Morgan Russell Solicitors

Side Letters

This briefing note explains what a side letter is and the circumstances in which a side letter may be used.

What is a side letter? 

  • A side letter is a document that is ancillary to another contract. The key question whenever the content or effect of a side letter is disputed is whether or not the side letter is binding.
  • Although the usual intention is that side letters will create legally enforceable rights and obligations, this is by no means guaranteed, even if the document is entitled “side letter”. In some cases, a side letter will have nothing more than moral effect.

When will a side letter be binding? 

  • If a side letter is drafted by lawyers and contains legal language (for example, "in consideration of ..."), boilerplate and confidentiality obligations, it is likely that it will be legally binding. However, whatever the language used, a court will not enforce a side letter if the key commercial terms are still being negotiated. The courts cannot make a contract, they can only interpret one.
  • A side letter is a contract and consideration (payment, in any form, under the contract) must be provided. Usually, if a side letter is made to clarify details relating to the main agreement, or to document agreed changes, the requirement for consideration is satisfied as the benefit to both parties is obvious.
  • If consideration is not provided, the side letter will not be binding unless it is executed as a deed. A deed is a written document which is executed with the necessary formality (that is, more than a simple signature).

In what circumstances are side letters used?

Clarification

Side letters are often used to confirm additional details that are not known when the principal documents are finalised or to clarify certain points. 

Variation

When dealing with any last-minute changes, it is often easier to set out the relevant details in a side letter than to make changes to the contract and have them initialled. Side letters are also an efficient means of documenting any changes that have been agreed in relation to a party’s standard terms and conditions.

Supplementation

Side letters may also evidence a binding contract between two of the parties to a multi-party transaction, whether or not disclosed to all other parties.

Further Information

If you have any questions regarding the above or require additional information or assistance, please contact Debbie Turner on +44 (0)1372 461411.

The data contained within this document is for general information only. No responsibility can be accepted for inaccuracies. Readers are also advised that the law and practice may change from time to time. This document is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.
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