How Better Contracts Can Strengthen Strategic Partnerships

Even the most carefully worded and meticiously reviewed contracts can fall apart once they hit the reality of modern business dynamics. Oliver Hart, Nobel-winning Harvard economist, and Kate Vitasek, faculty at the University of Tennessee, argue that, when it comes to contracts, one side often ends up feeling like they’re getting a bad deal, and it can spiral into a tit for tat battle. Hart and Vitasek say that companies should instead consider so-called relational contracts. Their research shows that creating a general playbook built around principles like fairness and reciprocity offers greater benefits to both businesses.