48+ Sample Letters of Agreement

What Is a Letter of Agreement?

For a very long time, people from the past would write letters to communicate with other people when distance won’t permit them to convey their message to each other personally. A message inscribed in a piece of paper gave these people an avenue to express their feelings, thoughts, and opinions before the existence of social media platforms. As time went by, the digital revolution paved the way for a more efficient method for individuals to communicate regardless of wherever they are in the world.

Aside from expressing oneself through letters, though, this medium of communication is crucial in various business processes that involve more than two parties. Much like legally binding documents such as contracts and agreements, letters help make arrangements and close deals between two parties. We refer to this type of document as a letter of agreement. It contains a summary of the essential points of the terms and conditions of a particular business procedure. Also, it gives the parties involved a clear understanding of their rights and responsibilities. Although it is usually non-binding, this document can be a means to resolve disputes whenever it arises.

Under What Circumstances Should You Write a Letter of Agreement?

As featured in an article from the Business Insider, results from a Deloitte survey revealed that out of 2000 consumers, 91% agreed with the legal terms and conditions without reading them. The study also showed that these people don’t bother reading the terms and conditions because of its complexity and length. Nevertheless, consumers or clients should know what they sign up for to avoid misunderstandings and controversies in the long run. Knowing that the majority don’t read lengthy terms and conditions, it would be best that you write an agreement letter since it only includes the key terms and conditions—which is less detailed than an agreement or a contract. Listed below are the different types of agreement letter which serves different purposes to individuals and businesses. You can write a letter of agreement for:

Payment: A payment agreement letter is beneficial when one party borrows money from another party. This document serves as evidence for the existing agreement between promisor or borrower as well as promisee or lender. In addition, a payment agreement letter specifies when and how should the borrowers make repayments of the amount they borrowed. When the lender imposes penalties due to late payments, the document should also clarify how much the fee will be. Regardless of who you will lend your money to, be it a close friend or a family member, you should still write an agreement letter, for you may never know when disputes will arise.Rentals or Leases: This type of agreement letter is essential for those who are running a rental business. It guarantees the landlords that their tenants will abide by the agreed-upon terms and conditions during the occupancy period. A rental or lease agreement letter is written by the landlord to confirm that both parties have reached a mutually beneficial arrangement with regards to the tenancy. Unlike an actual agreement or contract, the letter only contains important information about the rental, such as the payment arrangement. Landlords usually attach this letter with the rental agreement for the tenants to have something to refer to when they want to know if the details written in the letter coincides with the previously agreed-upon terms.Contracts: After both parties come to terms with the rules they have to abide by and the responsibilities they have to handle, it is important to clarify to those involved that they have agreed to the terms reflected in the contract. Therefore, writing a contract agreement letter is a must. This document provides proof of an agreement’s existence between two parties. In most cases, it restates the most important points the parties have to remember based on what was agreed upon.Child Support: The separation of parents will always create an impact on the children’s lives in different aspects. For this reason, parents who decided to cut ties with each other must make sure that either (or both) of them will look after their children and provide their needs. It is when child support agreements become beneficial. After the parents addressed several issues concerning the expenses that come with raising their children, there should be a child support agreement letter that specifies who will pay for the support of the child regularly.Employment: Employers can also make use of an agreement letter in laying out the terms and conditions of employment to a newly hired employee. The employment letter may include a statement to welcome the new employee to the company before setting forth the terms and conditions of employment. Moreover, it specifies the salary rate, responsibilities to handle, hours of work, benefits, and other terms.Agreement Termination: Aside from closing a deal, parties can also make use of a letter to terminate an agreement. An agreement termination letter can be used in notifying the other party that you wish to terminate the agreement before its date of expiration. Early termination of an agreement can be due to breach of the agreed-upon terms or wishing to end a business process or activity. The letter should specify the reason for the termination and make sure to provide relevant information about the post-termination process.

