Contracting in the New Economy (David Frydlinger et al.)
Problem
Legal terms alone cannot create effective cooperation.
Action
Build a relationship of trust before depending on the written agreement.
Outcome
The partnership handles challenges and change more effectively.
Chapter: Contracting in the New Economy - Welcome to the Contracting Paradox - Relational Contracting in Practice: The McDonald's Story
Problem
Complex projects fail when each party protects only its own interests.
Action
Work together to resolve issues as they arise.
Outcome
The project progresses with fewer conflicts.
Chapter: Contracting in the New Economy - Welcome to the Contracting Paradox - Relational Contracting in Practice: The Australian Navy FFG Story
Problem
Transactional relationships limit long-term value.
Action
Create agreements that encourage ongoing cooperation between both parties.
Outcome
The relationship produces better long-term results.
Chapter: Contracting in the New Economy - Welcome to the Contracting Paradox - Benefits of Relational Contracting
Problem
No contract can define every future situation.
Action
Agree on how both parties will make joint decisions when unexpected issues arise.
Outcome
The partnership adapts with less conflict.
Chapter: Contracting in the New Economy - Welcome to the Contracting Paradox - Why Are Contracts Written? - Hold-Ups, Incomplete Contracts, and Shading
Problem
Different expectations create unnecessary disputes.
Action
Agree on mutual expectations before signing the contract.
Outcome
Both parties make more consistent decisions.
Chapter: Contracting in the New Economy - Welcome to the Contracting Paradox - Why Are Contracts Written? - Contracts as an Expectation Management Instrument
Problem
Overly formal contracts reduce practical cooperation.
Action
Write legal terms that support how the business relationship will operate.
Outcome
The contract becomes easier to use in daily work.
Chapter: Contracting in the New Economy - Welcome to the Contracting Paradox - The Rise of Lawyers and Formal Contracts
Problem
Formal obligations alone do not guide cooperative behavior.
Action
Include clear legal clauses together with shared commitments to collaboration.
Outcome
The agreement supports both certainty and cooperation.
Chapter: Contracting in the New Economy - Welcome to the Contracting Paradox - A New Approach - Putting the "Formal" into Relational Contracts
Problem
Contracts that focus only on protection miss opportunities to create value.
Action
Design the agreement to encourage both parties to succeed together.
Outcome
The partnership creates greater shared value.
Chapter: Contracting in the New Economy - Welcome to the Contracting Paradox - Harnessing the Potential
Problem
Delaying change makes new contracting approaches harder to adopt.
Action
Plan early for a transition to relational contracting.
Outcome
Future implementation becomes smoother.
Chapter: Contracting in the New Economy - Welcome to the Contracting Paradox - A Look Ahead
Problem
Viewing contracts only as legal documents limits their value.
Action
Use the contract to guide collaboration throughout the relationship.
Outcome
Business decisions better support shared goals.
Chapter: Contracting in the New Economy - Viewing Contracting Through a Different Lens - Making the Shift
Problem
New contract models fail without consistent behavior.
Action
Practice cooperative behaviors throughout the partnership.
Outcome
The new approach delivers lasting results.
Chapter: Contracting in the New Economy - Viewing Contracting Through a Different Lens - Success with the Shift
Problem
Traditional contracts often do not fit modern business relationships.
Action
Adapt contracting practices to current business conditions.
Outcome
Partnerships become more resilient.
Chapter: Contracting in the New Economy - Viewing Contracting Through a Different Lens - Why Change? Why Now?
Problem
Modern business depends on continuous cooperation.
Action
Create contracts that support long-term collaboration.
Outcome
Partnerships perform more effectively.
Chapter: Contracting in the New Economy - Viewing Contracting Through a Different Lens - Contracting in the New Economy
Problem
Traditional contracts alone cannot manage complex partnerships.
Action
Choose formal relational contracts when success depends on close cooperation.
Outcome
The agreement better supports shared performance.
Chapter: Contracting in the New Economy - Viewing Contracting Through a Different Lens - The Rise of Formal Relational Contracts
Problem
Poor preparation weakens implementation.
Action
Review the key concepts before changing contract practices.
Outcome
Later decisions become more effective.
Chapter: Contracting in the New Economy - Viewing Contracting Through a Different Lens - A Look Ahead
Problem
Complicated contracts discourage everyday use.
Action
Draft agreements that support practical business decisions.
Outcome
The contract becomes a useful management tool.
Chapter: The Science of Contracting - Businesses Want Contracts; Business People Do Not - A Look Ahead
Problem
Contracts focused only on enforcement miss their broader purpose.
Action
Design contracts that support productive cooperation.
Outcome
The relationship works more smoothly.
Chapter: The Science of Contracting - The Social Science of Contracting - Contracts as Instruments for Social Cooperation
Problem
Unreliable behavior weakens trust.
Action
Act in ways that show commitment to the partnership.
Outcome
Trust grows between both parties.
