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What Is a Reciprocal Agreement?

A reciprocal agreement is a documented contract that establishes an ongoing working relationship between two entities.
A quid pro quo relationship is when each party extends the use of resources to the other, with the understanding that this exchange benefits both parties.
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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 22 November 2014
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Also known as a reciprocity agreement, a reciprocal agreement is a documented contract that establishes an ongoing working relationship between two entities. As part of the terms of this contract, both parties pledge to share resources and assist each other in achieving the stated goals for the partnership. Agreements of this type can be made between individuals, corporations, or nations.

A typical reciprocal agreement between individuals will establish what is known as a quid pro quo relationship. This simply means that each party will extend the use of resources to the other, with the understanding that this exchange is designed to allow both parties to benefit. For example, two neighbors may choose to enter into a reciprocal agreement that commits one neighbor to keeping up the lawn for the other neighbor. In exchange, the second neighbor agrees to service and maintain the vehicle for the other neighbor. As a result of the agreement, both parties secure something they need and benefit from the terms of the contract.

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With corporations, a reciprocal agreement may involve cooperation on specific projects that will ultimately benefit both companies. In the case of a new sales promotion, one company may have a cost-effective agreement in place that allows them to advertise on radio and television at reduced rates. The other company has a strong Internet presence, and a very aggressive online promotional strategy. Under the terms of the agreement, the two companies identify a product made by each partner, market them in tandem, and make use of the combined marketing resources to increase profits for both corporations.

Nations can also choose to enter into some type of reciprocal agreement. An agreement on this scale may be aimed at developing and maintaining a balance of trade between two countries, assuring that the ratio between imports and exports between the nations remains within acceptable limits for everyone concerned. Like a business arrangement of this type that exists between two corporations, a reciprocal agreement between two nations ensures that the sale of products is beneficial to both partners, and helps to promote a stable economy in both countries.

Depending on the circumstances, a reciprocal agreement can be highly detailed or a very simple document. The complexity of the agreement depends on what both parties have to offer, what they want from one another, and what terms and strategies they adopt in order to make sure the agreement is mutually beneficial. Often, agreements of this type include a start date and an end date, giving both parties the opportunity to evaluate the benefits received for the duration of the contract, then decide if they wish to continue the business relationship.

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