A back letter is a legally binding document used to supplement master agreements, specifying rights and responsibilities not included in the main agreement. It can address concerns, changes in trade laws, and compensation for breach of contract, without voiding or changing the main agreement.
A back letter is a type of legally binding document that is sometimes used to augment the terms and provisions found in some types of master agreement. Sometimes referred to as a secondary or supplemental agreement, the back letter specifies rights and responsibilities that weren’t included in the main agreement for some reason. When properly drafted and enacted, the letter becomes part of the overall contractual commitment that exists between the two parties and works in tandem with the primary contract to govern their business relationship.
There are several reasons why a back letter can be beneficial as a subsidiary contract to an existing contract. Over the course of the business, a buyer may want to lock in prices on goods or services that weren’t offered in the original agreement. Changes to trade laws may also require the buyer and seller to address some specific issues that are not adequately addressed in the master agreement. A response letter may simply address some concern that neither party was aware of at the time the main agreement was drafted, and rather than amending the existing contract, this format can be used to create a policy relevant to that concern.
One of the most common examples of a back letter is the compensation letter. This type of document usually provides a clear description of the type of reparations one party will make to the other if the terms of the master agreement are not met. For example, if the buyer fails to purchase goods and services that match the minimum amount of volume identified in the master agreement as necessary to secure discounted prices, the indemnity letter may allow the seller to charge the buyer the difference between that which was actually purchased and the purchase amount stipulated in the contract.
Typically, a return letter is not used to void or change any of the provisions of the main or principal agreement. In most cases, the terms and provisions of the letter will address matters that have not been specified in the contract for some reason. As a simple resource that allows buyers and sellers to refine their relationships for mutual benefit, the letter offers a quick and easy solution to handle anything not covered by the original contract without the need to rework the pre-existing agreement.
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