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What's the difference between a "contract" and a "Letter of Agreement"?

Los Angeles, CA |

I am a freelancer and like the plain language and simplicity of a Letter of Agreement, but began to wonder whether it is really "just as valid as a contract". My Letters of Agreement specify the parties, scope of work, terms of payment, definition of completion, that sort of thing, and all parties sign and date at the bottom. No legalese, plain language. But they are routinely just 3 pages long. How we'll settle a dispute is described in a single sentence, and not a very specific one. Should I just be more detailed in my Letters of Agreement, or am I fine-tuning a motorcycle when what I really need is a sailboat? (is the very idea of a "Letter of Agreement" invalid from the start?)

Attorney Answers 5

  1. A letter of agreement is a type of contract----as the name implies, it's an agreement in letter form. But as long as the essential elements of a contract are met (i.e., there is mutual assent among the parties as to the terms, and both parties are providing something of value), a letter of agreement is just as enforceable as a contract in traditional "long" form.

    If you prefer the format of a letter agreement, feel free to keep using it. You should know, however, that the format of the contract isn't nearly as important as its contents. I would therefore advise you to consult with an attorney to make sure your form protects you as it should, especially if you intend to keep using it with clients in the future.

    The information presented here is general in nature and is not intended, and should not be construed, as legal advice for a particular case. This posting does not create any attorney-client relationship with the author, and Pham Law Group does not represent you as your attorneys until retained by a written retainer agreement signed by both parties.

  2. The letter agreement you describe is a contract. Whether it will suit the purpose you intend if there is a dispute is anyone's guess that has not read the agreement or discussed the kinds of disputes that are likely to arise under it with you.

    We attorneys deal with the issue you mention everyday, even in our own attorney-client agreements -- I generally error on the side of inclusion rather than brevity. My contracts tend to get longer over time as issues present themselves which perhaps should have been addressed and were not.

    If you have not had an attorney review your contract, I suggest you do to make certain it clearly expresses the terms as you intend. Additionally, an attorney will probably suggest additional terms which you might want to include. Over the years I have read very few contracts drafted by clients that measured up to the intended task.

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  3. An agreement is generally binding if there is a "meeting of the minds" between the parties as to the terms of an agreement. All material terms must be definite (price, quantity, parties to the agreement, etc.) for the agreement to be binding. Also, the agreement must be executed without duress, coercion, or fraud, otherwise, a party may invalidate the contract at a later time. Finally, certain contract MUST be in writing: contracts involving land; contracts contemplating marriage; contracts which, by their nature, cannot be completed within one year, etc. Other contracts can be oral or implied by conduct.

    Getting back to your question: a "letter of agreement" is a valid contract as long as all the elements listed above are met.

    The opinions published on this forum should not be construed as creating an attorney-client relationship for any purpose, and is intended only for providing informal preliminary information to a legal inquiry.

  4. A contract does not need legalese to be valid or enforceable in a court. You can call it a 'contract', an 'agreement'--any title--As a general rule, a contract simply requires a meeting of the minds (agreement) with specific terms (price, dates, promise of performance, in return for, etc.) , between two (or more) individuals where a benefit (consideration) is exchanged. Sounds like you have been 'freelancing' contracts all the time. Sometimes even a string of emails can be cobbled into a contract when the court sees the basic elements of a contract are present.

    The downside to build your own is that frequently the builder is unaware of state laws, where those laws intersect with the 'builders' business and what the impacts downstream can be for a contract that deviates from the latest State court or legislative guidance. Many lawyers write non-legalese contracts--find one and have your contract reviewed to ensure it protects you to the maximum degree possible, without scaring off your business.

    READ THIS BEFORE CALLING OR EMAILING ME: I am licensed to practice before the state and federal courts in Virginia. We have not established an attorney-client relationship unless we have a signed representation agreement and you have paid me. I am providing educational instruction only--not legal advice. You should speak with an attorney to whom you have provided all the facts, before you take steps that may impact your legal rights. I am not obligated to answer subsequent emails or phone calls unless you have hired me. I wish you the best of luck with your situation.

  5. My colleagues have stated exactly what you need to do. Contact an attorney who specializes in contracts/agreements and have them look at your Letter of Agreement and then talk to you about what it is you are doing or trying to do and what needs to be added or changed. A good lawyer can make the cost of review/changes minimal compared to what it might cost you if something went wrong and a Judge had to look at it. Always remember also that whoever creates the "contract" is usually held responsible if there is something missing in the "contract".

    Mr. Crosner is licensed to practice law in California and has been practicing law in California since 1978. The response herein is general legal and business analysis.. It is not intended nor construed to be "legal advice" but rather it is analysis, and different lawyers may analyze this matter differently, especially if there are additional facts not reflected in the question. Oftentimes the question does not include significant and important facts and timelines that, if known, could significantly change the reply and make it unsuitable. I am not your attorney until retained by a written retainer agreement signed by both of us. See also terms and conditions item 9, incorporated as if it was reprinted here.