in every situation. The wording of the quote, what happened between the parties and the applicable state law can all affect the answer.

Separate unsigned Terms and Conditions can also sometimes form part of the agreement, including through incorporation by reference. However, they don't automatically apply simply because your business normally uses them.

How the terms were incorporated, when they were provided and whether the customer had access to them can all matter.

For transactions involving goods, the relevant state's version of UCC Article 2 can add another layer, particularly where the buyer and seller have exchanged conflicting documents.

If your business relies on quotes alongside separate Terms and Conditions, the safest approach is to make the documents, timing and acceptance process work together clearly from the beginning.If you would like help with this, you can reach us at (888) 449-8437 or team@sprintlaw.com for a free, no-obligations chat.