How Better Contracts Can Strengthen Strategic Partnerships

Episode notes

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. Hart and Vitasek, with the Swedish attorney David Frydlinger, cowrote the article " A New Approach to Contracts ." Listen to the original HBR IdeaCast episode: The Inherent Failures of Long-Term Contracts - and How to Fix Them Find more episodes of HBR IdeaCast Discover 100 years of Harvard Business Review articles, case studies, podcasts, and more at hbr.org