Trust, Contracting, and Adaptation in Agri‐Food Hybrid Structures

The paper considers the relationship between trust and governance structure from a Transaction Cost Economics perspective. The role of trust in the coordinating decisions is variously conceptualized according to the theoretical view adopted by the scholars. The present study adopt the three‐level schema introduced by Williamson (1996) and suggest that determinants of trust may operate both at institutional and governance structure level. The analytical framework depicted maintains that trust may determine a reduction of ex post transaction cost in the adaptation of hybrid structure. As a consequence trust appears to be able to extend the range of existence of the hybrids. The empirical part of the study is dedicated to a case study which illustrates the emerging of conditional trust (Fritz et al., 2008) and the role of trust in the adaptation process.hybrid, conditional trust, adaptation, contractual relationship., Food Consumption/Nutrition/Food Safety, Food Security and Poverty, Industrial Organization, Research Methods/ Statistical Methods,

The importance of completeness and clarity in air transport contracts in remote regions in Europe and Australia

As a result of the recent financial crisis and in times of government austerity, clear contracts are of immense importance to transport authorities in order to achieve value for money when procuring air transport services. Good contracts can support them in stretching budgets as far as possible whilst ensuring that good quality, and at least minimum service level requirements, are delivered. Moreover, incomplete and unclear contracts can also have very detrimental impacts on the financial performance of regional airlines. If a contract is unclear it is likely to create uncertainty, and in the worst case, result in a lack of interest from any airline when tendered out. Weakly drafted contracts can also result in disputes and high transaction costs. This paper compares the current experience of PSO carriers in Europe and Australia. We use an internet survey to reveal what features of the contract airlines experienced ex ante with regard to contract clarity and then ex post regarding the completeness of their transport contracts. Our results show differences across carriers that go beyond differences associated with geographic region. We also find common themes for contracting PSO services, for example the importance of trust and good relationships between transport authorities and operators

Trust and Contracting in Agri-Food Hybrid Structures

The paper aims at examining the hypothesis that the influence of trust on contract can be thought of as a dynamic factor of organizational choices in supply chains. The relationship between contract and trust is delineated on the basis of institutional environment, contractual incompleteness, safeguards and restrictive provisions. The interaction between individual and system elements in the formation of trust and its influence in hybrid contracting is considered. According to a New Institutional Economics approach and a theoretical framework is proposed. Empirical evidence is provided by a case study regarding an Italian retailer company establishing hybrid structure with its suppliers. Investments in suppliers selection provide the basis for trust supporting relationships which economize on negotiating and litigation costs.hybrid structures, trust, contract, Agribusiness, Q13, D23,

There is more to contracts than incompleteness: a review and assessment of empirical research on inter-firm contract design

This paper aims at achieving a greater understanding of how contracts operate in practice through a review of recent empirical literature on inter-firm contract design. Our focus on the structure of contractual agreements differentiates this review from others that dedicated ample coverage also to the antecedents of the decision to contract and of the choice of contracting versus integration. Our framework develops Stinchcombe’s (1985) hypothesis that contracts are an organizational phenomenon. This allows us to uncover considerable but unevenly distributed evidence on a number of organizational processes formalized in relational contracts, which partially overlap with the processes that are observed in integrated organizations. It also enables us to describe contracts in terms of a larger number of dimensions than is commonly appreciated. The paper summarizes the evidence by proposing a general and tentative framework to guide the design of relational contracts, discusses a number of lingering issues, and outlines directions for further research on contracts as an organizational phenomenon

Renegotiation of Joint Venture Contracts: The Influence of Boards of Directors and Prior Ties as Alternative Governance Mechanisms

Research on alliance governance has pointed out that joint ventures (JVs) are particularly complex forms of collaboration. Partnering firms therefore often face difficulties in anticipating contingencies and collaborative behaviors at the contract negotiation stage. When initial JV contracts are incomplete, renegotiation represents a key strategic opportunity for enhancing contractual safeguards or coordination guidelines over the course of the joint venture. Costs and risks entailed by renegotiating JV arrangements at a later stage are far from trivial, however. Existing research on alliances suggests that practitioners have alternative relational and formal governance solutions at their disposal for handling possible inefficiencies caused by contractual gaps over time. Although insightful, this research does not enable a determination as to whether these alternative relational and formal mechanisms substitute for or facilitate ex post contractual renegotiation. The competing arguments found in the literature provide little guidance to JV practitioners as well. Our results show that the collaborative context within which the JV is embedded (i.e., prior inter-partner ties) obviates the need for enhancing incomplete JV contracts ex post. By contrast, ex post contractual adjustments are fostered and facilitated by the formal and administrative apparatus engaged over the course of the JV (i.e., an involved JV board of directors). Such opposing effects suggest that prior ties can “prevent” the occurrence of inefficiencies caused by contractual gaps, while an involved JV board primarily can act as a mediation and renegotiation platform to “repair” the exchange when inefficiencies occur. Our findings highlight the multidimensional nature of joint venture governance, and in particular the interplay among various formal and informal governance solutions in the execution of joint ventures. By unpacking their complex effects on the decision to renegotiate incomplete JV contracts, our study also holds important value for managers seeking to govern their JVs over time

