Section 2(a) of the Indian Contract Act, 1872 defines a proposal as signifying
to another person your willingness to do something, with a view to obtaining the assent of that other.
That is a quotation exactly. Section 2(b) says a proposal, when accepted, becomes a promise, and section
2(h) says an agreement enforceable by law is a contract.
Section 5 sets the window you have: a proposal may be revoked at any time before the communication of its
acceptance is complete as against the proposer, but not afterwards. So the question that decides whether
you can still change your price is not whether you have signed anything. It is whether they have accepted
yet.
Section 4 makes that window narrower than most people expect. The communication of an acceptance is
complete, as against the proposer, when it is put in a course of transmission to him, so as to be out of
the power of the acceptor. Their acceptance email binds you before you open it. The section was written
for post and telegram, and on the narrower view the courts take of instantaneous messages it binds you on
arrival rather than on sending. Either way there is no gap between their sending and your reading in which
you can still pull out.
Which brings you to the one line that actually protects you. Section 6(2): a proposal is revoked by the
lapse of the time prescribed in it for its acceptance, or, if no time is so prescribed, by the lapse of a
reasonable time. Prescribe a time and you know the day your exposure ends. Prescribe none and
reasonable gets decided later, by someone else, on facts you will be arguing about. A customer who
accepts a four-month-old quotation after your material costs have moved is the whole problem, and one
sentence prevents it.
Two more provisions are worth knowing before you send anything. Section 7(1) requires acceptance to be
absolute and unqualified, so a reply accepting at five percent less is a counter-offer and does not bind
you at all. And section 8 says performance of the conditions of a proposal is itself acceptance, which
means starting the job on a phone call forms the contract on your quoted terms whether or not anybody
signed. If your terms were thin, that is the moment it matters.
GST sits on top of this rather than inside it. A quotation is not a GST document: section 31 of the CGST
Act does not mention one and Rule 46 does not prescribe its contents, so there is
no official quotation format and no mandatory field list. But section 14 means a
quotation is not a rate lock, because if the rate moves between your quotation and the supply it is the
invoice and payment dates that fix which rate applies. And section 15 reaches
into your terms in three places: packing and incidental charges form part of the value even when billed
separately, late-payment interest is itself taxable when you charge it, and a discount only escapes GST if
it reaches the invoice. Our
guide to getting
receivables paid faster covers the payment-terms side of the same problem.
A quotation also sits next to two documents people confuse it with. A
proforma invoice looks like an
invoice and creates nothing, which is the mirror image of a quotation: a quotation looks informal and
creates a contract. A purchase order is
the customer's document, and it is usually how the acceptance arrives.
