Legally Binding Nature of Signed Cost Estimates vs. Purchase Orders in the Philippines

This article explains how Philippine law treats cost estimates/quotations and purchase orders (POs), when each becomes a binding contract, and the common pitfalls that determine enforceability. It is general information, not legal advice.

1) The legal frame: how contracts are perfected in PH law

Under the Civil Code, a contract is perfected by consent, plus a certain object and cause (consideration) (Art. 1318). Consent requires a valid offer and an absolute acceptance (Art. 1319). If the acceptance adds conditions or varies terms, it is not an acceptance—it is a counter-offer (Art. 1319, ¶2).

For sales of goods or services, perfection occurs when the parties agree on the object and the price (Art. 1475). As a rule, no special form is needed for validity (Art. 1356). However, the Statute of Frauds requires a writing signed by the party to be charged for certain executory agreements—including a sale of goods P500 or more—for them to be enforceable in court (Art. 1403[2]). Importantly, the Statute of Frauds governs enforceability of executory contracts; partial or full performance generally takes the agreement out of the Statute.

Electronic documents and signatures are legally equivalent to paper and wet signatures under the Electronic Commerce Act (R.A. 8792) and the Rules on Electronic Evidence. Businesses therefore often bind themselves through e-mailed acceptances, e-signatures, click-acceptances, or EDI/ERP acknowledgments, provided reliability and attribution can be shown.

2) What is a “cost estimate/quotation” in law?

Typical legal character

A cost estimate, quotation, proposal, or pro forma invoice is usually treated as an invitation to make an offer, or as the seller’s offer that still requires acceptance by the buyer. Its binding effect turns on content and conduct, not its label.

When a signed estimate becomes binding

A signed estimate (by either or both parties) can ripen into a binding contract when:

Essential terms are definite: scope/specs, deliverables or quantity, certain price or a formula, delivery/performance schedule, and payment terms.
There is a meeting of the minds: the offeree accepts without qualification (Art. 1319). A customer’s written “Conforme/Approved” or purchase confirmation referencing the estimate can constitute acceptance.
No condition precedent remains: e.g., if the document says “Subject to issuance of a Purchase Order,” the PO is a condition precedent; until issued (or waived), there is typically no perfected contract.
Conduct shows acceptance: issuing down-payment, providing NTP (Notice to Proceed), supplying customer materials, or starting performance can evidence acceptance. Acceptance by conduct is recognized when consistent only with assent.

When a signed estimate is not binding

It uses hedging language: “budgetary/for estimate only,” “non-binding,” “subject to site verification,” “subject to management approval,” “subject to contract/PO,” or “prices may change without prior notice.”
Material terms are open: “price to be determined,” “TBD delivery,” or an index without a definable formula renders no certain price, so no perfected sale.
The signature is merely acknowledgment of receipt or for evaluation, not assent (“received for review”).
The supposed “acceptor” lacks authority (see §6 on authority) and the act is not ratified.

Bottom line: A signed estimate can be binding if it contains all essential terms and shows unconditional acceptance—but many estimates expressly defer binding effect until a PO or formal contract issues.

3) What is a “purchase order” in law?

A Purchase Order is a commercial instrument that, in Philippine practice, functions either as:

the buyer’s offer, which becomes a contract when the seller accepts (by written acknowledgment or by performance, e.g., shipping, starting services), or
a memorandum of an already-perfected agreement (e.g., after a signed quotation), in which case it serves as documentation and instruction.

Acceptance must mirror the offer. If the seller’s Sales Order/Acknowledgment or Delivery Receipt adds new material terms (liability caps, warranty limits, venue), that is a counter-offer unless the buyer assents or the parties’ course of dealing/usage supports integration.

Because a PO typically contains the object, price, delivery, payment, warranties, and T&Cs, it readily satisfies the writing requirement for enforceability under the Statute of Frauds. Delivery and invoicing further evidence perfection and performance.

4) Battle of forms (PO vs. quotation terms)

The Civil Code’s mirror-image rule controls: an acceptance that adds or changes terms is not an acceptance. In practice:

If the PO references the seller’s quotation “including its terms,” both sets may be read together.
If the PO says “subject to buyer’s T&Cs only,” and the seller ships without protest, courts weigh course of performance, prior dealings, trade usage, and the parol evidence rule to determine which terms govern.
Silence alone does not imply acceptance, unless there is a duty to speak (prior dealings, customs) and conduct shows assent.

