Quotation vs Purchase Order: Why a Quote Alone Doesn't Create a Contract

A buyer emails: "We accept your quotation." The seller replies: "We never received a purchase order." One party believes a contract exists. The other doesn't. Who is right?

This guide explains why quotations and purchase orders have different legal effects, and what documents are required to form a binding contract in international trade.

Is a quotation a legally binding offer?

No. Under contract law, a quotation is not an offer. It is an invitation for the buyer to make an offer.

Standard commercial contract clauses state this explicitly. According to contract terms documented by Law Insider: "Any quotation given by the Seller (whether in writing or orally) is only an invitation to the Buyer to make an offer."

This means a quotation by itself does not create legal obligations for either party. The seller can withdraw or modify the quoted terms at any time before a purchase order is accepted.

Key characteristics of a quotation:

• Invitation to offer, not an offer itself

• Usually includes a validity period (e.g., 30 days)

• Can be withdrawn or revised before a contract forms

• Does not obligate either party to proceed

When does a contract actually form?

A contract forms when there is a valid offer and acceptance. In the quotation-to-order process, the sequence works like this:

• Quotation: Seller proposes terms (invitation to offer)

• Purchase Order: Buyer makes a formal offer to purchase

• Order Confirmation: Seller accepts the purchase order

• Contract: Formed upon seller's acceptance

According to standard commercial terms: "The Contract is formed when the purchase order is accepted by the Seller." Until that acceptance occurs, no binding agreement exists.

For a contract to be legally binding, five elements must be present: offer, acceptance, consideration (exchange of value), intention to create legal relations, and capacity of parties to contract. A quotation alone does not satisfy these requirements because it is not an offer.

What if the buyer just emails "We accept your quote"?

An email stating "we accept your quote" does not automatically create a binding contract. Since a quotation is an invitation to offer (not an offer itself), the buyer cannot "accept" it in the legal sense.

Without a formal purchase order specifying quantities, delivery terms, and other key details, the seller has no obligation to proceed. The seller can still:

• Revise pricing before accepting an order

• Change lead times or availability

• Decline to proceed entirely

This is why buyers should always issue a formal purchase order and wait for the seller's written confirmation before assuming a contract exists.

What happens when terms don't match between PO and quotation?

When the buyer's purchase order contains different terms from the seller's quotation or order confirmation, a "battle of the forms" can occur. Each party's standard terms may conflict on issues like warranties, liability, delivery penalties, or dispute resolution.

Under the US Uniform Commercial Code (UCC), courts often apply the "knockout rule": conflicting terms cancel each other out, and UCC default provisions fill the gaps. Under the UN Convention on Contracts for the International Sale of Goods (CISG), which has been ratified by 97 countries representing two-thirds of global trade, the rules are stricter. Materially different terms in an acceptance may be treated as a counteroffer, meaning no contract is formed.

Common areas of conflict include:

• Warranty duration and scope

• Limitation of liability clauses

• Delivery deadlines and delay penalties

• Choice of law and jurisdiction

• Payment terms and conditions

How should exporters protect themselves?

Exporters should never assume a quotation creates any commitment from the buyer. Follow this process to ensure a binding contract exists before starting production:

• Issue a quotation with clear validity period and key terms

• Wait for a formal purchase order from the buyer

• Review the PO terms against your quotation for discrepancies

• Send an order confirmation explicitly accepting the PO (or noting any changes)

• Resolve any term conflicts before confirming the order

For high-value or recurring transactions, consider using a master sales agreement that governs all future orders. This eliminates the need to negotiate terms with each purchase order.

Quick reference: Document roles in contract formation

• Quotation: Invitation to offer (non-binding)

• Purchase Order: Buyer's formal offer to purchase

• Order Confirmation: Seller's acceptance of the PO

• Contract: Formed when seller accepts the PO

A quotation starts the conversation. A purchase order commits the buyer. The seller's acceptance creates the contract. Document all three before production begins.