An informal agreement is a contract made between two or more parties without the need of a formal written document. These agreements, also known as verbal or handshake agreements, are commonly made in personal and business relationships and are often used to establish mutually beneficial understandings.
However, informal agreements have their own risks and limitations. Unlike formal agreements, informal agreements are not legally binding and cannot be enforced in court. This makes it difficult for parties to seek legal remedies if one party breaches the agreement.
Despite this, informal agreements are still widely used in various settings. In many cases, they are used to establish trust and cooperation between parties. For example, a business owner may enter into an informal agreement with a supplier to ensure timely delivery of goods, or a landlord may make an informal agreement with a tenant to repair the property in exchange for lower rent.
The lack of legal binding also means that the terms of the agreement are often open to interpretation. This can lead to misunderstandings and disputes, particularly if the terms of the agreement were not clearly defined.
To minimize the risks associated with informal agreements, it is important for parties to have a clear understanding of the terms and conditions of the agreement. This can be done by documenting the terms of the agreement through email or text message, or by recording the agreement through a voice memo or video.
In conclusion, an informal agreement is a contract made between parties without a formal written document. While they can be useful in establishing terms and conditions of a relationship, they also carry risks associated with lack of legal binding and unclear terms. Parties should take measures to minimize these risks by clearly defining the terms of the agreement and documenting the agreement in some form.