Practical tip: Use explicit order of precedence and integration clauses to avoid uncertainty.

5) Conditions precedent vs. conditions subsequent

Conditions precedent (e.g., “subject to PO,” “subject to board approval,” “subject to site survey”) must occur before the contract binds. No fulfillment = no enforceable duty.
Conditions subsequent terminate or modify obligations after the contract exists (e.g., “price adjustable if FX moves by >5%”).

Whether a signed estimate or PO binds often turns on whether the “subject to” language creates a true condition precedent or merely a mechanical step. Wording and conduct decide the issue.

6) Authority to bind the company

A contract is only binding if signed or accepted by someone with actual or apparent authority:

Corporations: Authority flows from the Board under the Revised Corporation Code (R.A. 11232). Day-to-day contracting authority is commonly delegated (board resolution, secretary’s certificate, DOA matrix).
Apparent authority arises when the company’s representations lead the other party to reasonably believe the signer can bind the firm (e.g., position titles, prior deals).
Ratification cures lack of authority if the company, with knowledge, accepts benefits (e.g., accepts delivery, pays) or otherwise affirms the deal (Civil Code on ratification).

Red flags: “Sales trainee” signing a binding quote; “Received by” stamps; no DOA; inconsistent specimen signatures. Ask for a secretary’s certificate or DOA when in doubt.

7) Price certainty, variations, and change orders

A sale requires a certain price or a determinable price formula (e.g., bill of quantities × unit rates; FX/LME formula). Vague “market price” without a method is problematic.
Provisional sums, allowances, and reimbursables are enforceable if the method of measurement and valuation is agreed (e.g., time & materials rates).
Change orders/variation orders should specify: trigger, scope change, adjusted price/time, and documentation (site instructions, time sheets, delivery receipts). Absent an agreed mechanism, parties risk disputes over quantum meruit.

8) Delivery, risk, inspection, and acceptance

Delivery & acceptance often evidence perfection and performance. Keep Delivery Receipts (DRs), Goods Received Notes (GRNs), and Site Acceptance Tests (SATs).
Risk/title allocation typically follows Incoterms or explicit clauses; absent special stipulation, Civil Code default rules apply.
Inspection rights and rejection procedures must be explicit. Silent documents default to reasonable time standards and good faith.

9) Payment, retention, and remedies

Payment terms (e.g., 30/60/90 days, progress billing, milestones) must be clear. Invoices, official receipts (ORs), and withholding tax compliance matter for enforceability and defenses.
Retention or warranty holdbacks reduce post-completion risk; make release conditions objective (e.g., punchlist clearance).
For breach: specific performance, rescission, and damages are available (Arts. 1191, 1170). Liquidated damages are enforceable if not penal or unconscionable; courts may equitably reduce penalties.

10) The Statute of Frauds in practice (and how to satisfy it)

Executory contracts for sale of goods ≥ ₱500 must be evidenced by some note or memorandum in writing signed by the party to be charged (Art. 1403[2]). In modern commerce, treat anything beyond small petty cash as within writing requirements.
Any of these can satisfy it: signed PO, signed quotation with acceptance, e-mail chain clearly showing agreement on object and price, counter-signed terms, e-signature, or ERP acknowledgment attributable to the party.
Partial delivery/payment generally removes the bar to enforceability.

11) Electronic commerce specifics

R.A. 8792: Electronic data messages, documents, and electronic signatures are admissible and have legal effect. Reliability (system integrity, audit logs), attribution (whose act is it?), and integrity (unchanged content) are key.
The Rules on Electronic Evidence govern admissibility: keep system logs, hashes, metadata, and audit trails for POs/acceptances generated in ERP or via email.

12) Government procurement (brief note)

In public sector deals (R.A. 9184 and IRR), the binding sequence is formalized: Bid, Post-Qualification, Notice of Award, Performance Security, Contract/PO, Notice to Proceed. A “quotation” to government (e.g., under alternative methods like Shopping/Small Value Procurement) does not bind the government until the award and PO/NTP issue per IRR. Private-sector rules in this article do not override that regime.

