Relationship contract

The Jolly Contrarian’s Glossary
The snippy guide to financial services lingo.™

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A relationship contract is a legal agreement that governs the general relationship between two parties, within the parameters of which they can transact or provide and consume services among themselves, but does not itself commit either party to any transaction in particular. It is a framework agreement, describing an architecture within which the parties may build; a venue in which they may dance.

Examples

At the short end, terms of business, service contracts like custody agreements. At the long end, the classic examples are master trading agreements like the ISDA Master Agreement and the 2010 GMSLA.

Formation

Relationship contracts are invariably struck in fine weather, but concern themselves exclusively with what should happen if it rains, hence they are basically a downer, articulating as they do the deepest and most paranoid fears of each other’s credit departments on a day that is meant to be one of unalloyed joy.

Unlike transactions thast might happen under them, business relationships are long, indeterminate affairs of no fixed duration — the longer the better^[1] — and it is a curious fact that they suffer concentrated, intense, white-hot focus from all concerned during their formation, right up until the very moment they are executed — a period of time in which, necessarily, the parties have nothing at stake at all — and after, not a soul on either side gives them so much as a backward glance to the contract for the next twenty years except to periodically update it for MiFID, but in which period each party’s risk to the other may gyrate between colossal peaks.

Form

Where traditional marriage vows concern themselves with the countless ways each partner must strive to keep the relationship together however hard things get, relationship contracts tend therefore to catalogue all the ways one can contrive to get out of it at the first sign of trouble.

Nature

Because they contain no terms at all that would have made it onto the cocktail napkin, you may consider relationship contracts as pure, unadulterated boilerplate.

References

↑ The relationship, that is: once upon a time a legal eagle understood this truism to refer the written contract documenting the relationship and the rest is, as they say, the formal academic study of past events, particularly in human affairs, including, for the avoidance of doubt, any one or more specific series of past events, circumstances and activities arising in relation to or in connection with a particular person, place or thing.

[1] The relationship, that is: once upon a time a legal eagle understood this truism to refer the written contract documenting the relationship and the rest is, as they say, the formal academic study of past events, particularly in human affairs, including, for the avoidance of doubt, any one or more specific series of past events, circumstances and activities arising in relation to or in connection with a particular person, place or thing.

[1]