Chapter: The Science of Contracting - The Social Science of Contracting - How to Have Order Without Law - The Norm of Loyalty
Problem
Perceived unfairness damages cooperation.
Action
Treat both parties fairly when making decisions.
Outcome
The relationship becomes more stable.
Chapter: The Science of Contracting - The Social Science of Contracting - How to Have Order Without Law - The Norm of Equity
Problem
Ignoring human behavior weakens contract performance.
Action
Use loyalty and fairness to guide contract management.
Outcome
Partnerships become stronger.
Chapter: The Science of Contracting - The Social Science of Contracting - Learnings
Problem
Important lessons are often forgotten after one project.
Action
Use social science insights when creating future agreements.
Outcome
Future contracts become more effective.
Chapter: The Science of Contracting - The Social Science of Contracting - A Look Ahead
Problem
Poor incentives encourage conflicting behavior.
Action
Design economic terms that reward mutual success.
Outcome
Both parties make better decisions.
Chapter: The Science of Contracting - The Economics of Contracting - Contract Theory
Problem
Complex coordination wastes resources.
Action
Choose organizational arrangements that lower transaction costs.
Outcome
Business operations become more efficient.
Chapter: The Science of Contracting - The Economics of Contracting - New Institutional Economics - Ronald Coase
Problem
Weak institutions reduce effective collaboration.
Action
Create consistent rules that support long-term business relationships.
Outcome
Organizations perform more reliably.
Chapter: The Science of Contracting - The Economics of Contracting - New Institutional Economics - Douglass North
Problem
Different transactions require different governance approaches.
Action
Choose governance structures that fit the characteristics of the transaction.
Outcome
The contract performs more effectively.
Chapter: The Science of Contracting - The Economics of Contracting - New Institutional Economics - Oliver Williamson
Problem
Short-term gains can damage future relationships.
Action
Cooperate consistently so others expect reliable behavior over time.
Outcome
Long-term partnerships become stronger.
Chapter: The Science of Contracting - The Economics of Contracting - Repeated Game Theory
Problem
Contract decisions become weaker when economic principles are ignored.
Action
Use economic insights before designing future agreements.
Outcome
Contracts create better incentives.
Chapter: The Science of Contracting - The Economics of Contracting - A Look Ahead
Problem
People often underestimate the time and effort required.
Action
Review plans using realistic assumptions before making commitments.
Outcome
Projects are more likely to meet expectations.
Chapter: The Science of Contracting - The Psychology of Contracting - The Cognitive Biases of Humans - The Planning Fallacy
Problem
People often misjudge risks by ignoring their actual probability.
Action
Assess both the likelihood and the consequence of each risk.
Outcome
Risk decisions become more balanced.
Chapter: The Science of Contracting - The Psychology of Contracting - The Cognitive Biases of Humans - Probability Neglect
Problem
Self-serving thinking leads to biased decisions.
Action
Evaluate important issues from the other party's point of view.
Outcome
Negotiations become more constructive.
Chapter: The Science of Contracting - The Psychology of Contracting - The Cognitive Biases of Humans - The Self-serving Bias
Problem
People resist agreements they believe are unfair.
Action
Balance benefits and responsibilities for both parties.
Outcome
Commitment to the agreement increases.
Chapter: The Science of Contracting - The Psychology of Contracting - While Humans are Biased, They Do Have a Strong Sense of Fairness
Problem
Abuse of power damages cooperation.
Action
Exercise authority in ways that respect the other party.
Outcome
Trust is easier to maintain.
Chapter: The Science of Contracting - The Psychology of Contracting - Humans Don't Like Abuse of Power
Problem
Positive behavior weakens when it is not returned.
Action
Respond to cooperative actions with cooperative actions.
Outcome
Mutual trust grows over time.
Chapter: The Science of Contracting - The Psychology of Contracting - Reciprocity as a Fundamental Social Norm
Problem
People do not always behave rationally.
Action
Account for predictable human behavior when writing contracts.
Outcome
The agreement works better in practice.
Chapter: The Science of Contracting - The Psychology of Contracting - Behavioral Contract Theory
Problem
Behavioral lessons are often forgotten after negotiation.
Action
Use psychological insights throughout contract management.
Outcome
Relationships become easier to manage.
Chapter: The Science of Contracting - The Psychology of Contracting - A Look Ahead
Problem
A transaction-focused approach limits long-term value.
Action
Strengthen the relationship as carefully as the commercial agreement.
Outcome
Collaboration creates greater value.
Chapter: From Theory to Practice - A Comparison of Transactional and Relational Contract Models - Focus on the Deal or the Relationship
Problem
An arms-length approach reduces performance in shared work.
Action
Treat important suppliers and customers as partners.
Outcome
Joint performance improves.
Chapter: From Theory to Practice - A Comparison of Transactional and Relational Contract Models - Arms-Length Relationship or Partnership
Problem
Ignoring shared behavioral standards weakens cooperation.
Action
Encourage behaviors that reflect trust and fairness.
Outcome
Relationships become more resilient.
