(b) An ‘informal’ format: letter agreements

Letter agreement: A letter agreement is a letter that contains the terms of the agreement and is signed by both the sender and the addressee (‘for agreement’ or ‘for acceptance’).

Overview. A legal agreement does not necessarily need to be embodied in the traditional structure of a contract (with the parties’ signature block, recitals, words of agreement, numbered Articles and sections, and signature formula). Most types of agreements are just as enforceable when they take the form of a letter from one party to the other if they are ‘accepted’ or ‘agreed to’ by the receiving party.

Structure. A letter agreement is typically printed on the letterhead of the sender and contains the following elements:

  • the sender’s entity name and address;
  • the place and date;
  • a subject line (but not a title);
  • the addressee’s entity name and address;
  • a salutation (generic – Dear Madam, Sirs – or to the individual representing the other party);
  • an introductory sentence referring to the background of the letter or to an agreement to which it pertains;
  • the substantive terms of agreement;
  • a closing sentence requesting the addressee to countersign a copy;
  • the sender’s signature; and
  • the addressee’s signature (underneath) (preceded by the words “for acceptance” or “for agreement”).

Special characteristics of this type of agreement. Unlike a traditional contract, the substantive terms of a letter agreement are usually not subdivided into Articles and subsections, although a subdivision subdividing the text into numbered paragraphs is often helpful. The substantive terms may well include miscellaneous provisions, such as a choice of law and a choice of jurisdiction.

The closing sentence could be as follows:

If you agree to the above, please sign one copy of this Letter Agreement and return it to me at the above address.

The addressee’s signature block is typically preceded by the words `For acceptance` (suggesting that the letter itself is an ‘offer’ in the legal sense) or `For agreement` (reflecting the truly mutual nature of the letter agreement).