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Organizations often hire contractors. In most cases, negotiating and signing a contract should precede the beginning of work. In some cases, however, the assignment is too small to warrant a full contract.
LoAs are most commonly used for:
- Small engagements where a full contract would be overkill.
- Work agreements or schedules where a master contract has already been signed and the contractor is continuously re-engaged for short, terminal assignments.
- Projects where work must begin so quickly that there is no time to draft a contract.
- As a pre-contract where project details or the suitability of a contractor are not yet known and committing to a full contract would be premature or unwise.
In the first two cases, a contract is not necessary, provided that the LoA is comprehensive. In the second two cases, a contract should be pursued; the LoA is only an interim step.