WHY THIS, NOT THAT™ CONTRACTS | Relational Agreements

DO THIS

Be willing to abandon (when appropriate) a traditional contractual agreement.

NOT THAT

Consider a relational agreement.

WHY

When there is a long-term, complex relationship is at stake and trust is a problem, a relational contract may be the way to go.

When parties have a vested interest in each other’s success, formal relational contracting establishes a “what’s in it for we” partnership.

These agreements include many components of a traditional contract, but also contain relationship-building elements such as a shared vision, guiding principles, and robust governance structures to keep the parties’ expectations and interests aligned.

Consider the case study that involved Dell and FedEx highlighted in the Harvard Business Review article, “A New Approach to Contracts” by David Frydlinger, Oliver Hart, and Kate Vitasek.

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