Alex is Sprintlaw’s co-founder and principal lawyer. Alex previously worked at a top-tier firm as a lawyer specialising in technology and media contracts, and founded a digital agency which he sold in 2015.
Contents
- What Is a Side Letter and Why Would You Need One?
- What Are the Advantages of Using a Side Letter?
- Are Side Letters Legally Binding?
- Common Pitfalls and How to Avoid Them
- What’s the Best Way To Draft a Side Letter?
- Are There Any Laws or Regulations I Need To Consider?
- How Do Side Letters Compare To Other Contract Tools?
- Should I Get a Lawyer To Prepare My Side Letter?
- Key Takeaways
Ever finished negotiating a contract only to spot last-minute details or discover that not everything is as clear as it should be? It happens to business owners all the time. Maybe you realise the delivery schedule needs to shift, or a particular arrangement wasn’t nailed down. You don’t want to start again from scratch - but you know it’s important to get every agreement in writing.
This is where a side letter can be a genuine lifesaver. Used correctly, side letters help clarify, amend or fill in the blanks without overhauling your whole contract. But what exactly are side letters, when should you use one, and how do you make sure they actually do the job? Let’s break it down - and help you get those legal details sorted from day one.
What Is a Side Letter and Why Would You Need One?
A side letter is a short, separate legal document that sits outside (but alongside) your main contract. It’s designed to add extra detail, confirm practical arrangements, or clarify something not fully spelt out in the main agreement. Typically, a side letter comes into play when:- You need to clarify a term that’s vague or missing in the main contract (for example, specifying “healthy lunches” with actual menu options in a catering deal).
- An issue pops up during the final stages of negotiation and there isn’t time to amend the full contract.
- Minor changes arise after signing – like moving a delivery day – which don’t warrant redrafting the whole contract.
- You want to record arrangements that are temporary or practical (such as access details or special delivery methods) that may change over time.
How Do Businesses Use Side Letters in Practice?
Side letters are especially handy in commercial contracts where the “big picture” is agreed, but smaller details need more attention. Here are some common uses:Clarifying Contract Terms
Contracts can sometimes be vague on purpose, especially when parties are in a hurry. For example, your agreement might state, “Catering company to supply healthy lunches daily,” but not define “healthy.” In this case, a side letter can spell out precisely which meals, ingredients or dietary preferences are required. This avoids confusion (and potential disputes) down the track.Recording Practical Arrangements
Logistical details - like agreed delivery times, access to premises, or who to contact for emergencies - aren’t always known when the main contract is signed. A side letter can set out these specifics clearly. Think of it as an addendum recording the nuts and bolts, leaving the main contract focused on the big commitments.Documenting Minor Amendments
Business reality is rarely static. Maybe you realise you need to switch a delivery from Tuesday to Wednesday, or a location has changed. If these alterations don’t fundamentally change the contract, a side letter allows both sides to confirm the tweak - quickly and efficiently.Examples of Side Letter Scenarios
Let’s bring it to life:- Catering agreement: The contract simply requires “healthy lunches”, but you add a side letter listing the weekly menu, portion sizes, and the need for all foods to be nut-free.
- Supplier arrangement: Your contract states that deliveries will be made each week, but a side letter clarifies the preferred drop-off window and confirms an alternative location during a venue renovation.
- Service contract: A tech provider’s agreement covers system installation, but you later exchange a side letter to confirm they’ll send a named engineer for consistency during the first three months.
What Are the Advantages of Using a Side Letter?
There’s a reason side letters are popular with commercial contract experts - they allow you to adapt without renegotiating the whole deal. The big benefits include:- Flexibility: They make it easy to address late-breaking issues or clarify evolving arrangements - avoiding costly delays while keeping your contract up to date.
- Efficiency: Side letters are typically much shorter and more focused than the main contract. This makes negotiation, drafting, and getting sign-off much quicker.
- Building Trust: Agreeing a side letter can signal to your partner that you’re working in good faith to resolve practical issues. It can actually strengthen the business relationship by demonstrating open communication.
- Reduced Disruption: Instead of rehashing or redrafting an entire contract, you can use a side letter to log small changes - meaning less paperwork and legal wrangling.
What Should (and Shouldn’t) Go in a Side Letter?
A side letter is best reserved for minor clarifications, practical arrangements, or tweaks that don’t affect the “core” legal obligations in your main agreement.Good Uses for Side Letters
- Clarifying practical arrangements (delivery times, named contacts, additional specifications).
- Recording non-material changes that don’t affect the parties’ core duties.
- Stating temporary or exceptional arrangements for specific situations (like staff cover during holidays).