13) Common scenarios and outcomes

Buyer signs supplier’s estimate “Approved/Conforme,” no “subject to PO,” all essentials present → Binding; the “estimate” operates as the contract.
Estimate says “Subject to issuance of PO and contract”; buyer signs but never issues PO → Generally not binding until the PO/contract (condition precedent) is met or waived by clear conduct.
Buyer sends PO that restates the quotation but adds a limitation of liability; seller ships without protest → Likely binding, but which terms govern turns on mirror-image rule, course of performance, and integration; risk of a battle-of-forms dispute.
Oral acceptance of a ₱1M estimate; supplier delivers part and buyer pays down-payment → Enforceable despite Statute of Frauds due to partial performance; documentary trail still advisable.
Employee with no DOA signs; company accepts delivery and uses the goods → Ratification or apparent authority may bind the company.

14) Drafting and process tips (checklist)

If you’re the seller:

Put “This Quotation, upon acceptance by conforme signature or issuance of Purchase Order, forms a binding contract” and identify the order of precedence.
Avoid “budgetary” labels unless you truly don’t want to be bound.
Include validity period, lead times, change-order mechanism, warranty, LDs, limitations of liability, governing law/venue, entire agreement, and electronic communications clause.
State any condition precedent plainly (e.g., “subject to PO” or “subject to NTP”), and withhold performance until it’s met.

If you’re the buyer:

Use a PO with your T&Cs and an integration clause: “This PO and the documents it incorporates constitute the entire agreement; seller’s terms are rejected unless expressly accepted in writing.”
Explicitly incorporate (or exclude) the seller’s quotation: “including (or excluding) all terms in Quote #… dated ….”
Require acknowledgment of the PO and no performance until acknowledgment; specify acceptance method (signature in system/email).
Set venue, governing law (PH), dispute resolution, inspection and rejection, IP/data protection, and compliance clauses.

For both:

Keep an email/ERP trail; use e-signatures; preserve delivery and payment records.
Ensure authority: ask for or issue secretary’s certificates/DOA.
Align tax docs (VAT invoicing, ORs, EWT) with the contractual story.

15) Quick decision tree

Are object & price certain?
- No → not yet binding.
- Yes → go to 2.
Is there absolute acceptance (no “subject to” that’s unmet)?
- No → condition precedent; not binding until fulfilled/waived.
- Yes → go to 3.
Is acceptance evidenced in writing/e-writing or by performance?
- Yes → enforceable (Statute satisfied or mooted by performance).
- No → risk under Statute of Frauds if still executory.
Was the signer authorized, or did the company ratify?
- Yes → binding on the company.
- No → potential unenforceability unless ratified/apparent authority applies.

16) Key takeaways

A signed cost estimate can be as binding as a PO if it has definite essential terms and is unconditionally accepted—unless the document itself makes a PO or contract a condition precedent.
A PO typically satisfies writing requirements and often becomes binding upon the seller’s acknowledgment or performance.
The labels (“estimate,” “PO”) are less important than the language, definiteness, acceptance, conditions, authority, and conduct.
Use clear drafting and documented processes to avoid the most common enforceability traps.

Model clause snippets (adapt as needed)

Acceptance & Formation “This Quotation shall become a binding contract upon Buyer’s (a) signed conforme, (b) issuance of a Purchase Order referencing this Quotation, or (c) acceptance by performance, including payment of any down-payment.”
Order of Precedence “In case of inconsistency, the following prevails: (1) Purchase Order cover page; (2) Special Terms; (3) this Quotation’s General Terms; (4) specifications; (5) drawings; (6) other documents.”
Condition Precedent “Supplier shall have no obligation to commence work until receipt of a duly authorized Purchase Order.”
Integration & Rejection of Other Terms “This agreement constitutes the entire agreement. Any additional or different terms in acknowledgments, delivery documents, or invoices are rejected unless expressly agreed in writing.”

If you want, I can turn this into a one-page checklist or add templates for (a) a binding quotation, and (b) a buyer-friendly PO with order-of-precedence and electronic-acceptance language.