Are Estimates Binding?

It is common practice for potential clients to request an estimate of fees for engineering services. An estimate allows clients to appropriately plan and budget based on the anticipated cost for services.

On larger projects, clients typically provide sufficient details regarding a project, which allow an engineer to provide a reliable estimate. The estimate often becomes a critical term of the contract, as seen in the construction bidding system.

In general, smaller projects are less formal and clients may be unable to provide well-defined details for a project. As such, an engineer may be required to make several assumptions, which decreases the reliability of an estimate. Regardless, clients are likely to request an estimate, or at the very least, a range for the anticipated cost. If the actual cost exceeds the estimate, this can become a point of contention. If this is the case, is an engineer required to provide the services based on the estimated cost?

An estimate is not a guarantee or a warranty at law. [i] If the estimate is included as a term in the contract, then it is generally binding unless the contract includes language which allows the estimate to be adjusted at a later date. If an estimate is not a contractual term, it may have contractual effects depending on the circumstances it was given in.[ii] A court will look at the following factors to determine if the estimate is binding: circumstances in which the estimate was provided; positions of the two parties; knowledge of the party providing the estimate; and whether the estimate was relied upon by the party requesting it.[iii]

A verbal estimate provided over the phone is likely not binding. However, if an engineer subsequently visits the project site and provides an estimate, then it could be binding under the right circumstances.

In the court case Kidd v. Mississauga Hydro-Electric Commission, a consulting engineer estimated that staffing costs would be $5,000, but the actual cost was over $14,000. The court found that the estimate was binding because the scope of services remained the same but the cost for services greatly exceeded the estimate. Further, the estimate was used to induce the client into the contract.[iv]

An engineer may not be bound by an estimate if any of the following apply: work is completed outside the estimate at the request of the client; the amount of work is increased by the client’s conduct; unforeseen circumstances add a new and unexpected dimension to the work.[v] In another court case Pillar Resource Services Inc. v. PrimeWest Inc., an engineering firm was not bound to its estimate because the client provided inadequate drawings and details for the estimate and required the engineer to adapt to unforeseen circumstances and problems on site. [vi]

In conclusion, an estimate should not be included in a contract, unless it is expected to be relied upon. If an estimate is provided in a contract or as a separate document, a clause should be included to clarify that the estimate is subject to change under specified parameters.

This article may also be found here: http://www.corestone.ca/are-estimates-binding/

[i] Hodgins v. Hydro-Electric Commission of Nepean, [1976] 2 SCR 501, 1975 CanLII 31 (SCC)

[ii] Golder Associates Ltd. v. Mill Creek Development Ltd., 2004 BCSC 665 (CanLII)

[iii] 39957 Yukon Inc. v Sinclair 2012 YKSM 4

[iv] Kidd v. Mississauga Hydro-Electric Commission et al., 1979 CanLII 1714 (ON SC)

[v] See ii

[vi] Pillar Resource Services Inc v PrimeWest Energy Inc and PrimeWest Gas Corp, 2014 ABQB 317 (CanLII)