Price Quote

Price Quote: An in-depth Explanation

A price quote can be written or verbal, depending on the understanding between the seller and buyer. Despite this, it is advisable to have a price quote in writing. Generally, the content of a written price quote should include, but is not limited, to the following:

• The supplier’s business details
• Specification of the product or service
• Cost break down (if applicable)
• Validity of the price quote
• Payment details

Since a price quote can be thought of as a proposal, the details and format can vary according to the nature of the business. For instance, in the construction industry, time of completion is of the utmost importance. In a product based business, quality, durability and other such aspects are more important.

Terms and conditions constitute one of the most important features of the price quote.

Price Quotes: Terms and Conditions

Terms and conditions make up the contractual agreement between the parties. They are there to safeguard that the parties understand their legal rights and obligations. The prior agreement on terms and conditions helps to ensure that there has been a meeting of minds between the seller and buyer. In the event of a dispute, the terms and conditions will help to ensure that any dispute will be resolved on a timely basis.

Since the terms and conditions constitute an important aspect of the price quote, it is beneficial for all parties to agree on the terms and conditions to avoid any misunderstanding in the future.

Generally, terms and conditions for the price quote include, but are not limited, to the following:

• Acceptance of purchase order and contract

  Acceptance of terms and conditions is necessary to enter into the contract. Once parties enter into the contract, the terms and conditions, which are an important part of the contract, are binding on both parties. All terms and conditions that are mentioned in the price quote will supersede all other terms and conditions which may have been communicated orally or in any other form. If there is to be a change to the terms and conditions of the quote, they should be agreed upon by both the buyer and seller.

• Applicable prices and taxes

  The price is one of the essential items in the quotation. In fact, the buyer will compare different price quotes on the basis of price, before deciding to accept one quote as opposed to another. In addition to price, there can be different types of taxes such as value-added tax, levy, import duties, excise duty, registration fee, license and any applicable penalties on the deal.

• Shipping, packaging and delivery

  This is another important feature when it comes to trade transactions. Particularly in the case of import and export businesses, the shipping, packaging and delivery costs can make up a significant and major portion of the total cost. Thus, there is a greater need to emphasize these terms and conditions for this type of transaction.

• Intellectual Rights - (IP)

  When dealing with intellectual rights, the terms and conditions related to such transactions are of greater significance. There is a need to agree in advance if IP rights will be transferable, revocable or if there are certain restrictions on the use of services or products. Similarly there can be agreements that the customer will not be permitted to reverse engineer, clone a product or produce similar product types.

  In simple terms, the detailed IP terms need to be agreed upon by the product seller and customer. The agreement for IP terms and conditions include but are not limited to:

  • Right to use the product
  • Modification of the product
  • Any fee related to the license or use of the product
  • Compliance with the design or structure of the product
  • Rights of alteration presumed by the buyer
  • Restricted use of the product
  • Copyrights, trademark, and any other terms for the product use
  • Any indemnity

  It is important to note that the seller may transfer exclusive rights on the sale transaction.

• Payment terms

  The customer and seller may agree on different payment terms. For example, the transaction may be agreed upon in cash, credit for 30 days or any other terms to be agreed between the two parties. The payments can be deemed a receipt when a check is received or funds are transferred to the account.

  The payment terms for a transaction may include, but are not limited to, the following:

  • Any interest to the amount if the due date has passed
  • The interest rate on the due balance
  • Payment milestone
  • Advance payment
  • Recovery of any attorney fee for the collection of a due amount

• Applicable warranty

  Usually a seller will provide a warranty for the product sold. The warranty guarantees that the product is defect free and capable of being used for the intended purpose. The warranty may also include matters such as, maintenance, alteration, overhauling, unusual damages, and operating, just to name a few. Warranty clauses may be different depending on the product sold.

• Disputes

  This section details how a dispute will be resolved if there is a disagreement about the terms and conditions. Generally, the price quote for local trade utilises regulatory bodies as a dispute resolution point. For international trade, disputes are resolved by the international chamber of commerce.

• Governing laws for the trade

  The price quotation will specify the governing laws for the trade, which vary in line with the territory or location where the parties are based. In international business, global trade rules are applied.

Price Quote Disclaimer

A price quote disclaimer is included in the quote and is used to protect the seller when there are changes in the standard requirements. For example, the disclaimer might mention that the price may change in the event that the customer changes any requirements. A disclaimer may also draw attention to the product use. In other words, that the product is only suitable for the purpose that it is meant for. A disclaimer also mentions that it is only valid for the party mentioned in the price quote.

Overall, the purpose of the disclaimer is to ensure that the seller remains on the safe side.

Sample disclaimer:

Thank you for your interest in doing business with us. Please note that prices quoted pertain to standard specifications and terms. The final price is dependent on our technical analysis or if anything additional is requested. Further, information in the quote is confidential and the quote stands valid for you and must not be shared with a third party without our prior written consent.

Sample Email Template for Price Quote

Conclusion

Sellers issue price quotes to potential buyers in order to communicate the terms and conditions of trade. Certain components of the price quote which relate to the potential trade between seller and buyer include, business details of the supplier, product or service, specifications, cost breakdown for the total balance, validity period, details of the payment and others.

Terms and conditions constitute an important part of the price quote. These terms and conditions include, but are not limited to, acceptance of the purchase order, applicable prices and taxes, shipping, packaging, delivery, payment terms, warranty and other terms of trade.

If the seller and buyer agree on the terms of trade, then a legally binding contract is entered into and formed.

A disclaimer is another important feature of the price quote. It is included to protect the supplier or seller. A price quote might have different angles such as price, quality, payment, packaging, delivery, and other such details.

Frequently Asked Questions

Why is the expiration date necessary for a quotation?

We live in a world where inflation will increase from time to time. It is not logical to commit to sales for an unspecified period of time. This is because there is a higher risk that product prices will increase. If the seller commits to sell into the future, then they would have to sell the product or perform the service at the original price even though they could potentially sell at a price in which inflation is factored into.

It is important to note that a standard quotation expiry is 30 days.

What is the implication if the price quote has expired?

If the price quote expires, the buyer will no longer have the option of choosing to accept the quotation as the offer would have lapsed. If the potential buyer would still like to consider purchasing the product, a new revised quotation would need to be provided by the seller.

It is normal practice in trade, for companies to obtain three different quotations from different suppliers. It is even advisable to obtain quotes from suppliers in different markets.

For how much time is the price quote valid?

Usually a price quote is valid for 30 days. However this is not a strict rule. It is mainly dependent on the agreement between buyer and seller and there may be more days in the price quote than usual.

What is the difference between an estimate and quote?

An estimate is a guess as to the cost of the product whereas a quote is exact and used to communicate the terms of the deal. An estimate may be given by a contractor and it is their thoughts on how much the product should cost. Because this is just a contractor’s guess, there may be a difference when the bill is received. Whereas a quote is somewhat more accurate and is used as a term by the seller to offer the buyer into entering the contract.

Other types of invoices:

• Standard Invoice: standard invoice issued by a TAX payer
• Invoice for TAX non-payer: standard invoice issued by a TAX non-payer company
• Proforma invoice: simple request for payment
• Credit note: refunding a customer
• Recurring invoice: automatic invoicing a subscribing customer
• Debit note: requesting a refund from a vendor