Engagement Letter

AAA

DEFINITION of 'Engagement Letter'

A written agreement to perform services in exchange for compensation. Engagement letters are traditionally used by certain professional service firms, particularly in the fields of finance, accounting, law and consulting to define the specifics of the business relationship. Normally, the letter is sent by the service firm to an officer of the engaging company. Once the officer has signed the engagement letter, the letter serves as a contract.

INVESTOPEDIA EXPLAINS 'Engagement Letter'

Since an engagement letter serves the same purposes as a traditional contract, it is important to carefully lay out the scope of the engagement, any contingencies that must be addressed, completion deadlines, and compensation arrangements. Ensuring that these details are correct at the outset helps to avoid costly misunderstandings later on in the assignment. Since an engagement letter is more informal by its nature, it can be a good way to establish a written agreement where the parties would otherwise be reluctant to enter into a full contract.



RELATED TERMS
  1. Demand Letter

    A letter sent to a debtor requesting payment. A demand letter ...
  2. Oral Contract

    A type of business agreement that is spoken, not memorialized ...
  3. Breach Of Contract

    Violation of any of the agreed-upon terms and conditions of a ...
  4. Assignable Contract

    A futures contract with a provision permitting the contract holder ...
  5. Contract Holder

    An individual or organization who owns the rights to a debt or ...
  6. Baked In The Cake

    Projections, expectations and other news items that are already ...
Related Articles
  1. Attention Home Buyers! Why You Need ...
    Home & Auto

    Attention Home Buyers! Why You Need ...

  2. How To Pick The Right Lawyer
    Personal Finance

    How To Pick The Right Lawyer

  3. Moral Hazards: A Bump In The Contract ...
    Options & Futures

    Moral Hazards: A Bump In The Contract ...

  4. Be Your Own Boss By Freelancing
    Retirement

    Be Your Own Boss By Freelancing

comments powered by Disqus
Hot Definitions
  1. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  2. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  3. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  4. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  5. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  6. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
Trading Center