In the corporate and business world, not everything agreed between the parties is necessarily written into the main contract. There are additional agreements that, for reasons of confidentiality, flexibility, or strategy, are handled separately. This is where the Side Letter comes in.

What is a Side Letter?

A Side Letter is a complementary and confidential document that accompanies a principal contract. Although it is not formally incorporated into the contract, it is binding between the parties who sign it, as long as it does not violate the law or contradict the terms of the main agreement.
In simple terms, it is a “parallel agreement” that governs specific aspects the parties prefer not to include in the official document.

What is a Side Letter used for?

A Side Letter is a useful tool in many situations, especially in commercial, corporate, or financial operations, because it allows you to:

• Keep sensitive agreements confidential.
• Establish payment terms that differ from those in the main contract.
• Grant special benefits or compensation to partners or executives.
• Adjust negotiation details without modifying the main agreement.
• Include additional commitments that require discretion.

When should you use one?

A Side Letter can be key in different scenarios:

• Mergers and acquisitions: for example, to define the exit terms of a key executive.
• Shareholder agreements: when outlining benefits, restrictions, or commitments that should not be publicly accessible.
• Investment agreements: to set additional terms for investors who prefer confidentiality.
• Financial operations: when agreeing on rates, deadlines, or adjustments outside the standard contract.

Why draft a Side Letter?

• Confidentiality: it regulates matters you do not want to expose in the main contract.
• Flexibility: it allows you to adjust details without modifying the original agreement.
• Legal certainty: as a binding document, it provides legal protection in case of non-compliance.

Conclusion

A Side Letter is a legal tool that provides discretion and binding force to sensitive aspects of a negotiation. If you are finalizing an important contract—whether a sale, an investment agreement, or a partnership negotiation—having a document like this can make all the difference.

At JVD Consultores, we assist you in drafting Side Letters and other legal instruments to ensure your contracts are protected and your agreements are always secure.
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