Chapter: From Theory to Practice - A Comparison of Transactional and Relational Contract Models - Disconnect from or Embeddedness in Social Norms
Problem
Control alone cannot manage ongoing uncertainty.
Action
Align incentives and expectations instead of trying to plan everything.
Outcome
The partnership adapts more effectively.
Chapter: From Theory to Practice - A Comparison of Transactional and Relational Contract Models - Risk Mitigation Through Power or Alignment of Interests and Expectations - Complete Planning or a Flexible Framework
Problem
Unclear contract models create inconsistent behavior.
Action
Define the relationship in terms of shared goals and cooperation.
Outcome
Everyone understands how to work together.
Chapter: From Theory to Practice - A Comparison of Transactional and Relational Contract Models - The Definition of a Relational Contract: Revisited
Problem
Choosing too quickly increases the chance of poor contract fit.
Action
Review the available contract models before selecting one.
Outcome
The chosen model better matches the business need.
Chapter: From Theory to Practice - A Comparison of Transactional and Relational Contract Models - A Look Ahead
Problem
Not every situation benefits from relational contracting.
Action
Assess both risk and dependency before selecting the contract approach.
Outcome
The chosen model better fits the relationship.
Chapter: From Theory to Practice - When to Use a Relational Contract - A Matter of Risk and Dependency
Problem
High uncertainty increases the need for collaboration.
Action
Choose a relational contract when both risk and dependency are high.
Outcome
The partnership manages complexity more successfully.
Chapter: From Theory to Practice - When to Use a Relational Contract - Two Scenarios - Scenario High
Problem
Complex collaboration creates unnecessary effort in simple situations.
Action
Use a simpler contract model when risk and dependency are low.
Outcome
The agreement remains efficient.
Chapter: From Theory to Practice - When to Use a Relational Contract - Two Scenarios - Scenario Low
Problem
Poor risk assessment leads to poor contract decisions.
Action
Identify the major risks before choosing the contract model.
Outcome
The agreement better addresses uncertainty.
Chapter: From Theory to Practice - When to Use a Relational Contract - Risk
Problem
Hidden dependency affects contract performance.
Action
Evaluate how much each party depends on the other.
Outcome
The relationship is managed more effectively.
Chapter: From Theory to Practice - When to Use a Relational Contract - Dependency
Problem
The wrong relationship focus reduces value.
Action
Decide whether the situation requires a deal focus or a relationship focus.
Outcome
The contract better supports business needs.
Chapter: From Theory to Practice - When to Use a Relational Contract - Assessing Best Fit Across the Five Dimensions - Focus on the Deal or Focus on the Relationship
Problem
The wrong relationship style creates unnecessary friction.
Action
Choose between an arms-length relationship and a partnership based on business needs.
Outcome
Collaboration becomes more effective.
Chapter: From Theory to Practice - When to Use a Relational Contract - Assessing Best Fit Across the Five Dimensions - Arms-Length Relationship or Partnership
Problem
Different relationships require different levels of informal cooperation.
Action
Assess the role of shared social norms before selecting the contract model.
Outcome
Expected behaviors become clearer.
Chapter: From Theory to Practice - When to Use a Relational Contract - Assessing Best Fit Across the Five Dimensions - Disconnect from or Embeddedness in Social Norms
Problem
Shared interests naturally drift over time.
Action
Review and realign the interests of both parties throughout the relationship.
Outcome
The partnership remains productive.
Chapter: From Theory to Practice - When to Use a Relational Contract - Assessing Best Fit Across the Five Dimensions - Risk Mitigation Through Power or Continuous Alignment of Interests
Problem
Detailed plans become outdated as conditions change.
Action
Create a flexible contract framework that allows reasonable adjustments.
Outcome
The agreement remains effective over time.
Chapter: From Theory to Practice - When to Use a Relational Contract - Assessing Best Fit Across the Five Dimensions - Complete Planning or a Flexible Framework
Problem
Using the wrong contract model reduces performance.
Action
Review whether the relationship is suited to relational contracting before proceeding.
Outcome
The selected approach better matches the business need.
Chapter: From Theory to Practice - When to Use a Relational Contract - A Look Ahead
Problem
One sourcing approach does not fit every situation.
Action
Choose the sourcing model that best matches the work and relationship.
Outcome
The contract better supports business objectives.
Chapter: From Theory to Practice - Choosing a Contract Model in Practice - Sourcing Continuum
Problem
Supplier dependency changes how the relationship should be managed.
Action
Evaluate how much the business depends on the supplier.
Outcome
The relationship model better fits the situation.
Chapter: From Theory to Practice - Choosing a Contract Model in Practice - Relationship Model - Supplier Dependency
Problem
Market conditions influence the right contract approach.
Action
Evaluate how easily the product or service can be obtained elsewhere.
Outcome
The agreement better reflects market conditions.
Chapter: From Theory to Practice - Choosing a Contract Model in Practice - Relationship Model - Availability of Service/Product in the Marketplace
Problem
Core business activities require stronger partnerships.
