A gentlemen`s agreement is an informal agreement or transaction, often unwritten, which is supported only by the integrity of the other party to effectively comply with its terms. Such an agreement is generally informal, oral and not legally binding. Despite their informal nature, the violation of a gentlemen`s agreement could have negative consequences on trade relations if a party decides not to keep its promise. A gentlemen`s agreement can also be described as a “gentleman`s agreement” and can be completed by a handshake or not. A report by the U.S. House of Representatives detailing its United States Steel Corporation investigation stated that in the 1890s there were two general types of associations or bulk consolidations between steel and ferrous interests in which different groups owned ownership, as well as a high degree of independence: the “pool” and the “Gentleman`s Agreement.”  The latter type lacked a formal organisation to regulate production or prices or forfeiture rules in the event of infringement.  The effectiveness of the agreement relied on members to meet informal commitments.  This, in some cases, led to gentlemen`s agreements in which Wall Street financiers, such as J.P. Morgan and his “House of Morgan”, would meet with the office to obtain prior authorization for mergers and acquisitions. One such example was the gentlemen`s agreement in which regulators and the president ignored the Sherman Antitrust Act, which allowed united States Steel Corp. to become the world`s first multi-billion-dollar company. Gentlemen`s agreements between industry and the U.S. government were common in the 1800s and early 1900s.
The Bureau of Corporations, a predecessor of the Federal Trade Commission, was established in 1903 to investigate monopolistic practices. Similarly, in 1907 Morgan again collaborated with Roosevelt to create a gentlemen`s agreement that would allow Us Steel to acquire its greatest competitor, Tennessee Coal and Iron, in a tacit and unspoken rule that violated the Sherman Act. For example, it is possible to conclude an oral gentlemen`s agreement on a loan. A regular loan agreement has provisions and legal consequences that determine what will happen if the loan is not repaid or compensated. Rather, a gentlemen`s agreement depends on the honour of the parties, which means that it is not a legally binding agreement.