Increasing The Durability of Contracts
As Honeyman and Wade (2005, 15) point out, to increase the chances of ‘performance’ of a contract (and therefore reduce chances of a breach), a party should enhance:
- Entering into contracts with parties where there is already a longstanding relationship – therefore raising incentives to perform promises
- Avoiding making contracts with cultural groups that view contracts as the ‘beginning of a relationship’, rather than a legally binding agreement
- Clarifying whether ‘yes’ means ‘maybe’ or ‘no’ and whether signed and detailed contracts are considered to be binding, morally, legally and/or in reputation, or just amount to the declaration that a working relationship now exists
- Including clauses and a discussion regarding how any future misunderstandings and problems will be addressed
- Attempting to agree that final determination of any future problems with performance will be in a court or arbitration venue
- Only going into contract with parties that are stable and reliable
- Taking out risk management insurance for non-performance or currency fluctuations
- Attempting to enter into an agreement which recognizes procedural, emotional and substantive needs of all parties involved
- Not walking close to the line on any of the legal rules such as duress, deceit, vague terminology or illegality and this will give other parties the opportunity to claim a loophole
- Attempting to reduce buyer’s remorse by
- Making congratulatory speeches about the agreement’s benefits
- Never agreeing quickly to any clauses
- Adding post-agreement gifts and bonuses
- Publicize the deal by mutual agreement. A wider audience will then place expectations on all parties to perform, or risk losing face and credibility in future arrangements. Most people have a strong desire to act consistently with their own clear commitment
Read more about this topic: Ethical Implications In Contracts
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