The Potential Legal Value of Relational Contracts in a Time of Crisis or Uncertainty

22 Pages Posted: 16 May 2022 Last revised: 16 Jun 2022

Date Written: April 27, 2022

Abstract

A co-authored October 2020 Harvard Business Review (“HBR”) article promotes the use of “formal relational contracts” as a means of obviating or limiting opportunistic behaviors by contracting parties, including parties contending with cataclysmic events or factors in or outside the business that place significant financial stress on the business and its relations with others. The HBR co-authors note that the uncertainties exposed by and emanating from the ongoing COVID-19 pandemic are formative to their proposition. They specifically focus their attention on supply contracts, although their ideas may have broader application. This article preliminarily inspects the claims made in that HBR article from the standpoint of U.S. legal doctrine and lawyering and suggests avenues for future research, with the limited goal of offering legal commentary on a broad-based contract design idea that responds to the need for business operations flexibility in a pandemic or in other times of systemic or individualized crisis.

Keywords: relational contract, supply contracts, contract enforceability, contract design, contract drafting

JEL Classification: K12, K22, K40, M10

Suggested Citation

Heminway, Joan MacLeod, The Potential Legal Value of Relational Contracts in a Time of Crisis or Uncertainty (April 27, 2022). Law and Contemporary Problems, Vol. 85, No. 2, 2022, University of Tennessee Legal Studies Research Paper No. 430, Available at SSRN: https://ssrn.com/abstract=4104574

Joan MacLeod Heminway (Contact Author)

University of Tennessee College of Law ( email )

1505 West Cumberland Avenue
Knoxville, TN 37996
United States
865-974-3813 (Phone)
865-974-0681 (Fax)

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