A letter of agreement is a binding contract when it is signed by the parties involved. It outlines the services, goods or real estate space that will be provided by one party to another for agreed-upon terms, time or price. For contractor services, the letter would outline the work to be done, when it would be completed and how much the contractor would be paid.
Before writing the letter, the employer should research the laws in his or her state. If the letter is not in keeping with the local laws, it will not be legal and not stand up in court if there is a disagreement in the future. There is no real difference between an agreement letter and a contract. An agreement letter is a subset of contracts. To be binding, the letter needs to be signed by both parties, and in some states, it also needs to be signed by a witness.
An agreement letter is a legal way to make arrangements between two parties. Once the parties have agreed on the terms and conditions of a job, a letter of agreement needs to be written and signed that reflects the decision. The parties may be two individuals such as a person and a contractor or between a business and an employee, vendor or customer.
The letter should clearly state all specifics and not have any vague language that is open to interpretation. Every detail should be mentioned so there is no room for misunderstanding later that could cause legal consequences. The letter may state expectations as well as the consequences if the expectations are not met.
The letter should be succinct. There is no need for superfluous phrases or words. It may be worthwhile to show the letter to a third party who can help with language and grammar. While it may not be necessary for employing a contractor , in other cases it might be a good idea to show the letter to a lawyer.
An agreement letter is meant to be simple. Normally, it should have about five items. If the agreement requires legal jargon or requires several clauses and complex terms, it may be better to have a lawyer draft a legal contract.
There is no one-size-fits-all format for a letter of agreement, but there are five areas the letter should cover.
A description of the project – This includes details of the responsibility of the contractor. If the contractor needs materials for the job, either the cost of this should be included in the price for the work or the employer should provide the material.
The cost of the project – The letter should clearly state how much the contractor would be paid for his or her work including materials. For example, it may state that a certain amount will be given at the beginning of the project and the remainder given when it is completed.
The timeline – This should be exact dates when the work will start and finish. There may be a contingency given if the work is not completed on time. For example, if the contractor is expected to clean an outside barbecue, but the smoke still does not go up the chimney, the employer can refuse to pay until the job is done right.
The payment terms – For a contractor, payment is usually given when the work is complete. It may be given in cash or by personal check, but the method should be stipulated in the letter. If applicable, the payments could be given over time. For example, the contractor could be paid a certain amount each day he or she works, with a final amount given when the job is complete.
Unforeseen circumstances – There should be a contingency clause that exempts the contractor from not completing the job on time if a natural disaster or severe weather makes it impossible for the contractor to fulfil the agreement.
This is a sample letter of agreement for home improvement. The words agreement letter should be typed at the top of the page to make it clear what type of letter it is. Since it is a legal document, it should be written in formal business-letter style and sent through certified mail with a request for a receipt. It should be written with correct grammar and spelling and not use slang words or casual language. This gives proof to the employer that the letter was received.
Sample Letter of Agreement for Home Improvement
Name of Employer
Address of Employer
City, State, Zip Code
Name of Contractor
Address of Contractor
City, State, Zip Code
Dear Name of Contractor:
This letter is intended to serve as a formal agreement between you and myself for work in my home at the above address.
Name of Contractor agrees to install shelves on the eastern wall of my garage. The work will take two full days and be done on DATE and DATE. The work will be completed at the end of the working day DATE.
I, Name of Employer, agree to pay the AMOUNT in cash at the end of working day DATE. This amount includes the cost of labor and materials. The Name of Contract will provide the wood for the shelves and a receipt for the cost of the wood.
I, Name of Employer, have examined the previous carpentry work of Name of Contractor and find it satisfactory, and expect that my shelves will be as professionally done. If, for any reason, this is not the case, or if the work is not done on the date stipulated above, I will withhold payment until the work is completed.
Please sign the enclosed copy of this letter and return it to me.
Signature of Employer
Printed Name of Employer
Enclosed: One copy agreement letter
Signature of Contractor and date
By Andre Bradley