Legal Definitions - forward agreement

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.