Summary
- A side letter allows your business to vary, clarify or supplement an existing contract without renegotiating the entire agreement.
- It will only be legally binding if it meets standard contract requirements, including offer, acceptance, consideration and intention to create legal relations.
- Poor drafting or unclear interaction with the main contract can create disputes, unenforceable terms and commercial risk.
- This article explains how side letters operate under English law for business owners in the United Kingdom and provides a practical guide to managing legal risk.
- LegalVision, a commercial law firm that specialises in advising clients on commercial contracts and contract variations, outlines key drafting considerations and risks when using side letters.
Tips for Businesses
Treat side letters with the same care as your main agreement. Clearly define their legal status, how they interact with the original contract and ensure all contract formation elements are met. Keep signed copies organised with your core documents and regularly review them to avoid inconsistencies, missed obligations or enforceability issues.
On this page
- How Does a Side Letter Work in Practice?
- What Legal Risks Should You Consider When Using a Side Letter?
- How Should You Draft a Side Letter to Reduce Legal Risk?
- How Should Your Business Manage Side Letters Over Time?
- Why You Should Avoid Templates and Seek Legal Advice
- Key Takeaways
- Frequently Asked Questions
Commercial relationships evolve quickly. You may need to adjust agreed terms, clarify obligations or address new issues after signing a contract. Instead of renegotiating the entire agreement, you can use a side letter to record additional terms. If you use it correctly, a side letter gives your business flexibility and speed. This article explains how side letters work under English law, the legal risks you need to manage, and how your business should approach drafting them.
How Does a Side Letter Work in Practice?
A side letter is a document that sits alongside a main contract. You use it to supplement, clarify or vary agreed terms without replacing the original agreement.
It can operate in two ways. It may form part of the main contract or it may exist as a separate but related agreement. In either case, it has legal effect if it satisfies the requirements of a binding contract.
Under English law, this means your side letter must include:
- a clear offer and acceptance;
- valid consideration (or be executed as a deed); and
- an intention to create legal relations.
If these elements are missing, your side letter may not be enforceable. That creates real commercial risk, particularly where you rely on it to change key obligations.
What Legal Risks Should You Consider When Using a Side Letter?
Despite the practical benefits of using side letters, they can still create risks for your business. More specifically, you must draft the contract so that it is enforceable by law. Otherwise, disputes can arise, particularly where it is unclear whether the side letter is legally binding.
In this context, a side letter will only create binding obligations if it meets the standard requirements of a contract. Accordingly, your business should ensure that all such criteria are satisfied when entering into a side letter, including a clear offer and acceptance, consideration and an intention to create legal relations. Where consideration is not present, you can instead execute the side letter as a deed to ensure it creates binding obligations.
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How Should You Draft a Side Letter to Reduce Legal Risk?
You should approach drafting a side letter with the same level of care as your main agreement. A poorly drafted document can create more problems than it solves.
The table below summarises the key drafting principles your business should follow:
| Drafting Area | What You Should Do | Why It Matters |
| Legal status | Clearly state whether the side letter is legally binding (in whole or in part) | Avoids disputes about enforceability |
| Relationship with main contract | Refer to the main agreement and explain how the documents interact | Prevents conflicting obligations |
| Contract formation | Ensure offer, acceptance, consideration and intention to create legal relations are present | Ensures the side letter is enforceable |
| Consideration | Include valid consideration or execute as a deed | Avoids invalid or unenforceable obligations |
| Clarity of drafting | Use precise and complete language | Reduces ambiguity and dispute risk |
| Boilerplate provisions | Include or incorporate key clauses (e.g. governing law, jurisdiction) | Ensures legal completeness |
| Execution | Sign the document and follow deed formalities if applicable | Strengthens enforceability |
How Should Your Business Manage Side Letters Over Time?
You should treat side letters as part of your core contractual framework, not as informal add-ons. Your business should store each side letter with the relevant main agreement and maintain a clear record of all variations. You should also monitor compliance with any obligations introduced by the side letter. If you fail to manage these documents properly, you risk breaching obligations or relying on outdated or inconsistent terms.
Why You Should Avoid Templates and Seek Legal Advice
Using a generic template for a side letter can create serious legal risk. Templates often fail to reflect the structure and terms of your main agreement or address how the documents interact. They may also omit key provisions needed to ensure enforceability.
Key Takeaways
A side letter can be a handy document to help your business clarify, vary or supplement a commercial contract. However, drafting side letters requires careful attention to ensure that the documentation is accurate and has a greater chance of enforceability. Your business should maintain signed copies of side letters alongside the relevant main contractual documentation and regularly review them to ensure compliance and minimise risk.
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Frequently Asked Questions
A side letter can allow your business to adjust or clarify terms quickly without entering into a new contract. This can provide speed and flexibility in various scenarios.
Legal advice can help your business draft a side letter that meets the requirements for a binding contract, aligns with the main agreement without conflict and addresses key issues important in the context. This reduces the risk of disputes or unenforceable terms.
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