Quotation: Overview, definition, and example
What is a quotation?
A quotation is a formal statement issued by a seller to a potential buyer that outlines the price of goods or services. It typically includes the costs, terms of sale, specifications, and other relevant details related to the transaction. A quotation is not an agreement but rather an offer from the seller that the buyer can accept or decline. Quotations are often used in business to provide customers with detailed pricing for specific products or services based on their needs or requests.
For example, a contractor might provide a quotation to a client for the cost of remodeling their home, specifying the materials, labor costs, and estimated project timeline.
Why is a quotation important?
A quotation is important because it helps establish clear terms between a buyer and a seller before a transaction takes place. It provides transparency regarding the costs and terms associated with the purchase, allowing the buyer to make an informed decision. For businesses, quotations are vital for managing expectations, preventing misunderstandings, and ensuring that both parties agree on the pricing and scope of work before any commitments are made.
For buyers, a quotation provides an opportunity to compare prices, negotiate terms, and evaluate offers from multiple vendors. It serves as a preliminary agreement on price and services, ensuring both parties are aligned before finalizing the sale or contract.
Understanding quotation through an example
Imagine a company looking to purchase office furniture. The company reaches out to several suppliers for quotes on the furniture, asking for details about the cost, quality, and delivery time. Each supplier provides a quotation, specifying the total price for the furniture, delivery charges, and any warranties included. The company compares these quotations and chooses the supplier that offers the best combination of price and service.
In another example, a client requests a quotation from a marketing agency for a branding campaign. The agency provides a formal quotation detailing the scope of the campaign, the proposed deliverables, the timeline, and the price for their services. The client uses this quotation to determine whether to proceed with the agency or explore other options.
An example of a quotation clause
Here’s how a quotation clause might appear in a business agreement:
“The Seller shall provide a written quotation to the Buyer detailing the price of goods, terms of delivery, and any applicable taxes or fees. The Buyer may accept or reject the quotation within [X] days from the date of receipt. Once accepted, the quotation shall form the basis of the purchase agreement.”
Conclusion
A quotation is a vital tool in business transactions that helps establish clear expectations between the buyer and seller. It provides detailed pricing and terms for a proposed sale or service and allows both parties to assess whether the deal meets their needs before committing to a final agreement. Quotations ensure transparency and can help prevent disputes related to pricing, terms, or the scope of work.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.