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. It 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.
At the short end, standard terms of business and service contracts like custody agreements. At the long end, master trading agreements like the ISDA Master Agreement and the 2010 GMSLA.
Relationship contracts are invariably struck in fine weather, but concern themselves mainly with what should happen if it rains. Hence, they are basically a downer, articulating as they do, on a day that is meant to be one of unalloyed joy, the deepest and most paranoid suspicions the parties’ respective credit departments harbour about one other.
Unlike the transactions that might happen under them, business relationships are long, indeterminate affairs of no fixed duration — generally, the longer the better — 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.
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.
Because they contain no terms at all that would have made it onto the cocktail napkin, you may consider relationship contracts as the purest form of unadulterated, AAA rated, Merck laboratory-grade boilerplate.
- ↑ 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.