Relationship contract
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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 — generally, the longer the better[1] — and it is a curious fact that relationship contracts suffer almost unbearably intense, white-hot focus from all concerned during the six months from initiation right up to the moment they are executed — a period of time in which, necessarily, the parties have nothing at stake at all — but once consummated, not a soul on either side gives the contract so much as a backward glance to the contract for the next twenty years — except to periodically update it for MiFID — despite that being a period in which each party’s risk to the other will gyrate between colossal peaks.
Form
A business relationship may be like a marriage, but it is instructive to note the differences in contracting terms: where marriage vows concern themselves with the countless ways each partner must strive to cherish the other, straining sinews to keep the relationship together however peculiar her habits turn out to be, relationship contracts tend to catalogue all the ways one can contrive to get out of it at any 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.
See also
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.