Action
Determine whether the service supports a core business competency.
Outcome
Critical capabilities receive appropriate protection.
Chapter: From Theory to Practice - Choosing a Contract Model in Practice - Relationship Model - The Extent that Service Is a "Core Competency"
Problem
Business risk determines how closely both parties should work together.
Action
Evaluate business risk before selecting the relationship model.
Outcome
The agreement better supports important business objectives.
Chapter: From Theory to Practice - Choosing a Contract Model in Practice - Relationship Model - The Extent of Business Risk
Problem
Some partnerships offer greater value than others.
Action
Assess the potential for value creation before choosing the economic model.
Outcome
Resources are focused on the highest-value opportunities.
Chapter: From Theory to Practice - Choosing a Contract Model in Practice - Economic Model - Potential to Create Value
Problem
Different types of work require different commercial structures.
Action
Choose the economic model that matches the work being performed.
Outcome
The agreement supports effective delivery.
Chapter: From Theory to Practice - Choosing a Contract Model in Practice - Economic Model - Nature of the Workscope
Problem
Business-critical work requires stronger coordination.
Action
Adjust the contract model to reflect the importance of the work.
Outcome
Critical activities receive better support.
Chapter: From Theory to Practice - Choosing a Contract Model in Practice - Economic Model - The Criticality of the Work
Problem
Different attitudes toward risk create unnecessary tension.
Action
Consider both parties' risk tolerance when selecting the contract model.
Outcome
The agreement is more acceptable to both parties.
Chapter: From Theory to Practice - Choosing a Contract Model in Practice - Economic Model - Risk Tolerance Preferences
Problem
Decision tools cannot account for every business situation.
Action
Treat sourcing tools as guidance instead of fixed rules.
Outcome
Contract decisions become more reliable.
Chapter: From Theory to Practice - Choosing a Contract Model in Practice - Limitations of Sourcing Business Model Mapping Toolkit
Problem
Unstructured decisions increase the chance of choosing the wrong model.
Action
Use a structured decision matrix to compare alternatives.
Outcome
The selected model better fits the business need.
Chapter: From Theory to Practice - Choosing a Contract Model in Practice - Contract Model Decision Matrix
Problem
Important perspectives are missed when stakeholders are excluded.
Action
Involve relevant stakeholders before selecting the contract model.
Outcome
The agreement gains stronger organizational support.
Chapter: From Theory to Practice - Choosing a Contract Model in Practice - The Importance of Including Stakeholders
Problem
Organizations may not be prepared for a new way of working.
Action
Evaluate organizational maturity before adopting a new contract model.
Outcome
Implementation becomes more successful.
Chapter: From Theory to Practice - Choosing a Contract Model in Practice - Organizational Readiness and Maturity
Problem
Incomplete preparation weakens execution.
Action
Review readiness before applying the selected contract model.
Outcome
Implementation begins on a stronger foundation.
Chapter: From Theory to Practice - Choosing a Contract Model in Practice - A Look Ahead
Problem
Unclear contract categories make management more difficult.
Action
Classify contracts using a consistent structure.
Outcome
Contract management becomes more organized.
Chapter: From Theory to Practice - A Systemization of Contracts - Systemizing Contract Types
Problem
Unclear performance measures reduce accountability.
Action
Choose whether the contract should focus on inputs or outputs.
Outcome
Performance expectations become clearer.
Chapter: From Theory to Practice - A Systemization of Contracts - Dimension 1: The Input/Output Dimension
Problem
Poor financial structures weaken incentives.
Action
Design financial relationships that support the intended objectives.
Outcome
Commercial performance improves.
Chapter: From Theory to Practice - A Systemization of Contracts - Dimension 2: Capital Resource Relationships - Financial Capital Contract Relationships
Problem
Physical assets may not support business operations effectively.
Action
Align physical asset agreements with operational requirements.
Outcome
Assets are managed more effectively.
Chapter: From Theory to Practice - A Systemization of Contracts - Dimension 2: Capital Resource Relationships - Physical Asset Contract Relationships
Problem
People require different contractual relationships than physical resources do.
Action
Create human capital agreements that encourage collaboration.
Outcome
Teams work together more effectively.
Chapter: From Theory to Practice - A Systemization of Contracts - Dimension 2: Capital Resource Relationships - Human Capital Contract Relationships
Problem
Poor information management reduces contract value.
Action
Define how important information will be shared and protected.
Outcome
Better information supports better decisions.
Chapter: From Theory to Practice - A Systemization of Contracts - Dimension 2: Capital Resource Relationships - Information Capital Contract Relationships
Problem
Looking at one dimension alone gives an incomplete view.
Action
Assess all relevant contract dimensions before finalizing the agreement.
Outcome
The contract better fits the business situation.
Chapter: From Theory to Practice - A Systemization of Contracts - The Combined View
Problem
Weak planning reduces later contract performance.
Action
Review the input side of the contracting landscape before making commitments.
