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When to Use a Relational Contract

In: Contracting in the New Economy

Author

Listed:
  • David Frydlinger

    (Cirio Law Firm)

  • Kate Vitasek

    (University of Tennessee at Knoxville)

  • Jim Bergman

    (Commercial Officers Group, Inc)

  • Tim Cummins

    (World Commerce & Contracting)

Abstract

In this chapter, When to Use a Relational Contract, a common question is “when should I use a relational contract instead of a transactional contract?” This chapter sets out to answer this question. Neither option is best in all scenarios, but some scenarios are more appropriate for relational contracts. This chapter examines how a global consumer packaged goods company considered dependency and risk when contracting with a supplier for third-party logistics (3PL) support. Two scenarios are reviewed—Scenario High and Scenario Low—which consider very different circumstances regarding dependency and risk and reaching the ultimate decision. While a countless number of scenarios can be analyzed (e.g., both risk and dependency are in the mid-range), these two scenarios showcase the logic of how one might select the most appropriate contracting model for a specific situation.

Suggested Citation

  • David Frydlinger & Kate Vitasek & Jim Bergman & Tim Cummins, 2021. "When to Use a Relational Contract," Springer Books, in: Contracting in the New Economy, edition 1, chapter 0, pages 107-122, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-65099-5_8
    DOI: 10.1007/978-3-030-65099-5_8
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