The documentation suggests there are no limitations when setting up party relationship types:

https://learn.microsoft.com/en-us/dynamics365/finance/accounts-receivable/location-relationship

However, some relationship types are not supported and will result in unexpected errors. I consider this a bug, but PG team claims this is an (undocumented) feature, see support case 2412191420001753.

Ideally this bug should be fixed, alternatively the behaviour should be documented in the documentation (which essentially comes down to documenting the bug as a feature).