Outcome
The agreement starts from a stronger foundation.
Chapter: From Theory to Practice - A Systemization of Contracts - The Contracting Landscape - The Input Side of the Landscape
Problem
Success cannot be measured without clear expected results.
Action
Specify the required outputs before starting the work.
Outcome
Performance becomes easier to evaluate.
Chapter: From Theory to Practice - A Systemization of Contracts - The Contracting Landscape - The Output Side of the Landscape
Problem
Skipping preparation weakens later implementation.
Action
Confirm that the contract framework is complete before beginning the next stage.
Outcome
Implementation starts with stronger alignment.
Chapter: From Theory to Practice - A Systemization of Contracts - A Look Ahead
Problem
An inconsistent process creates avoidable mistakes.
Action
Use a defined step-by-step process to build the partnership.
Outcome
The relationship develops on a stronger foundation.
Chapter: Five Steps to a Relational Contract - The Importance of the Right Process - A Look Ahead
Problem
Weak relationships reduce the value of contract terms.
Action
Establish trust and shared commitment before discussing detailed provisions.
Outcome
The partnership becomes more resilient.
Chapter: Five Steps to a Relational Contract - Step 1: Lay the Foundation for a Partnership - What Does This Mean?
Problem
Relationships are harder to strengthen after problems appear.
Action
Spend time developing the partnership before focusing on contract details.
Outcome
Future collaboration becomes more effective.
Chapter: Five Steps to a Relational Contract - Step 1: Lay the Foundation for a Partnership - Why Should You Do It?
Problem
Strong relationships can weaken without attention.
Action
Reinforce existing strengths before taking on new commitments.
Outcome
The partnership continues to perform well.
Chapter: Five Steps to a Relational Contract - Step 1: Lay the Foundation for a Partnership - From Theory to Practice - Existing Healthy Relationship (Discovery Health)
Problem
Unresolved conflict weakens future cooperation.
Action
Resolve relationship problems before creating new agreements.
Outcome
The partnership has a stronger chance of success.
Chapter: Five Steps to a Relational Contract - Step 1: Lay the Foundation for a Partnership - From Theory to Practice - Existing Unhealthy Relationship (Island Health)
Problem
New relationships often begin with different assumptions.
Action
Discuss expectations openly before beginning the work.
Outcome
Both parties start with greater alignment.
Chapter: Five Steps to a Relational Contract - Step 1: Lay the Foundation for a Partnership - From Theory to Practice - New Relationship (Telia)
Problem
Poor partner fit creates continuing conflict.
Action
Walk away when values or goals cannot be aligned.
Outcome
Resources are focused on better partnerships.
Chapter: Five Steps to a Relational Contract - Step 1: Lay the Foundation for a Partnership - What to Do if You and Your Potential Partner Are Misfits?
Problem
Poor preparation reduces the quality of discussions.
Action
Complete the recommended pre-work before meeting the other party.
Outcome
Early conversations become more productive.
Chapter: Five Steps to a Relational Contract - Step 1: Lay the Foundation for a Partnership - Tips and Tools for Getting Started - Pre-work
Problem
An unclear start creates confusion.
Action
Hold a kickoff meeting to establish direction and expectations.
Outcome
Everyone begins with a shared understanding.
Chapter: Five Steps to a Relational Contract - Step 1: Lay the Foundation for a Partnership - Tips and Tools for Getting Started - Step 1: Kickoff
Problem
Avoiding difficult conversations weakens trust.
Action
Hold honest discussions about important topics.
Outcome
Mutual understanding improves.
Chapter: Five Steps to a Relational Contract - Step 1: Lay the Foundation for a Partnership - Tips and Tools for Getting Started - Step 2: Discussion
Problem
Skipping foundational work creates future problems.
Action
Review the partnership foundation before moving to the next step.
Outcome
Later contract work becomes more effective.
Chapter: Five Steps to a Relational Contract - Step 1: Lay the Foundation for a Partnership - A Look Ahead
Problem
Different goals lead to conflicting decisions.
Action
Develop a shared vision with the other party.
Outcome
Both parties move in the same direction.
Chapter: Five Steps to a Relational Contract - Step 2: Co-create a Shared Vision and Objectives - What Does It Mean?
Problem
Unclear objectives reduce cooperation.
Action
Define shared objectives before finalizing the contract.
Outcome
Decision-making becomes more consistent.
Chapter: Five Steps to a Relational Contract - Step 2: Co-create a Shared Vision and Objectives - Why Should You Do It?
Problem
Objectives created by one party reduce commitment.
Action
Create objectives together through joint discussions.
Outcome
Both parties support the agreed direction.
Chapter: Five Steps to a Relational Contract - Step 2: Co-create a Shared Vision and Objectives - From Theory to Practice
Problem
A vague vision does not guide behavior.
Action
Document a simple and clear statement of the shared purpose.
Outcome
The partnership has a common direction.
