What is Engagement Letter?
The Short Answer
Engagement Letter explained simply
An Engagement Letter is a formal contract that sets the terms of a professional relationship. It details what services will be provided, how much they will cost, and the responsibilities of both the service provider and the client. This letter protects both sides by making sure everyone is on the same page before work begins.
Real-World Example
Hiring a Business Broker
Imagine you want to sell your business and hire a business broker. The broker will send you an Engagement Letter. This letter will specify:
- Services: What the broker will do (e.g., market your business, find buyers, help with negotiations).
- Fees: How the broker will be paid (e.g., a percentage of the sale price, an upfront retainer).
- Term: How long the agreement lasts.
- Responsibilities: What you need to provide (e.g., financial documents) and what the broker is responsible for.
Why this matters
An Engagement Letter is important because it prevents misunderstandings. It clearly defines the scope of work, fees, and expectations. This clarity helps avoid disputes and ensures a smooth working relationship.
Always read an Engagement Letter carefully before signing. Make sure you understand all the terms, especially the fees and what services are included. If something is unclear, ask for clarification.
Always read an Engagement Letter carefully before signing. Make sure you understand all the terms, especially the fees and what services are included. If something is unclear, ask for clarification.
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