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LSDefine
Simple English definitions for legal terms
forward agreement
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A quick definition of forward agreement:
A forward agreement is a type of contract between two or more parties that creates obligations that can be enforced by law. It is a written document that sets out the terms of the agreement. A contract can refer to three things: the actions taken by the parties to create the agreement, the physical document that records the agreement, and the legal obligations that result from the agreement. A contract is essentially a promise or set of promises that the law recognizes as a duty, and if the promises are broken, the law provides a remedy.
A more thorough explanation:
A forward agreement is a type of contract between two or more parties that creates enforceable obligations. It is also known as a forward contract.
For example, let's say that a farmer wants to sell their crop to a buyer at a future date. They could enter into a forward agreement that specifies the price, quantity, and delivery date of the crop. This creates a legal obligation for both parties to fulfill their end of the agreement.
Another example could be a company that wants to hedge against fluctuations in currency exchange rates. They could enter into a forward agreement with a bank to exchange a set amount of one currency for another at a future date and at a predetermined exchange rate.
These examples illustrate how a forward agreement creates a legally binding obligation for both parties to fulfill their end of the contract. It provides certainty and reduces risk for both parties involved.