Chapter: Five Steps to a Relational Contract - Step 2: Co-create a Shared Vision and Objectives - Tips and Tools for Getting Started - Create Your Shared Vision
Problem
A vision alone does not guide daily work.
Action
Develop strategic objectives that support the shared vision.
Outcome
Progress becomes easier to measure.
Chapter: Five Steps to a Relational Contract - Step 2: Co-create a Shared Vision and Objectives - Tips and Tools for Getting Started - Developing Your Strategic Objectives
Problem
Contracts lose direction when objectives are missing.
Action
Include the shared vision and objectives in the agreement.
Outcome
The contract supports the intended partnership.
Chapter: Five Steps to a Relational Contract - Step 2: Co-create a Shared Vision and Objectives - Tips and Tools for Getting Started - Contract Work
Problem
Moving ahead without alignment creates future problems.
Action
Review the shared vision before beginning the next step.
Outcome
The partnership remains focused.
Chapter: Five Steps to a Relational Contract - Step 2: Co-create a Shared Vision and Objectives - A Look Ahead
Problem
Different behavioral expectations create conflict.
Action
Agree on guiding principles that define how both parties will work together.
Outcome
Daily cooperation becomes more consistent.
Chapter: Five Steps to a Relational Contract - Step 3: Adopt Guiding Principles for the Partnership - What Does It Mean?
Problem
Unspoken expectations are often misunderstood.
Action
Identify the social norms that should guide the relationship.
Outcome
Behavior becomes more predictable.
Chapter: Five Steps to a Relational Contract - Step 3: Adopt Guiding Principles for the Partnership - What Is a Social Norm?
Problem
General principles are difficult to apply consistently.
Action
Describe each guiding principle with clear practical meaning.
Outcome
Both parties understand the expected behaviors.
Chapter: Five Steps to a Relational Contract - Step 3: Adopt Guiding Principles for the Partnership - What Are the Six Guiding Principles and What Do They Mean?
Problem
Confusing principles create inconsistent behavior.
Action
Write guiding principles in language that everyone can understand.
Outcome
Shared expectations become easier to follow.
Chapter: Five Steps to a Relational Contract - Step 3: Adopt Guiding Principles for the Partnership - Why Should You Do It? - Not Making the Guiding Principles Legally Binding Creates Confusion
Problem
Trust is difficult to establish through legal terms alone.
Action
Adopt guiding principles that show confidence in the partnership.
Outcome
Trust between the parties increases.
Chapter: Five Steps to a Relational Contract - Step 3: Adopt Guiding Principles for the Partnership - Why Should You Do It? - A Strong Signal of Trust
Problem
Behavioral uncertainty increases partnership risk.
Action
Apply guiding principles to shape everyday decisions.
Outcome
The partnership becomes more stable.
Chapter: Five Steps to a Relational Contract - Step 3: Adopt Guiding Principles for the Partnership - Why Should You Do It? - Risk Mitigation
Problem
Legal obligations alone do not prevent breaches of contract.
Action
Apply the guiding principles whenever decisions are made under the contract.
Outcome
Both parties honor their commitments more consistently.
Chapter: Five Steps to a Relational Contract - Step 3: Adopt Guiding Principles for the Partnership - Why Should You Do It? - A Security Measure Against Breach of Contract
Problem
Behavioral commitments lose value when they are not practiced.
Action
Use the agreed guiding principles during everyday collaboration.
Outcome
The partnership behaves more consistently.
Chapter: Five Steps to a Relational Contract - Step 3: Adopt Guiding Principles for the Partnership - From Theory to Practice
Problem
Weak preparation leads to ineffective behavioral standards.
Action
Complete the necessary preparation before drafting the guiding principles.
Outcome
The principles better support the partnership.
Chapter: Five Steps to a Relational Contract - Step 3: Adopt Guiding Principles for the Partnership - Tips and Tools for Getting Started - Pre-work
Problem
Different meanings create misunderstandings.
Action
Review and agree on key definitions before creating the guiding principles.
Outcome
Everyone interprets the principles consistently.
Chapter: Five Steps to a Relational Contract - Step 3: Adopt Guiding Principles for the Partnership - Tips and Tools for Getting Started - Step 1: Review the Definitions
Problem
Behavioral standards may not work in practice.
Action
Compare each guiding principle with past partnership experiences.
Outcome
The principles become more practical.
Chapter: Five Steps to a Relational Contract - Step 3: Adopt Guiding Principles for the Partnership - Tips and Tools for Getting Started - Step 2: Review the Guiding Principle Against Your Experiences
Problem
One-sided principles reduce commitment.
Action
Develop the guiding principles jointly with the other party.
Outcome
Both parties support the expected behaviors.
Chapter: Five Steps to a Relational Contract - Step 3: Adopt Guiding Principles for the Partnership - Tips and Tools for Getting Started - Step 3: Create Your Guiding Principles
Problem
Behavioral commitments are easily forgotten when they are disconnected from the agreement.
Action
Include the guiding principles in the contract documentation.
Outcome
The contract better supports collaboration.
