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Relational contract theory and management contracts: A paradigm for the application of the Theory of the Norms

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  • Diathesopoulos, Michael

Abstract

This paper examines management contracts as a paradigm for the application of relational contracts theory and especially of the theory of contractual and relational norms. This theory, deriving from Macauley's implications, but structured and analysed by I.R. MacNeil gives us a framework for the explanation and understanding of contractual obligations and business relations' rules and practice. After presenting the key literature about the norms theory and especially defining the content of MacNeil's norms, we define management contracts as relations, characterised by a high relational element and we explain why, investigating all their features, which make them a suitable object for an application of norms theory. Then, we select a list of the core obligations for the recipient, provider and both parties in such a relation and we analyse each obligation according to MacNeil's model of norms. Specifically, we test the application of specific relative norms to each obligation and we examine which norms appear in which obligation. Finally, we concentrate our results and we result to our conclusions, based on a matrix showing the strength, breadth and depth of the application of each norm, while we also compare our results to those coming up from the application of a shorter comprehensive model of norms (Austen-Baker's model). The above analysis and tests provide us valuable results about the application, significance and practical value of the theory of the norms, about the significance of each norm for business relations and finally about the potential to present a more useful and comprehensive model of norms.

Suggested Citation

  • Diathesopoulos, Michael, 2010. "Relational contract theory and management contracts: A paradigm for the application of the Theory of the Norms," MPRA Paper 24028, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:24028
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    References listed on IDEAS

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    1. Morten Hviid, 1998. "Relational Contracts, Repeated Interaction and Contract Modification," European Journal of Law and Economics, Springer, vol. 5(2), pages 179-194, March.
    2. Hackett, Steven C, 1994. "Is Relational Exchange Possible in the Absence of Reputations and Repeated Contact?," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 10(2), pages 360-389, October.
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    4. Bernstein, Lisa, 1992. "Opting Out of the Legal System: Extralegal Contractual Relations in the Diamond Industry," The Journal of Legal Studies, University of Chicago Press, vol. 21(1), pages 115-157, January.
    5. Megginson, William Leon, 2005. "The Financial Economics of Privatization," OUP Catalogue, Oxford University Press, number 9780195150629.
    6. Vincent-Jones, Peter, 2006. "The New Public Contracting: Regulation, Responsiveness, Relationality," OUP Catalogue, Oxford University Press, number 9780199291274.
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    2. Kambale Mirembe, Omer, 2013. "Customs reforms in eastern Congo (DRC): Between norms and practices," IOB Working Papers 2013.04, Universiteit Antwerpen, Institute of Development Policy (IOB).

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    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • K00 - Law and Economics - - General - - - General (including Data Sources and Description)
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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