Legal Definitions - letter contract

A letter contract is a preliminary written agreement, often in the form of a letter, that allows parties to begin work immediately on a project or service while a more comprehensive, formal contract is being negotiated and prepared. It typically outlines the essential terms, scope of work, and a commitment from both parties to finalize a detailed agreement at a later date. Letter contracts are often used in situations requiring urgency or when the full scope and terms of a project cannot be immediately finalized.

• Example 1: Emergency Infrastructure Repair

  After a severe storm causes significant damage to a municipal bridge, the city government needs immediate repairs to restore essential transportation. To expedite the process, the city issues a letter contract to a qualified construction company. This letter authorizes the company to mobilize equipment, secure materials, and begin emergency stabilization work right away, even as the city's legal department and the company's representatives continue to negotiate the detailed terms, budget, and timeline for the full, long-term repair project. The letter contract ensures critical work starts without delay.

• Example 2: Initial Phase of a Technology Development Project

  A large tech company wants to explore a new software feature that could revolutionize its product. To quickly assess feasibility and begin initial development, they send a letter contract to a specialized software engineering firm. This letter outlines the initial research and development tasks, a preliminary budget for this phase, and a commitment to negotiate a full development and licensing agreement if the initial phase proves successful. This allows the engineering firm to allocate resources and start coding without waiting for the lengthy process of drafting a complete master service agreement.

• Example 3: Time-Sensitive Marketing Campaign

  A major consumer brand needs to launch an advertising campaign for a new product with a very tight deadline to coincide with a seasonal event. To ensure the campaign can meet the launch date, the brand's marketing department issues a letter contract to an advertising agency. This letter authorizes the agency to immediately begin creative development, media planning, and preliminary production work, such as booking talent and studio time. Meanwhile, the legal teams for both the brand and the agency work on finalizing the comprehensive service agreement that will cover the entire campaign's scope, deliverables, and payment schedule. The letter contract prevents critical pre-production time from being lost.