Contracts in agriculture (2009)

The purpose of this guide is to provide an introduction to the legal foundation of contracts and an understanding of the role of contracts in business transactions. It provides information that will allow readers to understand several other guides dealing with specialized contracts being offered in agriculture. These specialized contracts involve activities such as carbon sequestration, conservation easements and long-term leases for wind energy turbines.New 8/09/3M

Metropolitan bus service contracts (MBSC): Thoughts on the next round

This paper revisits a number of themes that have played a crucial role in the debate on alternative contracting regimes for the provision and bus and coach services. We have selected seven crucial issues to reflect on: (i) contractual regimes (in particular negotiated performance based contracts linked to benchmarking and competitive tendering); (ii) contract completeness (focussing on ex ante and ex post elements and what can be improved within the context of current contracts); (iii) building trust through partnership; (iv) number of contract areas (emphasising the crucial demand-side objective); (v) tactical or system level planning for bus services; (vi) asset ownership; and (vii) margins

Contracts in agriculture

"Contractual relationships are nothing new for farmers. Contracts commonly used in agriculture include sales of land, equipment and grain; loans and mortgages; input purchases; land and equipment leases; and production and marketing contracts. Although these transactions occasionally take the form of oral agreements, written documents are increasingly being used to specify the terms of an intended transaction. In fact, contracts have become so common that they are often overlooked. When installing a software program on a computer, users are asked if they accept the terms of the end user license agreement. Most people check "I agree" without reading the lengthy verbiage and not realizing that it is legally binding. While this method may be acceptable for some transactions, it is certainly not recommended for agribusiness contracts. Some farmers have avoided written contracts, believing that they communicate lack of trust. A handshake and verbal agreement should be sufficient, some would argue. This perspective focuses on a potential offense of clearly writing out the terms of the agreement while overlooking the value of written contracts to clarify the agreement that is being entered into, and hence, preclude real offense. Depending on several factors, an oral agreement may not qualify to be called a contract and may have the effect of leaving one or both parties with absolutely no legal obligation. A contract is a legally enforceable promise. It is an agreement that specifies the terms to which all parties associated with the contract agree. It is the result of one party making an offer that, if accepted by the other party, generally places on both parties the legal obligation to perform on their respective promises. More specifically, it often lays out the allocation of decision rights, value and risk among the parties either specifically or by inference. The purpose of this guide is to provide an introduction to the legal foundation of contracts and an understanding of the role of contracts in business transactions. It provides information that will allow readers to understand several other guides dealing with specialized contracts being offered in agriculture. These specialized contracts involve activities such as carbon sequestration, conservation easements and long-term leases for wind energy turbines."--First page.Authors: Ray Massey (Agricultural Economist, Commercial Agriculture Program), Mike Sykuta (Agricultural Economist, Department of Agricultural Economics), Vern Pierce (Agricultural Economist, Commercial Agriculture Program)New 8/09/3

Taxonomy for Justifying Legal Intervention In An Imperfect World: What To Do When Parties Have Not Achieved Bargains Or Have Drafted Incomplete Contracts

This paper addresses the fundamental methodological issue of when courts should intervene in incomplete contracts by interpreting them, filling in gaps and imposing liability on parties who have not yet reached a bargain. It addresses whether such intervention poses a threat to the parties\u27 freedom from contract, the subject of the Wisconsin Symposium on Freedom from Contract. It uses an instrumental approach to determine the circumstances in which courts can outperform parties in improving welfare by intervention. It assesses the two dominant strands of scholarship for addressing the legal intervention question. One strand emphasizes the costs of parties achieving complete contracts and justified legal intervention as a means to reduce such transaction costs. The other strand of scholarship, represented by the new formalists, emphasizes the difficulty of supplying terms that depend on unverifiable or unobservable information. While both strands of the literature contain valid insights, this paper suggests that neither strand of scholarship provides an analysis of how intervention would advance or hinder the parties\u27 welfare when certain factors such as uncertainty, sunk costs and opportunism are taken into account. Therefore, they cannot assess whether intervention in the form of a precontractual liability rule, with its apparent reduction in freedom from contract, advances welfare or not. This paper develops a taxonomy for legal intervention that focuses on the structural barriers that interfere with the parties\u27 ability to solve a key problem in contracting: the tendency of parties to behave opportunistically. To date, the full implications of this behavioral uncertainty have not been sufficiently incorporated into models assessing legal intervention nor into models demarcating the appropriate boundaries realm for freedom from contract. This paper suggests that legal intervention may be called for when sunk costs and uncertainty about the likelihood of opportunistic behavior are present and the parties\u27 costs of dealing with the recurring problem on their own are most costly than judicial intervention. It specifically explores the taxonomy of legal intervention in the specific context of precontractual liability and the implied limits on revocation in Drennan and unilateral contracts