An Engagement Letter is a written agreement that lays out the business partnership about to be entered into by a customer and a company. This document is legally binding, and it’s a good idea to have it even if you already have a verbal agreement. With an engagement letter, you can more easily enforce the terms of your agreement than an oral agreement.
Engagement letters follow a standard format, making them relatively easy to draft or tweak to suit your purposes. This is especially true when you have an engagement letter sample or letter of engagement template, like one from LegalTemplates, which lays out the standard form.
It is best practice to use an engagement letter at the beginning of the business arrangement before any work begins. In doing so, you ensure the client and the firm know what they are getting into and can discuss any changes before starting work.
How an Engagement Letter Works
An engagement letter describes the terms of the business relationship – terms which both the customer and the company have agreed to. The primary terms discussed in an engagement letter are the services the company agrees to offer and the pay the customer agrees to provide to the company in exchange.
If any deadlines or time frames need to be laid out, the engagement letter will also describe these.
If the company or the customer breaches the engagement letter, they can use their written agreement to enforce either delivery of services or pay legally.
Who Prepares and When To Send
It is the responsibility of the company that offers the services to prepare the engagement letter. It may benefit the company to have an attorney look over the engagement letter as well. They are then responsible for sending it to the customer at the beginning of the business relationship but before any work begins.
Is an Engagement Letter the Same as a Contract?
Engagement letters are similar to contracts in terms of their function. Both engagement letters and contracts lay out the terms of the agreement. Both are legally binding and enforceable.
However, an engagement letter is less formal and usually less bogged down by legal jargon. An engagement letter also tends to be shorter than the average contract.
Why Use
There are several reasons why you should use an engagement letter:
- Setting expectations is crucial in any business arrangement.
- A written agreement ensures both parties are on the same page.
- An engagement letter is easy to update and understand.
- It helps avoid legal jargon often involved in traditional contracts.
- It serves as a reference point for the terms of the agreement.
- It can be used to enforce the terms of the agreement.
Sample
Below, you can download an engagement letter template in PDF or Word format:
