An estimate is often the first calculation compiled for a project.
You can as well skip getting an estimate all together and opt for an accurate bid; however, because estimates are usually completed in a short time, it is deemed as a good starting point.
Although an estimate is a rough valuation, it will help you know if a project is within your planned budget, closed, or beyond your means.
Here is a good example— if you are contemplating including a swimming pool in your project, receiving about 3 to 4 estimates from different contractors will allow you to tell if, given your financial plan, having a pool is a realistically viable plan for your home.
If it falls within your budget, then you can proceed to get formal bids.
Simply put, an estimate allows you to have a perspective on how much a project will cost and whether to keep pursuing part of the project or not.
Estimates customarily aren’t legally binding for either the company providing the estimate or the client.
An estimate is typically what a small business considers are the charges for its services for a particular project.
This should not be binding as it doesn’t take account of final costs, but is just a rough calculation of where the costs might range.
The estimate provided should consider the dynamics that will define the final cost, such as the project timeline.
How an Estimate can be Binding
For instance, a moving company provides a homeowner with an estimate that shows the service will cost $10,000 to transport all contents of their home to a new home that happens to be in another State.
This figure is based upon the estimated weight of the contents to be moved, the distance to the other State, packing services, and also the mover’s insurance.
The estimate will include a statement noting that the conclusive price or fee may fluctuate based on the definite weight of the contents.
Nevertheless, an estimate could be binding if it specifies that all costs are final and assured that you are bound to the charges.
A binding estimate has to be in writing and a duplicate sent to the customer before the service is offered.
When a moving company provides the client with an estimate that is binding.
The charges outlined are final and cannot change at any point, even if the client’s movables are heavier than previously projected.
In case the homeowner requires extra services, at that point, the mover will ask the client to sign an addendum to the initial binding estimate that will include the new costs.
When an Estimate Is a Bid
Occasionally, some bids are labeled erroneously as estimates.
At times, a small business may use the term “estimate” as the main heading of the document, but in a real sense, they are creating a bid as projected by the body of the document.
Contract law declares that bids are deemed as proposals which can either be accepted or rejected.
A small business may opt to withdraw its bid at any time.
When an offer has been accepted by one party, it befits to be a contract. A contract can be either verbal or written.
A contract is lawfully binding basically because one party (a small business) is promising to do a service in exchange for the client paying for that service.
In this case, both parties have rights that remain legitimately enforceable on the condition that the offer has been accepted. Neither two parties can withdraw the offer or their acceptance.
Simple estimates are typically free. However, some service providers will charge clients for the time and effort it takes to make a comprehensive estimate.
Contractors that charge for estimates will provide a considerably detailed document where nothing is left out.
Estimates Can Be a Challenging Legal Affair
Normally, an estimate should not be legally binding and both parties should understand that it is bound to change once additional information about the project is unveiled.
If the client has obscured information about zones of rocky soil, perhaps the contractor was unconscious of that detail—the original estimate for the foundation would possibly not include the cost of jackhammering or blasting that rocky soil.
Therefore, the estimates for foundation building will rise. The reason being that of unanticipated rocky soil. And the increase is neither an error of the client nor of the contractor.
Estimates Help in Planning
Estimates are undoubtedly an indispensable part of pricing and transactions.
They provide an outline for time, scope, financing, and guide the client and contractor regarding projected costs and the range of crucial work to bring the task to completion.
Estimates are still, in their nature, indefinite.
Advantage of Estimates
Estimates, generally, are the least precise of documents. But the main benefit of an estimate is the fact that it can be prepared fairly easily and quickly to assist the client and the contractor to project and determine costs and help to budget for the project.
Estimates are fairly flexible, and that can allow for adjustments to meet the client’s budget and needs.
Although it is clear that estimates are just that — estimates — unless cautiously worded, estimates can be a source of legal responsibility.
Under some laws governing misrepresentation, inaccurate statements made to the other party can create the root of a claim of negligent misrepresentation.
How to Safeguard Against Estimate Claims
In the construction industry, developers and owners might depend on estimates as a basis for scheduling and financing a project.
Finance charges and interest payments accumulated because of scheduling and finishing point assumptions, maybe proclaimed as matters of damage.
Relying on a contract estimate document (project delivery forms differ from unit price and lump sum), an estimate can generate a clear reason for a neglectful misrepresentation claim.
How do you safeguard yourself while still maintaining the critical analysis of an estimate?
Here are some good tips that will surely help you when dealing with estimates:
- The estimate must have language that is subject to modification in time, scope, and financing.
- The estimate should include language that limits the projected use of the estimate — for example, it cannot be used to project a financial budget (otherwise, if it does, limit the use of the estimate).
- Differentiate the types of estimates that exist: preliminary estimate, intermediate estimate, and final estimate
Each estimate reflects a certain degree of certainty and progression of the project.
In the long run, an estimate is as essential a document to the project just as the contract.
Just like the initial project contract, it is critical to confirm the language described in the estimate and the use and level of dependence on the estimate.
If a project eventually goes south, be sure that the estimate will not be the document in question.