Relational contract

A relational contract is like making a deal with a friend. You both agree on things, but it might not be written down on a piece of paper. It's more about trust and understanding each other.

When you and your friend make a promise to each other, you don't need to write it down. You both know that you will keep your word. For example, if your friend promises to share their cookies with you every time you come over, you trust them to do it every time.

This kind of agreement is exactly like a relational contract. In business, it's when two companies or people agree to work together in a way that builds trust and strengthens their relationship. It's not always written down like a formal contract, but it's still important that both parties understand what they're agreeing to.

Relational contracts are important because they allow companies or people to work together for a long time, even if they don't have a lot of formal agreements written down. They're built on trust and understanding, so both parties know that they can count on the other one to keep their promises.