How To Create A Letter of Agreement

The premise behind a letter of agreement is that it can be used as a binding contract as opposed to something that is simply proclaimed verbally.  There is no requirement for such a document to be titled as an agreement. Just the fact that it has been put down in writing and signed by the participating parties can yield it binding.

A letter of agreement can be used for almost all types of binding contracts and although it may be beneficial to have an attorney draft it or review and edit it, anyone can produce a letter of agreement that, if executed by parties of sound mind and in the presence of a notary. Once the document is signed and sealed it can be used as a binding agreement.

There is a standard set of items that a letter of agreement should include. The purpose is to put in writing the complete understanding of what the document intends. It should be directed to a person or persons by name and title and to include their current mailing address. If the person is designated as an officer of the organization then that should be included.

The purpose of the agreement should be detailed in the letter as specifically as possible. Understand that if a disagreement occurs, the more detailed the agreement is the easier it will be to determine the true purpose and thus avoid lengthy litigation. It is essential that the letter be dated.

Any material terms that are commonly understood to you and the other parties, they should still be clarified as if writing the letter for someone who is not in your line of work and may not use or understand those terms.

In the event there may be litigation over any items, it is beneficial to put in the letter how this will be handled and who will pays the costs of the attorney’s fees.   Try to anticipate any issues that may arise and draft the letter with them in mind.

Also, it is prudent to include the duration of the agreement. If it continues in effect until a certain time then state this. If there is an event that will terminate the agreement this also should be included.

All monetary values that are part of the understanding should be detailed. Remember, people are often very excited to enter into an agreement when everything looks rosy but when issues arise the more detail and precise your letter of agreement is the better it will be for all parties involved.

Last but not least all parties should sign and date the letter in the presence of a duly authorized notary public. They will affix their seal which will help to ensure the document is binding on all signers.

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