Colleague Glenn Meier (1) , in our recent attendance at the Global Collaborative Law Council Annual Conference last August in Lincoln, Nebraska, raised some questions regarding the work being done with contracts. I wasn't able to respond properly to Glenn as I would have liked, which is why I decided to develop the responses more slowly and share them on my blog in sequence. Here is the first question and its answer.
Question: HOW DO RELATIONAL CONTRACTS GENERATE MORE COLLABORATION FOR CONTRACTING PARTIES?
First, one must understand exactly what a relational contract is, due to the fact that most people still cannot see a contract as a relationship, or even as the unfolding of a relationship.
Despite all contracts having, to a certain extent, a relational aspect, studies that proposed a sociological view of contracts emerged in the 1960s, mainly through the Relational Theory of Contracts presented by Ian Macneil(2).
Macneil worked with the idea that the contract is ultimately an exchange and, as such, one of the most recurrent human behaviors. Society is the primary source of contract and, along with it, specialization of labor and exchange, free choice and awareness of the future.
Macneil himself had, among one of his definitions, that the contract was the symbol of the relationship between people to design a future exchange.
Therefore, when we talk about the relational contract, we must associate it with the construction of a relationship, and the contract must be the reflection of it, and not the opposite.
And when we talk about relational contracts, we must understand them as those who project long-term relationships, whose exchange extends into the future, generating interdependence between the parties and which must take into high consideration all the factors that influence any durable human relationship.
Macneil stated that there are de facto rules and social norms that pertain to all contracts and that influence their effectiveness and duration, such as integrity, reciprocity, flexibility, solidarity in harmonization with the social and economic matrix, among others. Still, he distinguished between two types of contracts, the “discrete” and the “relational”. The “discrete” ones would be those that are short or immediate and that would have a merely transactional nature, while the relational ones are those of long duration and that project the exchange in successive installments, generating interdependence between the parties and requiring flexibility to maintain interests and needs aligned.
The sociological view of the contract, however, remained a mere academic reference, having been swallowed up by the classical, traditional and transactional view.
However, the speed and complexity proposed by the digital revolution and the ongoing social and economic globalization have provoked and are provoking profound changes in the social format, resurrecting the theme that, in turn, became the object of many studies and, methodologies more appropriate and directed to the construction of relational contracts, as is the case of the Conscious Contracts®️(3) and Vested(R)(4) both practiced by my law firm.
The pandemic was the trigger that catapulted the contractual environment into a deep reflection, giving rise to two imperatives without which personal and business relationships would not have survived the chaos imposed by Covid, namely, collaboration and flexibility.
Let's think that in order to start and maintain any relationship - personal or business - collaboration must be kept in mind, seen as the possibility of producing a greater and better result than that produced alone, together with the flexibility to allow facing changes and maintaining the balance of interests and needs of all who make up the relationship.
The answer to the question raised could be, in short, that collaboration is part of the essence of any relationship and in formal relational contracts – applying the appropriate methodologies in their construction – the parties become more aware of what it is and how to collaborate, in order to preserve the relationship in a balanced way.
I hope I have answered Glenn Meier's first question satisfactorily.
September 07, 2022.
Ana Luiza Panyagua Etchalus
[3] https://consciouscontracts.com/user/anaetchaicloud-com/
[4] https://www.vestedway.com/
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