How Does a Letter of Agreement Work?

Introduction

A letter of agreement is usually used for smaller projects when it is necessary to provide more than just a handshake as a means of agreement. While a letter of agreement is not recommended for a full-blown, large-scale, expensive project, a letter of agreement helps to clarify intent on smaller projects.

Summarize the Intent

A quality letter of agreement outlines the reason for its existence. It names the parties involved and provides an overview of the tasks to be accomplished. The summary does not have to include the fine details as the details are outlined further along in the letter of agreement.

Outline Pertinent Information

The most important part of the letter of agreement is the details. It contains the dates, time frame and duties of each party. The duties must be specific and unambiguous. The letter should be written in such a way that if an uninvolved party reads the letter of agreement, there is no doubt as to the duties of each party involved.

Remuneration (Payment)

Most letters of agreement involve one party performing a task or duty for another party. Upon completion of the task or duty, the recipient party offers payment. Whether the remuneration is in the form of money, baby sitting or house cleaning, it should be specifically outlined in detail in the letter of agreement.

Signatures of All Parties

To make the letter of agreement a valid agreement, it must be signed by all parties involved. If Party A signs the agreement, but Party B does not, then the letter of agreement is not in effect.

Put it on Paper

It is not completely necessary to have a letter of agreement on a physical sheet of paper, but it does make it easier for the everyday person to ensure its authenticity. With the ability to graphically alter electronic documents and modify signatures, dates and other clauses of a letter of agreement, an old-fashioned paper document is the simplest way to carry out a letter of agreement.

Each party gets a fully executed original copy of the agreement. Therefore it is necessary to print enough copies of the agreement so that each party has an original signature on their copy of the letter of agreement.

Default

A letter of agreement does not carry the same weight of a full fledged legal contract signed and witnessed by an attorney and a notary. However, if the intent is clearly outlined in the letter of agreement, it can be used in a court of law in the event one party decides to sue the other for not living up to the letter of agreement.

Resources

• Sample Letter of Agreement