How to write a letter of Agreement

Letters of agreement are used to clarify working arrangements between two parties:

.a homeowner and a contractor; a consultant and a client; a vendor and a customer; a company department and senior management. When the relationship is customer/ vendor, a signed letter of agreement may serve as a contract between the parties.

We cannot give legal advice regarding contracts or letters of agreement in this book. However, letters of agreement should accomplish several tasks:

• The letter must identify that it is an agreement to do work.

• The project should be named and described.

• It’s also a good idea to thank the customer for choosing you or at least for allowing you to submit the agreement for consideration.

Other important items to include are cost, deadline, schedule, and payment terms. Be detailed and specific. If the agreement is unclear, vague, or ambiguous, it is the vendor, not the client, who is likely to suffer most, although it’s generally bad for both parties.

Close by asking for the go-ahead — the return of the signed letter of agreement with any advance payment required.

Sample Letters

Sample Letter of Agreement

Dear Mr. Jones:


Thanks for choosing Satisfaction Ad Agency to handle your job #3333. Job #3333 is a series of three capability brochures. I will write these brochures for you and provide such marketing and editorial consulting services as may be required to implement the project.

My base fee for the services I described above is $10,000. That fee estimate is based on 100 hours of working time at my hourly rate of $100, and includes time for copywriting, editing, teleconferencing, meeting, consulting, travel, and research. Copy revisions are included in my base fee, provided that at such time as the total time devoted by me shall exceed 100 hours, I shall bill you for additional working time at the rate of $100 per hour.

Out-of-pocket expenses, such as toll telephone calls, photocopies and computer printouts, fax charges, messengers, and local and out-of-town travel incurred in connection with the project will be billed to you in an itemized fashion. Payment of the base fee will be made as follows: One-third of the above-mentioned base fee is due upon my commencement of work; one-third upon delivery of first draft copy; and one-third is due upon completion. Payment for expenses will be made within ten days following receipt of invoice.

If you are in agreement, please sign and date this letter on the lines provided below and fax it to me at xxx-xxx-xxxx or mail it to the address on the letterhead.

John Brown
By: ___________________________ Date: ___________________________

• Use plain English — not legalese. The latter is a turn-off, and your reader may not sign because of it.

• If the subject matter is complex and there are a lot of details and clauses, consider hiring a lawyer to write a more formal agreement in the form of a contract.

• Explain all terms, conditions, and contingencies in detail and have everyone review them. Make any necessary changes and then submit a final document to all parties so that there is a written record.

• Add as many paragraphs as it takes to cover conditions likely to arise. For instance, if you are a roofer, and promise to get the job done in 3 weeks, what happens if it rains for 21 days straight and you are not finished by the agreed-upon date?

• Address the subject of expenses. Is the client paying expenses? Which ones? Are there limits, e.g., meal reimbursement not to exceed $50 a day?

• Provide two copies of the letter of agreement. Tell the client to sign both, return one to you, and keep one for her files. Provide a self-addressed stamped reply envelope or return FedEx label she can use to send the document back to you.

• Develop a standard letter of agreement, using the models provided here, and have your attorney review it. Then use that as a template for your other projects.

• If there are more than three to five items in the agreement, separate these items by numbering them. That way, in discussions you can refer to “point 12.”

• Note that the laws of your state govern the agreement. Name the state in theagreement. Know your state laws — ignorance will not protect you in court!

• Require the vendor to provide a federal tax ID number or, if he is an individual, a Social Security number.

Handy Phrases: This letter confirms our agreement; In accordance with your; Our mutual understanding; Specifically requested that the terms of our; Any changes should be made directly on this agreement; For our records; I have enclosed; Please return a signed copy to; This will apply to; If there is any problem; If you have any questions; Let me know as soon as possible.