Functional Contracting: Re-Conceptualizing Business Contracts in Face of New Forms of Production

26 Pages Posted: 6 Oct 2020 Last revised: 7 Oct 2020

See all articles by Mika Viljanen

Mika Viljanen

University of Turku - Faculty of Law

Jaakko Salminen

Copenhagen Business School

Anna Hurmerinta-Haanpää

affiliation not provided to SSRN

Date Written: October 5, 2020

Abstract

Alongside bilateral one-off transactions, contracts are used to govern the dynamic, multi-tiered production networks that constitute a majority of global commerce today. Contract law and theory do not reflect this change in contractual modalities. In this paper, we look first to summarize earlier theories of contract and posit that the theory of functional contracting offers a novel and more useful approach for understanding contractually governed dynamic and multi-tiered transactions. We then underscore the difference between functional contracting and earlier theories by describing a recent practical case on the contractual governance of business-model transitions. Finally, on the basis of the theoretical comparison, case study and other related case-studies, we evaluate how the model of functional contracting helps legal scholars and practitioners to understand changes in contractual modalities brought about by changes in the global economy.

Keywords: Contract Law, Contract Theory, Functional Contracting, Relational Contracting, Transaction-cost economics, Global Value Chains, Global Production Networks

JEL Classification: K12, D23, F61

Suggested Citation

Viljanen, Mika and Salminen, Jaakko and Hurmerinta-Haanpää, Anna, Functional Contracting: Re-Conceptualizing Business Contracts in Face of New Forms of Production (October 5, 2020). Copenhagen Business School, CBS LAW Research Paper No. 20-34, Available at SSRN: https://ssrn.com/abstract=3705216

Mika Viljanen

University of Turku - Faculty of Law ( email )

FIN-20014 Turku
Finland

Jaakko Salminen (Contact Author)

Copenhagen Business School ( email )

Anna Hurmerinta-Haanpää

affiliation not provided to SSRN

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