Brief Introduction About the Engagement Agreement
The engagement caters to the needs and the values required when two or more entities are involved in a contract. The engagement agreement assists the business momentum to remain confident and fairly manner. The engagement contract keeps a hook on the people involved in the contract. Once a particular framework is charted out, and if any particular member wishes to breach the agreement as per his reasons, then the engagement contract desists him from breaching or moving out of the agreement. This is very important to complete a particularly important deal.
Who Takes the Engagement Agreement? – People Involved
The Engagement Contract is inked between people who have agreed and provided consent to abide by an agreement to go through a deal, acquisition regarding any property, business, or financial transaction. Engagement agreements act as a supportive cushion framework for the deal to proceed on even in case any individual involved in the deal backtracks or re-frames from obliging to his/her committed terms. Hence an Engagement Contract is essential to complete the deal smoothly.
Purpose of the Engagement Agreement – Why Do You Need It?
As the concerned parties agree on a particular deal that does not get completed, the seller receives the entire payment amount. During this process, it is possible that some parties can backtrack or not stand on their committed statements. This can hamper the business agreement. This creates a loss to the main individual who is supposed to receive the finances. As a result of the inconsistent behavior of the parties involved, and Engagement agreements bind them to keep up their promises or committed statements.
Contents of the Engagement Agreement – Inclusions
Facilitating an Engagement contract is an important aspect of the contract. The contract has terms that are viewed in a serious apprehensive manner and shall be implemented in a mature and standard fashion. In case the abided terms are not followed meticulously, then it may lead to severe complications or legal tangles. An Attorney must be engaged in the process, and an attorney engagement letter is essential for the contract to proceed on hassle-free.
The Engagement contract must have practical terms and conditions that dwell the participants to acknowledge and follow the rules depicted in the Engagement Contract. The engagement letter sample must be distributed to all the concerned members of the contract.
Engagement Amount: A percentage of amounts should be paid in advance by all the parties who are involved in getting the deal done. This amount varies between 5% to 15% – as per the approval of all the parties involved in the agreement. The final prices should be discussed and accepted by all the parties involved in it. After accepting the final price, a timeline should be fixed to close the deed or the sale.
How to Draft the Engagement Agreement?
The letters of engagement should comprise of features that deal with different situations that arise while implementing the contract.
Deposit Confirmation: The amount to be deposited should be decided and established correctly. Confirmation should be provided as to by when they are willing to pay the amount. In case, due to unavoidable reasons, they are unable to pay that amount, then either compliance of the contract should be evoked, or termination of the contract should take place.
Cancellation Penalty: Cancellation penalty comes into the picture when a particular member of the agreement chooses not to abide by the policies framed in the Engagement contract and chooses to disobey the contract; at that time, Cancellation Penalty rules are applicable. Letters of engagement should be circulated between all the parties of the Engagement Contract.
The channel of negotiation should be an effective and systematic manner. It involves an arbitrator who is experienced in dealing with Engagement Contracts. The decision-making ability should be acceptable by one and all.
Benefits and Drawbacks of the Engagement Agreement
Engagement contract makes sure that nobody will end up in a loss or suffer due to non-compliance of any party involved in the Engagement Contract. Engagement contract gives equal opportunity to all the parties to exercise their rights and due full authority over the Contract proceedings. No matter how many arbitrators or judicial persons are involved in case somebody withdraws in the middle of the contract, then it may lead to severe time waster, energy waste, and monetary tensions.
What Happens in Case of Violation?
In case of violation, both the sides of the participants have an equal benefit of the law. Violation clause comes into effect in case anybody breaches the code of conduct.
Possible situations are:
- In case the buyer cancels the contract, then he/she will lose all the money invested in the contract.
- In case the seller breaches the contract, then he/she should pay double the amount received during the entire process.
The engagement contract adds value to the business or financial agreements that happened now and then. The engagement contract serves as a guarantee of hope and judicious implementation of the contract in case things do not go as per the prescribed manner. Engagement contract is essential for business deals that are risky and unpredictable.