Putting It Into Writing: The Value of Written Agreements

In most cases, a verbal agreement is not a guarantee that either party will abide by the terms and conditions they agree upon. While it’s good to trust people, there is no harm in making sure that everyone involved in the agreement will remain true to their word. Therefore, it is crucial to put your agreement into writing when making negotiations with another party. Here are other reasons why you should write a written agreement:

Provides Proof of Commitment

It is easy to break a promise when there is no written evidence that an understanding has been met between two parties. Without proof of agreement, there is no assurance that both parties will adhere to the deal. Therefore, it is a must to put an agreement into writing to give both parties a peace of mind. For example, it is specified in a tenancy agreement that the tenants will pay a fixed amount on a monthly basis. It gives them the legal obligation to pay rent regularly. In the absence of a written agreement, it would be hard for the landlords to sue the tenant for non-payment of rent because they won’t have a document that would strengthen their argument.

Gives Clarity

Sometimes, making arrangements with another party can be confusing due to the lack of details provided. It would be hard for both parties to know what they can and cannot do. With a written agreement, though, there is a clear and detailed explanation of the terms, conditions, responsibilities, rules, and limitations. It gives both parties a clear understanding of their obligations they have to handle as they commit themselves to an agreement. When they fully understand the terms and conditions from the beginning, there will be lesser possibilities of future disputes.

Protects Both Parties

This usually applies to agreements that involve businesses and clients. When two parties are involved in a transaction, there will be expectations that the other needs to meet. It means that the company should provide what they promised. In return, the client should pay for the service they received. A written agreement gives businesses the right to demand payment in case their clients fail to pay during the due date. On the other hand, clients can also raise their concerns if the business fails to do their obligations. Without a written agreement, there will be nothing to protect these rights.

Before the enforcement of a contract or agreement, both parties have to discuss the terms and conditions of the transaction for it to be mutually beneficial. The signatures affixed in the agreement by both parties will serve as solid proof that they have reached an arrangement that gives them the best deal possible. Thus, reducing the risk of disputes during the period covered by the agreement. In the event that misunderstandings occur, either party can refer to the written agreement to resolve it before the situation escalates.

How to Pen a Solid Letter of Agreement

Since the launch of Gmail last 2004, the number of its active users soared up to 1.5 million on a global scale. On the other hand, the United States Postal Service delivered approximately 159 million addresses in one year. Even with the advancement of technology, some people and organizations have not totally eliminated the use of papers in sending letters. Physical or digital—whichever medium you prefer to make use of—here are the steps to help you write a solid letter of agreement.

Step 1: Reach an Agreement

A letter of agreement will only serve as a record that two parties have reached an agreement with regards to the transaction. The agreement itself is a separate document which gives a more detailed explanation of the terms and conditions. For this reason, both parties should discuss what would be beneficial to both sides and finalize the agreement before writing the letter.

Step 2: Create an Outline

Saying that you have already reached an agreement with the other party, you must create an outline of the information you should include in the agreement letter. See to it that the letter covers essential points about the arrangement. For business transactions, the agreement letter should mention the nature of the agreed-upon business process, due dates, terms of payment, duration of the agreement, and other details you’d like to emphasize.

Step 3: Know the Basic Elements of a Letter

Traditionally, the elements of a letter include the following: heading information, recipient’s address, salutation, the main body of the letter, complimentary close, and signature. However, the existence of emails eliminates the need for the sender to include the addresses. If you want to send a digital copy of the letter, you have to fill in the subject line, write the salutation, followed by the body of the letter, then the complimentary close.

Step 4: Start With the Purpose

When receiving a letter or an email, most people question what it is for. Don’t make the recipient of the letter wonder why they are receiving a letter from you—the first paragraph of your agreement letter should directly state its purpose. Make sure to provide important background information about the transaction or the arrangement. After doing so, start laying out important details on the agreed-upon terms.

Step 5: Send a Copy

After finalizing the content of the letter and printing it, make sure to provide signature blocks for you and the other party. Both parties should sign the agreement letter as proof that both agreed to the terms written. Aside from that, the parties involved should have a copy of the letter—there might be a need to present it in case of disputes.

When verbal agreements and “okays” would not suffice in closing a deal between two parties, writing an agreement letter would be the best choice to make. Now that you know the importance it bears in business processes and personal endeavors, would you still take the risk of closing the deal through spoken words and handshakes alone? No, right? Therefore, when you make arrangements with another party, always remember to put it into writing, and you’ll have the peace of mind you deserve.