Chapter: Five Steps to a Relational Contract - Step 3: Adopt Guiding Principles for the Partnership - Tips and Tools for Getting Started - Contract Work
Problem
Negotiations are weaker without shared behavioral expectations.
Action
Review the guiding principles before moving to commercial discussions.
Outcome
The partnership enters the next stage with stronger alignment.
Chapter: Five Steps to a Relational Contract - Step 3: Adopt Guiding Principles for the Partnership - A Look Ahead
Problem
Competitive negotiations reduce shared value.
Action
Apply collaborative contracting rules while designing the agreement.
Outcome
The final contract better supports mutual success.
Chapter: Five Steps to a Relational Contract - Step 4: Align Expectations and Interests (Architect the Deal Points) - What Does It Mean? - Four Rules for Collaborative Contracting
Problem
Conflicting incentives encourage conflicting behavior.
Action
Design commercial terms that reward mutual success.
Outcome
Both parties stay focused on common goals.
Chapter: Five Steps to a Relational Contract - Step 4: Align Expectations and Interests (Architect the Deal Points) - What Does It Mean? - Use Win-Win Economics
Problem
Unrealistic expectations create avoidable disputes.
Action
Agree only to commitments that both parties can realistically deliver.
Outcome
Contract performance becomes more reliable.
Chapter: Five Steps to a Relational Contract - Step 4: Align Expectations and Interests (Architect the Deal Points) - What Does It Mean? - Ensure Realistic Expectations
Problem
Poorly designed clauses reduce contract effectiveness.
Action
Draft every clause to serve a clear business purpose.
Outcome
The agreement works better in practice.
Chapter: Five Steps to a Relational Contract - Step 4: Align Expectations and Interests (Architect the Deal Points) - What Does It Mean? - Ensure Contracting Clauses Are Fit for Purpose
Problem
Unclear wording leads to inconsistent interpretation.
Action
Write contract obligations in precise, direct language.
Outcome
The agreement is easier to apply.
Chapter: Five Steps to a Relational Contract - Step 4: Align Expectations and Interests (Architect the Deal Points) - Why Should You Do It? - Why Have Concrete Contract Language?
Problem
Contract clauses can undermine agreed behaviors.
Action
Review every clause to ensure it supports the guiding principles.
Outcome
The contract reinforces consistent cooperation.
Chapter: Five Steps to a Relational Contract - Step 4: Align Expectations and Interests (Architect the Deal Points) - Why Should You Do It? - Why Do Contract Clauses Need to Align with the Guiding Principles?
Problem
Untested contract language may fail during execution.
Action
Evaluate proposed clauses using realistic business situations.
Outcome
The contract becomes more practical.
Chapter: Five Steps to a Relational Contract - Step 4: Align Expectations and Interests (Architect the Deal Points) - From Theory to Practice
Problem
Poor preparation weakens contract revisions.
Action
Complete the recommended preparation before rewriting contract language.
Outcome
The drafting process becomes more effective.
Chapter: Five Steps to a Relational Contract - Step 4: Align Expectations and Interests (Architect the Deal Points) - Tips and Tools for Getting Started - Pre-work
Problem
Large contract revisions are difficult to manage.
Action
Select one clause and redesign it using relational principles.
Outcome
The revision process becomes easier to control.
Chapter: Five Steps to a Relational Contract - Step 4: Align Expectations and Interests (Architect the Deal Points) - Tips and Tools for Getting Started - Step 1: Pick a Contract Clause You Want to Recast as a Relational Contracting Clause
Problem
Changing contract language without analysis introduces unnecessary risk.
Action
Answer structured review questions before revising each clause.
Outcome
The revised clause better supports its purpose.
Chapter: Five Steps to a Relational Contract - Step 4: Align Expectations and Interests (Architect the Deal Points) - Tips and Tools for Getting Started - Step 2: Complete an Analysis Asking the Following Questions, Writing Your Answers
Problem
One-sided drafting reduces shared ownership.
Action
Discuss revisions together before finalizing each clause.
Outcome
Both parties support the revised language.
Chapter: Five Steps to a Relational Contract - Step 4: Align Expectations and Interests (Architect the Deal Points) - Tips and Tools for Getting Started - Step 3: Discuss How You Should Re-Write This Clause for a Relational Contract
Problem
Partial revisions leave inconsistent contract language.
Action
Repeat the review process for each important clause.
Outcome
The contract becomes consistently aligned.
Chapter: Five Steps to a Relational Contract - Step 4: Align Expectations and Interests (Architect the Deal Points) - Tips and Tools for Getting Started - Step 4: Repeat Steps 1-3 for Each Clause
Problem
Unresolved contract issues weaken execution.
Action
Review the completed deal terms before moving to governance.
Outcome
Implementation begins with stronger agreement.
Chapter: Five Steps to a Relational Contract - Step 4: Align Expectations and Interests (Architect the Deal Points) - A Look Ahead
Problem
Expectations naturally drift over time.
