Business Agreement Letter

You can never tell what will happen next, be in it in love, business  or life in general. There is no assurance in anything in this world. When you enter into business transactions especially those that deals with a large sum of money, you have to make sure the money you spend are put into good use. You may also see commercial agreement examples & samples.

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You can’t just shake hands and make deals with business partners or investors without having an assurance that you get your end of the bargain. This is when you need a business agreement letter.

Should you wish to enter in a business transaction with any individual or company, as the provider or customer, you have to establish terms and conditions that both of the parties involve should comply and follow.

Having a vocal agreement would not suffice in situations like this, you need to put what you have agreed on in writing to make things official. Aside from that, the document that has both you and the other party’s signature affixed will be valued as evidence should the other fail to comply or run away from the responsibilities involved in the transaction. You may also see management agreement examples & samples.

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What is a Business Agreement Letter

A business agreement letter contains all the information relevant to a business agreement between two parties or more. It is a formal letter that is used to outline the terms and conditions in a business agreement. For example, it can be used to outline the employment conditions between an employer and a new employee. It can also be used to state the terms and conditions between an independent contractor providing a certain company with products or services.

Generally, a business agreement letter outlines the expectations that each party have for each other and most importantly to protect the legal rights of both parties. The letter includes all the necessary and relevant information concerning the employment or project. The letter consists of the type of simple agreement, what service or products is to be exchanged, payment details, service quality, policies and job duties. It ensures that both parties are protected to the full extent.

Lastly, it is a legally binding document and it will require the signatures of all the parties involved. A witness may also sign to testify that the agreement was both agreed on by the parties involved. The professional letter can also be used as a contract in some cases so it is important to clarify the form and information included. And since it is a legally binding document, failure to deliver what has been agreed upon may be liable in the court of law.

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Contents of a Business Agreement Letter

Businesses and contractors cement and make a deal official with the hep of an agreement letter.  The letter formalizes the agreement by laying out the terms agreed upon in writing. The business agreement letter consists of a couple components, these components are listed and explained below:

1. Introduction

The introduction of the agreement letter directly states the purpose of the letter. It should only open about the purpose of the letter, no need to include all other information since they are meant to be discussed on the other parts of the letter. Keep the introduction of your letter short, on or two sentences will be enough for this part off your simple letter. For example:

“The purpose of this letter of agreement is to define the terms of the upcoming merger between ABC Company and DEF Company.”

2. Services Rendered

In this section of the letter, you state what each party promises to do for each other. This is the part where you state and discuss what the agreement is all about, what products or services will you offer for each other and what each party expects from each other. This should describe in complete detail what each party will offer or do for the other. For example:

“ABC Company agrees to write a three-page pamphlet promoting the goods and services of DEF Company. Information for the aforementioned pamphlet will be provided exclusively by DEF Company. DEF Company. will also cover 100% of the cost of printing and distribution.” You may also see service agreement examples.

3. Payment/Fee

This means what it literally means. This section should directly state the exact fee or compensation in exchange for the product or services offered by the other party. It should also include conditions with regard to the payment, if applicable. For example:

“DEF Company agrees to pay ABC Company a flat fee of $3000 for timely completion of the aforementioned brochure. Compensation hinges upon the brochure being completed in a timely manner and meeting the specifications instigated by DEF Company.” You may also like sales agreement samples.

4. Additional Costs

Any additional costs that has not been included in the above section is to stated here. Who should accept the responsibility when reasonably outstanding circumstances such as unexpected costs induced by delay or third-party intrusion should be made clear in this section in order to avoid confusion especially since this entails additional expenses for the parties involved. You may also check out roommate agreement examples.

5. Timeline

The meaning of the term “timely fashion” should be explained clearly in order to avoid confusion and to set an exact deadline or date on the contractor. This is an important part of the letter because it can affect the compensation in exchange for the products or services. For example:

“ABC Company agrees to provide the aforementioned brochure in its completed form to the DEF Company by April 24, 2018.” You might be interested in marketing agreement templates and examples.

6. Payment Terms

This is different from the payment/fee section because it is about the conditions wherein the contractor receives payment. This section is about the details of the basis on which the contractor will receive payment. For example:

“$1500 will be submitted to ABC Company within three days following the signing of this letter of agreement. The remaining $1500 will be issued to ABC Company upon timely completion of the project.”

A business agreement can also have other sections like the legal remedies and termination of agreement section where terms and conditions that apply to each section are stated and discussed. Other sections to be included on the letter depends on the contractor and the hiring party’s agreement. The above mentioned contents of an agreement letter are only the most common sections in an agreement letter.

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Reaching, Drafting and Finalizing a Business Agreement Letter

Reaching an Agreement

1. Talk with the other party

• Have a sit down conversation with the other party to know what they want to agree on. Try to come to as much agreements possible. Take notes of the progression with your conversations.

2. Negotiate

• If you have disagreements in some aspects, try to negotiate and compromise. Be prepared to give something away to get something in return as well. You may also see how to write sponsorship agreements.

3. Outline the business agreement letter

• Organize the information you have written during your conversations and negotiations. Outline how the letter should look like considering the coherency of the topics.

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Drafting a Business Agreement Letter

1. Complete necessary heading

• This is still a letter, include all the necessary headings such as return address or the receiver’s name and address, the date and the inside address or your address as the sender of the letter. You may also see non-compete agreement examples.

2. Write introduction

• Open the letter by explaining its purpose. Explain why you are writing an agreement letter in the first place. This section can be written in one or two sentences.

3. Define services to be rendered

• in as much detail as possible, clearly outline what tasks are needed to be performed. This should clarify what is expected from the other party and also what is expected from the other.

4. Identify benchmarks and timeline

• Explain benchmarks or conditions and the timelines of the project. This should be explained in as much detail as possible. This is where you write what should be submitted when or vice versa. You may also like how to write a separation agreement.

5. Agree on revisions

• If the projects involve creative works such as writing, artwork, music, etc. you may need to agree on revisions. It should be stated clearly in the letter how revisions will be handled and explain the entire revision process.

6. Include payment information

• Clarify all that pertains to the payment and payment process. Include how much will be paid and when the payment should be given. If anything, include how much should be paid upfront.

7. Clarify the period of enforcement

• If not obviously stated in any part of the letter, clarify how long the agreement is in effect. You may also check out website hosting agreement checklist examples.

8. State the governing law

• Same goes in a contract, you should also which law governs the agreement in case there is conflict.

9. Add non-disclosure clause, if necessary

• If there is confidential information involved in the project, include a non-disclosure clause or provision.

10. State the letter contains entire agreement

• If only some portion of the agreement is included in the letter, no need to include this section. If the letter serves as the final agreement, directly state this.

11. Include signature block

• Make two signature blocks, one for each party.

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Finalizing a Business Agreement Letter

1. Send rough draft to the other party

• Send a rough draft copy to the other party for review. Give them a chance to object or correct some contents of the letter. You may also see why business associate agreement templates are useful.

2. Sign the letter

• Once both are in agreement, print and sign the letter. Add the date when you have signed the letter.

3. Let other party affix signature

• Send revised copy of the letter and let the other party sign it. Note that the other party will need to return the original to you. You may also like important things about franchise asset purchase agreements.

4. Store own copy of the letter

• Store your original signed copy. This can be used as evidence should dispute arise.