Define: Reliance Letter
A Reliance Letter is a written statement in which the party who prepared a professional opinion, valuation, or report (such as a legal opinion, survey, or audit) permits a named third party to rely on that document as though it had been addressed directly to them. It transfers the benefit of the original work without requiring a fresh report.
Legal accuracy standard set & glossary spot-checked by Imad Mohammed Nazar , Skadden-trained M&A lawyer, Legal Engineer at GenieAI
What Reliance Letter Means in a Contract
A Reliance Letter is a short, standalone instrument, or sometimes a clause embedded in a wider agreement, through which the author of a professional document, typically a legal opinion, valuation report, survey, or due diligence memorandum, extends permission for a specified third party to treat that document as if it were addressed to them personally. Without such a letter, the original recipient is usually the only party entitled to rely on the conclusions, and anyone else attempting to use the document could be told they have no contractual or tortious basis to complain if the advice turns out to be wrong.
In commercial transactions, Reliance Letters commonly appear when a lender, buyer, or investor enters a deal that was originally structured for someone else. For example, a bank refinancing a property might want to rely on a survey commissioned by the previous lender rather than paying for a new one. The Reliance Letter bridges that gap by formally extending the professional's duty of care, subject to conditions the professional controls.
How Reliance Letter Is Defined or Measured
There is no single statutory definition of a Reliance Letter; its meaning is shaped entirely by the wording the parties choose and by the general principles of the law governing the contract regarding duty of care and reliance. Courts typically look at whether the letter clearly identifies the beneficiary, clearly identifies the underlying report, and clearly states the scope of permitted reliance.
Measurement, in a practical sense, comes down to scope and limitation. A Reliance Letter will usually specify a cap on liability, a cut-off date beyond which the advice cannot be relied upon, and a statement that no update or verification has occurred since the original report was issued. These elements determine how much protection the new party actually receives.
- Identification of the original report and its author
- Named beneficiary or beneficiaries permitted to rely
- Express limitations on liability and time
- Confirmation that no additional due diligence was performed
Where Reliance Letter Appears in Agreements
Reliance Letters surface most often in finance and real estate transactions, where lenders or investors want the comfort of an existing survey, valuation, or legal opinion without commissioning a duplicate. They are also common in mergers and acquisitions, where a buyer seeks to rely on due diligence reports originally prepared for the seller or an earlier bidder.
They frequently sit alongside a Relevant Circumstances
Relevant Sectors