Side Letters - Not Just A Side Order

Recent legal developments highlight the importance of making sure a side letter to a document has all of the elements it needs to be legally binding, otherwise you could find that you have an expensive extra piece of paper which has no more than a moral effect.

What are side letters? A side letter is a legal document used to clarify, supplement or vary an existing contract. Many people view them as simple documents but you should be aware that preparing a side letter is more complex than it seems and if not attended to correctly, could be ineffective, as illustrated by a recent legal case. Why are side letters useful? The common uses for side letters include:

Providing clarification, such as when details become available which were not known when the contract was originally entered into; Supplementing negotiations between parties by providing additional obligations or exemptions; or Confirming variations where last minute changes have been made, where it is not practical or cost-effective to re-draft a substantial document. When will a side letter be binding? A side letter must be properly drafted to be binding on both parties and there must be a contract in existence, or the main negotiations for such a contract must be complete at the time the side letter is entered into. If...