Legal Question in Business Law in California

You probably think you have a cut and dried case and are looking for affirmation to use in dealing with your customer. If that is the case, I'm sorry to disappoint you. Your question reads like a law school or bar exam question. If you asked the 1717 attorneys who passed the last California Bar Exam your question on the exam, you would get over 5151 different analyses and answers. The reason is that, like a good exam question, there is so much unknown or unspecified about the facts. That makes for a great exam question, because the test taker is expected to demonstrate their legal knowledge with a series of "if this then . . ." responses. Unfortunately for you who wants an answer to their business issue, there is an argument to be made that you have a written contract, an oral contract, a contract by conduct, a contract by custom and usage, no contract, or an equitable claim. Your customer is wrong that they must sign the estimate to have a contract, but they still might be right that there is no contract, or at least not on the terms of your estimate. The good news is that under most ways we could look at this, the customer probably owes you something, either for breach of contract or under some other theory. Back to the bad news, even if you had an iron-clad contract, the customer has paid for the intermediate product. So they are entitled to breach the contract if you have one and face the consequences of that if they choose, but they still are entitled to the intermediate product. If you withhold it, you risk being legally determined to have taken it, and the customer can sue you for the value or the cost of replacing it, whichever is greater, as well as cancelling the contract. So, without answering your legal question, since we can't, I can give you a business answer. You should let your customer know that the law recognizes contracts without any signature, including one formed by partial performance of the agreement. If they want to abide by the contract, great. If they want to breach the contract, they can have what they paid for, but you will sue them for breach of contract for the profit you would have earned had the contract been fully performed. Up to you if you want to also offer to renegotiate the contract and put it in a clear written form (I would, but up to you). If they call you hand and breach the (probable) contract, give me a call and we can get into the details to see if you have a case worth persuing.