Bilateral agreements may be formed as business or personal agreements between individuals or companies. They may also be formed between sovereign countries in the form of trade agreements or agreements in other areas. In either case, a bilateral agreement is a binding contract between the two parties that have agreed to mutually acceptable terms.
Bilateral Personal and Business Agreements
A bilateral agreement in business or in personal affairs usually takes the form of a legally binding contract. Bilateral contracts are drawn between two individuals, between an individual and a company, or between two companies. The important aspect of a bilateral agreement is that it represents an accord between two legal entities. An example of a bilateral personal agreement is a lease between a landlord and a tenant. An example of a bilateral business agreement is a contract between a supplier for raw materials and a manufacturer to purchase those raw materials.
Elements of a Bilateral Business Agreement
Each bilateral contract has a number of elements: the offer, or the object or service under negotiation; the terms under which the object or service will be transferred from seller or supplier to buyer; and the acceptance by the buyer, which signals an agreement between the parties. A fully executed bilateral contract bears the signatures of both parties (along with the elements outlined in the previous section).
Bilateral Trade Agreements
Among the most common bilateral agreements between sovereign nations are bilateral trade agreements. Bilateral trade agreements work much like personal and business contracts in that they are binding agreements that spell out the terms of a trade transaction between two countries. Oftentimes bilateral trade agreements take place between a pair of countries that have exclusive trade agreements with one another for a particular item, such as raw minerals for manufacturing.
Other Bilateral Agreements
Countries also enter into bilateral agreements in other areas. For instance, two countries may agree to freely accept workers from the other country without visa requirements. Other bilateral agreements may allow the citizens of each country to travel freely to the other country with only an identification card rather than a passport or visa, which was the case until recently between the United States and Canada. This sort of bilateral agreement spells out the terms for a favorable exchange between two countries and may or may not involve a monetary transaction.
Effects of Bilateral Agreements
In the case of bilateral contracts, the terms of the bilateral agreement are legally binding. This means that if either party fails to live up to the terms of the agreement, it could mean legal action on the part of the aggrieved (wronged) party.
International bilateral agreements may cause friction if they set favorable terms for two countries while leaving out other adjacent countries or even more distant countries. Also, the terms of a bilateral agreement may be in conflict with the terms of a multilateral agreement involving one or both of the countries that have formed a bilateral agreement.
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