Regardless of what industry you work in or the kind of goods or services you provide, your clients/customers are the lifeblood of your business and that is why you can never place too much emphasis on them.  When you secure a client/customer, it is equally important to not forget about the Engagement Letter.

Irrespective of the industry you work in, formalizing your client’s/customer’s business relationship starts with them signing your Engagement Letter. Engagement Letters are generally less formal than a contract but carry the same weight, as it is legally binding and enforceable between the parties.

Why is it important?

Well, for certainty and clarity.  The moment the client/customer signs on the dotted line, you have peace of mind knowing that you have a written agreement in place that describes the business relationship, the scope of work, the terms, conditions and costs involved.

These are essential aspects to understand from the outset, as it sets the tone and expectations for both parties, especially if the intention is to develop a professional working relationship for the long term.

ADVANTAGES OF AN ENGAGEMENT LETTER

Given that an Engagement Letter is legally binding, it helps the service provider and the client/customer to set a solid foundation and the parameters of the working relationship between them by:

  • Ensuring transparency and promoting certainty between the parties;
  • Explicitly defining what the services will include and exclude;
  • Assist in managing the clients’/customers’ expectations as far as deadlines are concerned;
  • What professional standards shall be met by the service provider;
  • Managing fee creep by clearly stating what costs will be charged for the services;
  • Clarifying how the client/customer can request additional services;
  • Providing a procedure and process when a dispute may arise; and
  • What obligations need to be satisfied by the parties.

By carefully considering the above aspects, you will quickly realize that an Engagement Letter is an effective way to manage the parties’ professional relationship.  It can also limit any misunderstandings or liability claims that may potentially arise during the engagement.

Engagement Letters are generally used by professional firms when they onboard a new client/customer for a specific piece of work. It is worth noting that in other industries, an Engagement Letter could also take shape in the form of a Service Level Agreement, Purchase Order, Consultancy Service Agreement or Online Terms and Conditions.

It is essential to have properly drafted and well thought out Engagement Letters in place for your business. If you are looking to put an Engagement Letter in place or simply require us to review one handed to you for signature, please do not hesitate to contact BBP Law Attorneys. We will gladly schedule a meeting and provide you with the necessary legal assistance and guidance required.

 

Brent Petersen
Brent@bbplaw.attorney
Senior Associate

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