A letter of undertaking is an assurance by one party to another party that they will fulfill the obligation that had been previously agreed on, but not written into a contract. For example, if one party wishes to complete some work for a business and get paid for it, the individual would issue a letter of undertaking to the business stating their intentions.
A letter of undertaking is also common in real estate and other transactions where one party wishes to reduce potential losses. For example a property buyer’s bank may request a LOU from the seller assuring them that if the legal transfers don’t go through, any money released to the seller will be returned to the bank. This is used because the bank does not have an explicit contract with the seller.
Undertaking letters are used in many other scenarios as a formal way to state one’s intentions.
LOUs are brief and straightforward, clearly outlining the sender’s intentions.
Both parties must agree on terms else the letter is redundant. It is therefore important that if you’re requesting the letter, not to be unreasonable with demands, and if sending one to make sure the recipient is expecting it.
Because it is a form of agreement it is customary to sign the letter in good faith.
Mr. John Doe,
Dear Mr. Doe
This letter is to inform you that I wish to accept the position of head landscaper that was offered to me on the day of December 24th, 2009.
As per the agreed upon terms, I will be compensated $10 per hour for my services, and will complete work for 3 hours per day, 5 days per week, I will have no vacation time, and I will be responsible for all my own equipment and supplies. I agree that I can be terminated at any time if I violate the Tractor Supply code of conduct.
Dear Forrester Clarke, Commanding Officer, National Maritime Center,
I hereby assure that I will be financially liable to the United States Coast Guard (USCG) for any travel expenses occurred during the planned training exercise on April 03, 2013, and will reimburse said costs in a timely manner.
Director of Strategic Boat Testing Ltd
LETTER OF UNDERTAKING TO BANK OF CALIFORNIA
To Whom It May Concern,
I Mr. Lewis Gore, Vendor of property located at 108 Indian Grove, Weiner, WA, 99127-1698, assure the Bank of California that any payment released on behalf of Purchaser Mr. David Fremont, will be reimbursed in the event that the Memorandum of transfer in favor of the Purchaser or the Memorandum of change in the bank’s favor are not registered.
Mr. Lewis Gore
To: Inland Revenue Authority of Singapore,
I, Yusof Ahmad, hereby confirm that I will not be leaving Singapore permanently once my contract of employment ends with Bonafide Electrical, and am still required to pay income tax to the IRAS on all future earnings within the country.