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. Although agreements between individuals often create legally binding obligations, reciprocal commitments may not be legally binding. Sometimes referred to as «gentlemen`s agreements,» the parties may respect them because moral obligations require compliance or because future relationships will be more difficult if the current agreement is broken. International organizations may also need such informal agreements to maintain member satisfaction. Sometimes the enabling contracts that create an international organization are not resolved on certain procedural or voting issues. Instead of modifying the formal document, which is usually a difficult task, an informal work agreement is developed to solve a particular problem. As long as there is a consensus to respect the informal agreement, it is not necessary to embody it in a legal document. In English contract law, for it to be binding, an agreement must have the intention of establishing legal relations; but in commercial transactions (i.e. agreements that do not exist between family members or friends), there is a legal presumption of «intent to establish legal relations». In the 1925 case of Rose and Frank Co. v.
JR Crompton – Bros Ltd., however, the House of Lords found that the phrase » «This regulation is not … a formal or legal agreement … is only a record of the parties` intention «was sufficient to rebut this presumption.  Gentlemen`s agreements, because they are informal and often not written, do not enjoy the same legal and regulatory protection as a formal contract and are therefore more difficult to implement. 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. The end result may, in many cases, be higher cost or lower quality products for consumers.
Worse, a gentlemen`s agreement can be used as a means of promoting discriminatory practices, as in a «network of old boys.» Gentlemen`s agreements have often been concluded in international trade and international relations, as well as in most industries. Gentlemen`s agreements were particularly prevalent at the birth of the industrial era and well beyond the first half of the 200th year, as regulations often delayed new business practices. It was found that such agreements were used, among other things, to control prices and limit competition in the steel, iron, water and tobacco industries.