A letter of agreement template is one of the most important documents that is commonly used in both personal and professional world. This letter is used to establish the terms and conditions that both the parties agree for a personal or professional dealing. A letter of agreement is prepared to ensure both the parties are on a same page and ready for a certain business transactions or contracts. This letter is prepared and signed by both the parties in order to legally accept the agreement. There are numerous instances where a letter of agreement is used such as rental agreement, employment agreement, freelancing agreement, selling and buying property, etc.
In this post, we have covered the important information related to letter of agreement and provided FREE letter samples or examples as well in an editable format. Creating a letter of agreement becomes easier once you have an editable template with you.
Understanding a Letter of Agreement
A letter of agreement i.e. LOA is a written document that outlines the terms and conditions or agreement that take place between two parties regarding a particular transaction, project. This document is commonly used in both personal and professional setting. Do not confused a letter of agreement with a Contract, e have explained the difference between the one later in this post.
A letter of agreement is basically understanding between two parties. The signatures of both the parties should be there otherwise it’s just a piece of paper which hold no value.
Download Letter of Agreement Template
Why Should I Prepare aLetter of Agreement?
A letter of agreement is important to ensure there is a clarity between both the parties and there is no confusion regarding the project or transaction. Plus, it acts as a legal protection for all parties involved. Some of the benefits of letter of agreement are briefly discussed below.
- A letter of agreement clearly outlines the roles, responsibilities and expectations for both the parties which removes the chances of misunderstanding.
- It protect the legal rights of both the parties. This is not a formal contract but still it can be used as a legal protection if properly created.
- Creating a letter of agreement is simpler and time saver in comparison to a contract.
- This letter establish trust and credibility between both the parties.
- It is important to have a letter of agreement for record keeping purposes and comes in handy when it comes to resolve any issues or misunderstandings.
Where Can I Use a Letter of Agreement?
There are numerous instances where a letter of agreement is prepared. Let discuss some of them:
Landlord and a Tenant
This is one of most common use of an agreement letter. A letter is agreement is prepared between the landlord and a tenant in order to outlines the terms and conditions related to the rental price, duration, mode of payment, etc. Both the parties are required to sign the letter of agreement in order to agree to the conditions mentioned. This letter could be use as an evidence of agreement in case any of the party defaults or fail to comply with the terms or conditions.
Real Estate
The use of letter of agreement is there in the Real Estate Industry when it comes to buying and selling a property. Both the parties comes on the mutual understanding and confirm the deal with a aigned letter of agreement. This agreement is legally binding until the full transaction is complete.
An employer and employee
You may also see the use of agreement letter between an employee and employer where an employee agrees to join the company under certain conditions or vice versa. A letter of agreement is used to formally bind the words between the two. Both the parties should sign the document before the employment contract begins.
A supplier and a client
Mutual agreements are prepared and signed between a supplier and a client to outlines the quantities of goods or services that will be provided at a certain price in a given time with a certain mode of payment.
Different Elements of Letter of Agreement
Following are some of the elements that you find in a well structured letter of agreement.
- The heading should be there i.e. “Letter of Agreement”
- The date of writing the letter should be there for record purposes.
- The full name, address, and contact details of all parties involved should be written in a letter.
- Make sure to highlight the purpose of the agreement. The nature of agreement should be very clear to all the parites which are involved. Mention whether it’s a service, project, or business deal.
- Each letter of agreement has some terms and conditions, make sure to mention them. The terms and conditions could be related to the payment terms, payment schedule, scope or work or services, duration of the agreement, responsibilities of each party, etc.
- The termination clause should be specified so both the parties knows what’s the requirements and any penalties, if applicable.
- The signatures of all parties involved should be there. A letter of agreement without signatures is just a piece of paper which holds no value, so make sure to get it signed by all parties and a witness or notary public may also sign if necessary.
Understanding the difference between a letter of agreement and a contract
A letter of agreement should not be confused with a contract, both are different document. However, there is a thin difference between the two.
Let’s understand the key difference between these two documents,
A letter of agreement is prepared by the involved parties. All the parties sit together and draft a letter and it does not involve any lawyer or legal entities to witness. The terms and conditions are discussed and written down in a letter. It is signed by the parties after confirmation.
On the other hand, a contract is a legal agreement between the parties that is prepared by an attorney or the client who then involved an attorney to witness the contract for supply goods or services.
When it comes to revoke, a letter of agreement can be mutually revoked by the parties involved outside the court of law. While a contract is a legally binding document which cannot be revoked unless through a legal entity.
Conclusion
A letter of agreement is one such document that is used in both personal and professional settings. Therefore, every person must know what a letter of agreement is, purpose of using it, how to create it, etc. We have already covered a lot of the important information here and provided free agreement letters in an editable format. Make use of the sample letters or templates to create a well structured letter of agreement for your use.