When Not to Use a Side Letter
If you’re dealing with significant amendments - for example, changing payment terms, adjusting liability clauses, or adding/omitting key services - a side letter is not the right tool. Instead, you should formally amend the main contract (often called a contract variation). Trying to push major changes through via side letter risks confusion, or even having your amendment ignored if there’s ever a dispute. Remember: Anything in a side letter must not contradict or undermine your principal contract. If it does, you may end up with unenforceable terms, or a court may side with the main agreement in a conflict. For more info on when to take the formal route, see our article on Contract Expiring? Your Options.Are Side Letters Legally Binding?
In the UK, a well-drafted side letter can be legally binding just like your principal agreement, so long as it meets the requirements of a contract (intention, certainty, consideration, and so on). However, there are a few best practices:- Be clear about intent: Both sides should express clearly if the side letter is intended to be binding - or just for information. Uncertainty here can cause big headaches.
- Reference the main agreement: State in the side letter which contract it relates to (including date and parties) to avoid any ambiguity.
- Word it precisely: Avoid duplicating or contradicting terms from the main contract. Use clear, plain language and avoid technical ambiguity.
- Ensure it’s properly executed: Side letters should be signed by all relevant parties, just like the main contract.
Common Pitfalls and How to Avoid Them
While side letters offer flexibility, they do come with some risks if not handled correctly. Here are the most common traps:- Conflicting Terms: If a side letter undermines the main agreement, it may not be enforceable. Always double-check your contracts for contradictions.
- Overuse: Relying on a patchwork of side letters to fix fundamental issues in the main agreement is a red flag. If you keep needing to issue side letters, it’s probably time to consider a formal contract amendment.
- Lack of Clarity: Vague side letters can cause just as many problems as an unclear contract. Be specific about arrangements, dates, and obligations.
- Unintentional Binding Effect: Sometimes side letters are drafted informally - but they may be binding anyway! Don’t treat a “simple” side letter as a throwaway document; it can have major legal impact.
What’s the Best Way To Draft a Side Letter?
Ready to put together a side letter? Follow these steps for best practice:- Reference the main contract clearly (state its date, parties, and subject matter).
- Write in plain English, focusing solely on the issue being clarified or amended.
- Be specific and detailed (include dates, names, times, or other critical facts).
- Avoid ambiguous phrases or terms that are open to interpretation.
- State whether the side letter is binding or just for information.
- Have both parties review and sign - and keep the side letter with your contract records.
Are There Any Laws or Regulations I Need To Consider?
As with all commercial contracts in the UK, your side letter must comply with relevant legislation. Some key points to remember:- Consumer Protection: If your agreement is business-to-consumer, consumer law (such as the UK Consumer Rights Act 2015) will apply, and your side letter can’t exclude statutory rights.
- Data Protection: If your side letter covers how you’ll manage, share or process data, you need to comply with the UK GDPR and Data Protection Act 2018. Make sure any personal data arrangements are specifically addressed.
- Employment Arrangements: If your side letter concerns employment details or variations, bear in mind the rules under employment law about contract amendments and employee rights.
How Do Side Letters Compare To Other Contract Tools?
There are several ways of clarifying or changing a contract, so when is a side letter the right tool? Here’s a quick comparison:- Side Letter: For minor clarifications, practical arrangements or non-core amendments. Quick, efficient and sits alongside the main contract.
- Contract Amendment/Variation: For substantive changes to key rights or obligations. Requires formal execution and must follow any amendment procedure in the contract.
- Addendum: An addendum is a supplement, often used for more material changes, formally attached to the main agreement.
Should I Get a Lawyer To Prepare My Side Letter?
Absolutely - we always recommend running any legal document by a professional. While side letters are often simpler than principal agreements, they can have binding legal force and significant business consequences. Even small mistakes or unclear terms can trigger confusion, unintended obligations, or legal disputes. A contract lawyer can ensure your side letter:- Doesn’t conflict with your main contract
- Is correctly formatted and executed
- Reflects your business’s intentions and protects your position
Key Takeaways
- A side letter is a supplementary contract tool to clarify or record minor arrangements outside of the main agreement.
- It’s ideal for detailing the nuts-and-bolts issues - like delivery schedules or special requirements - where the main contract is silent or vague.
- Use side letters for small clarifications, not for major changes or fundamental amendments, which require formal contract variations.
- Make sure side letters are clearly expressed, reference the main contract, and are properly signed by all parties.
- Handle side letters with care - they are legally binding and can have significant effects if not drafted or executed correctly.
- If in doubt, seek professional legal advice to ensure your documents are enforceable and protect your business interests.