Action
Review shared expectations regularly with the other party.
Outcome
The partnership stays coordinated.
Chapter: Five Steps to a Relational Contract - Step 5: Stay Aligned - What Does It Mean?
Problem
Relationships weaken without ongoing attention.
Action
Continue structured communication throughout contract execution.
Outcome
The partnership remains effective.
Chapter: Five Steps to a Relational Contract - Step 5: Stay Aligned - Why Should You Do It?
Problem
Small issues become larger when they are ignored.
Action
Hold regular governance meetings to review the relationship.
Outcome
Problems are resolved earlier.
Chapter: Five Steps to a Relational Contract - Step 5: Stay Aligned - From Theory to Practice
Problem
Unplanned governance creates inconsistent oversight.
Action
Design governance activities before the relationship begins.
Outcome
Ongoing contract management becomes more effective.
Chapter: Five Steps to a Relational Contract - Step 5: Stay Aligned - Tips and Tools for Getting Started - Pre-work
Problem
Different interpretations weaken governance decisions.
Action
Agree on governance definitions before putting the process into practice.
Outcome
Governance is applied more consistently.
Chapter: Five Steps to a Relational Contract - Step 5: Stay Aligned - Tips and Tools for Getting Started - Step 1: Review the Definitions
Problem
Relationships lose alignment without clear governance.
Action
Create governance roles, meetings, and decision processes together.
Outcome
The partnership stays aligned throughout execution.
Chapter: Five Steps to a Relational Contract - Step 5: Stay Aligned - Tips and Tools for Getting Started - Step 2: Design Your Governance
Problem
Undocumented governance leads to inconsistent management.
Action
Include the agreed governance approach in the contract.
Outcome
The relationship is managed more consistently.
Chapter: Five Steps to a Relational Contract - Step 5: Stay Aligned - Tips and Tools for Getting Started - Contract Work
Problem
Weak governance reduces partnership performance.
Action
Review the governance framework before beginning long-term collaboration.
Outcome
The partnership is better prepared for future challenges.
Chapter: Five Steps to a Relational Contract - Step 5: Stay Aligned - A Look Ahead
Problem
Limited legal knowledge increases contract risk.
Action
Learn the basic legal principles that govern contracts.
Outcome
Contracts are drafted with greater confidence.
Chapter: Are Relational Contracts Legally Enforceable? - Legal Considerations of Relational Contracts - What Is Contract Law?
Problem
Poor use of contractual freedom creates unbalanced agreements.
Action
Exercise freedom of contract while considering both parties' interests.
Outcome
The agreement better reflects shared intentions.
Chapter: Are Relational Contracts Legally Enforceable? - Legal Considerations of Relational Contracts - Freedom of Contract
Problem
Ambiguous language increases the chance of disputes.
Action
Write contract terms using clear and consistent wording.
Outcome
The agreement is interpreted more reliably.
Chapter: Are Relational Contracts Legally Enforceable? - Legal Considerations of Relational Contracts - Interpretation of Contracts
Problem
Self-interested behavior weakens contractual relationships.
Action
Deal honestly and fairly in every stage of the partnership.
Outcome
Trust between the parties grows.
Chapter: Are Relational Contracts Legally Enforceable? - Legal Considerations of Relational Contracts - The Good Faith Doctrine - A Frustrating Concept
Problem
Good faith obligations differ across jurisdictions.
Action
Account for the applicable legal system when drafting the contract.
Outcome
The agreement better fits its legal environment.
Chapter: Are Relational Contracts Legally Enforceable? - Legal Considerations of Relational Contracts - The Good Faith Doctrine - Good Faith in the United States, Germany, and France
Problem
Ignoring court practice increases legal uncertainty.
Action
Review relevant court decisions before drafting important agreements.
Outcome
The contract better reflects established legal practice.
Chapter: Are Relational Contracts Legally Enforceable? - Legal Considerations of Relational Contracts - The Good Faith Doctrine - Good Faith and Relational Contracts in UK and Canadian Court Practice
Problem
A purely literal reading may conflict with the parties' intentions.
Action
Apply the principle of good faith when interpreting contract provisions.
Outcome
Contract disputes are resolved more fairly.
Chapter: Are Relational Contracts Legally Enforceable? - Legal Considerations of Relational Contracts - The Good Faith Doctrine - The Use of Good Faith in Contract Interpretation
Problem
Different expectations about good faith create uncertainty.
Action
Discuss and define good faith before relying on it during the relationship.
Outcome
Both parties share clearer expectations.
Chapter: Are Relational Contracts Legally Enforceable? - Legal Considerations of Relational Contracts - The Good Faith Doctrine - So Just What Is Good Faith? And Who Gets to Decide?
Problem
People may assume relational contracts cannot be enforced.
Action
Write relational commitments as clear legal obligations.
Outcome
The agreement gains stronger legal enforceability.
Chapter: Are Relational Contracts Legally Enforceable? - Legal Considerations of Relational Contracts - Why Relational Contracts Are Enforceable