How to Write a Contractor Clearance Letter

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Contractor clearance letters reduce liability for employers.
Contractor clearance letters reduce liability for employers. (Image: PhotoObjects.net/PhotoObjects.net/Getty Images)

Clearance letters help protect businesses from potential liability. Anyone who hires contractors to perform services for an organization that provides commission or is subject to inspection or encumbrances should utilize clearance letters as a method of relieving the employer (principal) from all potential liability related to the business engagement or contract before the final payment for services is rendered. The clearance letter should clearly specify the parties involved, the work performed and release of liability.

Acquire or create company letterhead. Use stationery that includes the name of the employer, company address, and contact information (including phone, fax and email address).

State the name of the service provider. Start with the date and then list the name(s) of the primary responsible parties, provide their addresses and contact phone numbers. Include their company’s tax identification number, if possible.

Identify the account. Specify the contract or account (from any associated invoices) for which the product or service was provided. List the full account number of all services, if more than one job was performed.

Describe the nature of the work. Briefly state what work was requested and performed, highlighting the completion date and any agreements regarding unfinished or canceled work products or service items.

Define the release date. State clearly as of what date the employer (principal) considers the work to be complete and in good standing. From this point, the employer will not be held liable for any liens or claims. Ask an authorized member of the employer’s organization to sign and date the clearance letter.

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