How to write an agreement letter in 4 simple steps
People agree on things all the time. Usually, these agreements are casual in nature and don’t need to be put in writing. When a freelancer or contractor is involved, though, it may be time to put pen to paper, so to speak. In cases where a significant risk is involved or you simply want to protect yourself and your client, an agreement letter is recommended.
If you’re thinking this is just one more thing to add to the challenges of freelancing, you’re wrong. Even if you’re unfamiliar with writing an agreement letter, there’s no need to worry. The concept is really quite simple. It’s easy to learn how to write an agreement letter and to discover when these types of documents are necessary.
1. The first step for how to write an agreement letter? Know when to use one
Learning how to write an agreement letter between two parties starts with identifying a situation where an agreement letter is necessary, or can be helpful. Knowing when to use an agreement letter is an important project management tool and can save you from negative repercussions down the line.
Generally speaking, an agreement letter is necessary if you’ve agreed to work with a client, but the conditions of the arrangement have not been put into a legal or binding contract. These are familiar scenarios for freelancers and independent contractors who are not affiliated with an official company and who are not entering into employment contracts.
Some freelancers think that learning how to write an agreement is a waste of time. For instance, you may have heard that verbal agreements are sufficient—this is a common misconception. While there are cases where a verbal agreement is enforceable, they are the exception rather than the rule. Unfortunately, the days when business agreements were sealed with a simple handshake are long gone. Today, verbal agreements can be complicated—even impossible—to enforce. Why? Because there’s nothing stopping the client from changing their minds after the fact and misrepresenting their initial agreement.
Of course, that’s the worst-case scenario. There are also situations where people simply forget the original terms of the agreement. We are all human, after all! These situations are common, particularly when a significant amount of time has passed between the initial agreement and the end of the business engagement. A written agreement letter can ensure that the terms and conditions you agree on are indisputable by either party. When the specifics of the agreement are documented in black and white, there’s almost a zero chance of a dispute over these terms later on. This is why it’s imperative that freelancers discover how to write an agreement letter between two parties.
2. Next, agree on the terms
Many freelancers and consultants make the mistake of trying to figure out how to write an agreement before the agreement is made verbally. This can be a waste of time and energy because the client may find the agreement letter unacceptable. In this case, you’ll be back to the drawing board and have to start the process all over again. That’s why it’s pertinent that you come to a meeting of the minds before you draft any sort of formal document, including an agreement letter.
To come to a proper agreement, you’ll need to think through the project from beginning to end. It may be a good idea to jot your ideas down as you go. Write down any thoughts and questions you have about project specifications, retainer agreements, deadlines, and payment, for instance. You may also want to consider aspects of the project such as the number of revisions you’re willing to do and any milestones you want to set for project completion.
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Once you’ve collected your thoughts on the project terms, the next step is to communicate these thoughts to your client. This is also the time to ask any questions you might have and get feedback from the client on your proposed terms. Keep in mind that it may take some time to negotiate the terms so that they are agreeable to both parties. Even so, it’s important to be patient with the process and ensure you reach an agreement that both you and your client are completely comfortable with. This will prevent any potential confusion or delays when it comes time to write the formal agreement letter.
3. Now that you know how to write an agreement, start the draft
Believe it or not, drafting the actual letter may be the easiest part of the entire process of learning how to write an agreement. Once you know whether such a letter is necessary and the terms have been agreed upon, the only thing left to do is to properly document the conditions of the agreement. If you’ve successfully completed the other two steps above, this part should be a breeze!
You’ll want to start the drafting process by writing a brief preface to the agreement letter. This section of the document will specify the parties entering into the agreement (i.e., you and your client), the purpose of the agreement, and the date that the agreement terms go into effect. Simple enough, right?
Next, you’ll want to write the agreement letter itself. The most important thing to remember here is that the agreement letter must include each and every term and condition that you and your client have previously agreed to verbally. Don’t leave anything out! It doesn’t matter how long the letter ends up being. Take the time and the space that you need to spell everything out. This may be the most critical thing to keep in mind when learning how to write an agreement.
For instance, if you have agreed to send regular invoices throughout the duration of the project, be sure to note this in the agreement letter. Also, specify when the client has agreed to pay these invoices, whether it be within a week or a month of receiving the invoice, for example. These types of conditions are extremely important to document because they can help you resolve any disputes or problems you encounter with your client in the future. Instead of bickering back and forth over payment terms or confidentiality agreements, for instance, you can just politely refer to the paragraph in the agreement letter that specifies what the client has already agreed to and signed off on!
While you can certainly re-create the wheel if you want when drafting your agreement letter, there are also many agreement templates you can choose from. These can save you time while simultaneously ensuring that you have all of the important components to make the letter official. Using a template is also a good idea if you’re still a bit unsure of how to write an agreement properly.
4. Finally, sign on the dotted line (or any line!)
Another important thing to remember when figuring out how to write an agreement letter between two parties is to get a signature. In fact, the letter will need at least two signatures—yours and your client’s. In some cases, you may prefer to have a witness sign the agreement letter as well. While not absolutely necessary, this could add an extra layer of protection to the contract. When requesting a signature from your client, be sure to have him or her date it as well. This proves that the agreement letter was signed before the project started and adds legitimacy to the document as well.
Learning how to effectively write an agreement letter is just one of the many tools you can have in your back pocket to make your life as a freelancer easier and more enjoyable. In particular, it can help you stave off conflict and make your work more enjoyable. As historian and philosopher Arnold J. Toynbee once said, “the supreme accomplishment is to blur the line between work and play.” Want more tips and tools to achieve this ultimate goal? Try Bonsai for free today!