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. Takeover

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

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  4. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  5. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  6. Budget Deficit

    A status of financial health in which expenditures exceed revenue. The term "budget deficit" is most commonly used to refer ...
Trading Center