This article analyses the utility and advantages of employing side letters in the investment chapter in Preferential Trade Agreements (PTAs). Even thoughparties to a PTA often use side letters, particularly in relation to the investment chapter, the literature has paid little attention to their utility and advantages. This article develops a typology based on the three functions of the side letter (ie clarification, correction, and consensus on a new term) and explains the detailed letter exchange procedure of the letter exchange. It then discusses the three advantages (ie cost efficiency, flexibility, and transparency) of using side letter.