When a business in Germany submits an offer (sometimes also called a quote) to a potential customer, it creates a legally binding commitment. Once the customer accepts it, the German Civil Code (BGB) obligates the business to perform the contract. This obligation can create problems, especially for freelance professionals and small and medium-sized enterprises (SMEs) facing fluctuating costs or changes in their operating environment. German businesses can avoid these risks by issuing nonbinding proposals.

This article will tell you what a nonbinding offer is, what legal requirements it has to satisfy, and how it can be converted into an agreement and, then, an invoice. We’ll share how to avoid typical errors and how freelancers and SMEs, in particular, can get the most out of nonbinding proposals.

What’s in this article?

• What is a nonbinding offer?
  
• What are the legal requirements a nonbinding offer has to satisfy?
  
• From offer to contract to invoice
  
• Risks and root causes of errors when issuing nonbinding offers
  
• How can freelancers and SMEs get the most out of nonbinding offers?
  

What is a nonbinding offer?

A nonbinding offer is one in which the business does not undertake any commitment to fulfill a contract. Unlike an actual proposal, it does not constitute a legally binding declaration of intent. Parameters such as prices, volumes, or delivery times could change when the two parties enter into a final agreement.

This quote is particularly well-suited to companies that are exposed to fluctuating costs or are unable to predict availability and lead times with absolute certainty. The ability to make retroactive changes protects them against financial risks and ensures they can actually meet their contractual obligations.

A nonbinding cost estimate plays a similar role, serving primarily as a rough guide rather than creating a firm commitment. The main difference, however, is that a quote typically includes a detailed breakdown of foreseeable expenses for a specific performance or delivery. In a nonbinding offer, prices or quantities could be subject to change. It is also possible to combine the two documents. Construction firms, for example, frequently prepare these proposals for planned housing projects alongside a pricing estimate.

What are the legal requirements a nonbinding offer has to satisfy?

To treat a quote as subject to change, the issuer must explicitly label it as such. You can do this using so-called nonbinding nature clauses. Common wordings include “nonbinding” or “subject to change.” You can apply these clauses to the entire offer, or solely to individual sections. It’s also possible to combine different tentative nature clauses. Some of the wordings used to make specific aspects of a proposal are:

• Restrictions on price: “Price subject to change” or “Price changes reserved”
  
• Volume-related restrictions: “While stocks last” or “Subject to availability”
  
• Time-related restrictions: “Offer valid until” or “Delivery time subject to stocks”
  

In principle, any of the aspects mentioned above can be reserved, but you need to use nonbinding nature clauses only where truly necessary. Bear in mind that customers value security in planning, and too much uncertainty might scare them off.

From offer to contract to invoice

Having a smooth process from the nonbinding offer to the binding contract to the paid invoice is important for the success of your business; it requires having the necessary tech in place, and watching for administrative traps. A well-structured workflow keeps operations running smoothly and protects against tax and legal risks.

From offer to contract

When you make a nonbinding offer, customers accept or decline it. If they miss the stated deadline, the offer expires. If they accept, a prompt response is required. At that stage, you can still withdraw the proposal or change the conditions, but it needs to happen in writing. If there’s no response, the law treats the proposal as accepted, and an agreement comes into force. The agreed terms and conditions now bind you, and you must fulfill the contract.

In many cases, it might be a good idea to draft a contract formalizing the defined requirements of the offer. This agreement has to set out prices and any value-added tax (VAT) due as precisely as possible. It’s imperative to list the terms of settlement as clearly as possible to avoid misunderstandings. Payment terms and options, as well as potential discounts, must be clearly defined.

From contract to invoice

Depending on the defined agreements reached, you will issue your invoice either immediately upon contract conclusion or upon delivery or performance. Ensure all information required under § 14 of the German VAT Act (UStG) is specified correctly and in full. That includes, in particular:

• Full name and address of the company supplying the goods or service
  
• Full name and address of buyer
  
• A sequential, unique invoice number
  
• Issue date of invoice
  
• Date of delivery or other service
  
• The tax identifier issued to the seller by the tax office or the VAT identifier issued by the Federal Central Tax Office
  
• The quantity and type of products supplied or the scope and type of service rendered
  
• Net and gross amount
  
• The applicable tax rate and the corresponding tax amount or, in the case of a tax exemption, a reference to the tax exemption
  

It’s especially important that you specify the correct tax rate and record VAT correctly. Errors in VAT information can not only make it harder for your customers to deduct input tax, but they can also result in incorrect tax returns. When this happens, the fiscal office might levy extra charges or estimate the tax owed. This, in turn, can lead to arrears and interest. Plus, if there are repeated violations, the office could impose penalties or order a special VAT audit.

Risks and root causes of errors when issuing nonbinding offers

Nonbinding offers give businesses in Germany a high degree of flexibility and security, but they also come with risks.

The first key point to remember: a proposal becomes nonbinding only when it is clearly stated as such. It must be clear that your quote is not binding and could be subject to change. It’s important to ensure the wording of the reservation is sufficiently precise. Clauses that leave room for interpretation could lead to misunderstandings or, in the worst-case scenario, legal disputes.

In addition, with a nonbinding offer, there’s always a risk customers will opt out of the contract if you raise prices after the fact. If the difference here is too significant, they might feel deceived and view your company as unreliable. In these cases, not only do you risk losing the business, but you also risk reputational damage.

A reply is necessary as soon as a customer accepts a nonbinding offer. If you remain silent or implement no changes, the law treats the proposal as received, and the agreement comes into force under the original terms and conditions. But if, say, the costs for the materials required to manufacture a product have increased since you sent the quote, you risk taking a loss.

How can freelancers and SMEs get the most out of nonbinding offers?

Businesses in Germany, particularly freelance professionals and SMEs, can make effective use of nonbinding offers by leveraging automated systems. The key here is straightforward integration into existing accounting processes, and the shift from proposal to invoice.

As soon as a customer accepts an offer and an agreement is concluded, you must turn the contract terms and conditions into an invoice—including VAT—with absolute precision. This is where Stripe Billing can help. Billing automates recurring invoicing for usage-based models and tailored contracts. Using flexible pricing models, you can respond to customer demand quickly—including by using usage-based, tiered, flat-rate, and optional fees. It also covers vouchers, free trials, discounts, and additional features.

Stripe Billing simplifies the entire process by closely linking the offer and billing workflows. With the prices, quantities, and conditions set out in the proposal transferred automatically, you can say goodbye to resource-intensive manual labor. It’s more beneficial if operations are scaling, since you can manage recurring payments and repeat transactions efficiently, without the need for further admin resources.

Another plus is avoiding compliance risks. Stripe automatically helps you comply with the statutory requirements and display VAT correctly, minimizing the risk of errors and added charges from the fiscal office, and ensuring invoicing is always compliant with the latest tax regulations.