The following is not meant to be legal advice.
Sometimes at the end of a quarter in a software company, the sales person brings to the legal department commitment letters to review. Are commitment letters of significance?
The commitment letter is of no significance. The letter is used when the customer says it will sign an agreement, but not yet. The letter indicates that the customer will commit to signing a contract in 2 weeks or so. The revenues cannot be booked based on the commitment letter. The sales person is not able to obtain sales commissions with the commitment letter even when it is signed, especially when there is no physical purchase order attached.
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