Cultural Expectations of Flexibility
In some cultural groups such as Japan, the creation of a contract symbolises the formation of a working relationship, and not a legally binding agreement. Some groups will regard the contract as being flexible in terms that if any problems or issues arise, the parties will reassess the obligations of the agreement and negotiate ways to preserve the relationship (Honeyman and Wade 2007, 8). However, this is not generally the ‘Western’ view on contracts.
In relation to the ethical issue of cultural relativism, a business is obliged to operate in a manner acceptable to the host country, both legally and morally (Grace and Cohen 2005, 19). But what if the contract is not necessarily subject to having a ‘host country’? Is it morally wrong for a Western party to hold a Japanese party to the contract when it is known that the Japanese party would not have intended to be legally bound? Or is it unethical or immoral of the Japanese to sign such an agreement, even though they mean well when signing it, knowing the Western party intended to be legally bound by the contract but themselves see the contract as more of a flexible agreement?
Honeyman and Wade (2007) state that differences in cultural expectations can predictably lead to the more economically powerful party attempting to negotiate that all breaches will be dealt with ultimately by courts from their own culture, applying their own cultural and legal rules.
This then highlights the issue of different legal rules existing in different countries which enable contracts to be set aside. The list of exceptions to finality of contracts varies from one jurisdiction to another, and this is often placed under the label ‘frustration of contracts’.
Read more about this topic: Ethical Implications In Contracts
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