Arrangement: Overview, definition, and example
What is an arrangement?
An arrangement refers to a formal or informal agreement between two or more parties outlining specific terms for cooperation, obligations, or transactions. Arrangements can be legally binding, such as contracts, or non-binding, such as memorandums of understanding (MOUs) or verbal agreements, depending on the intent of the parties involved.
For example, two companies might enter into an arrangement where one provides services to the other on a flexible, as-needed basis without a long-term contract.
Why is an arrangement important?
Arrangements provide clarity and structure to business dealings, ensuring that all parties understand their roles, responsibilities, and expectations. Even when not legally binding, a well-defined arrangement can help prevent misunderstandings and disputes.
For businesses, arrangements offer flexibility in forming partnerships, managing collaborations, and conducting transactions without requiring rigid contract terms. In some cases, they serve as preliminary steps before formal contracts are signed.
Understanding an arrangement through an example
Imagine a freelance graphic designer agrees to provide design services for a marketing agency as needed. They do not sign a long-term contract but have a mutual arrangement where the agency sends projects, and the designer completes them at a predetermined rate. While the arrangement is not a strict contract, both parties understand their working relationship.
In another scenario, two tech startups collaborate on a joint marketing campaign. Instead of drafting a complex contract, they establish an arrangement where each company contributes resources and agrees to promote each other’s products. The arrangement allows them to work together without committing to long-term obligations.
An example of an arrangement clause
Here’s how an arrangement clause might appear in a contract:
“This Arrangement sets forth the understanding between the Parties regarding [specific purpose]. While this Arrangement does not create a legally binding obligation, the Parties agree to act in good faith to fulfill the terms outlined herein.”
Conclusion
An arrangement provides a structured yet flexible way for businesses and individuals to collaborate, whether through formal contracts or informal agreements. By defining expectations, an arrangement helps facilitate smooth business interactions while allowing adaptability in evolving relationships.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.