Abstract
Preliminary findings indicate that businessmen often fail to plan exchange relationships completely, and seldom use legal sanctions to adjust these relationships or to settle disputes. Planning and legal sanctions are often unnecessary and may have undesirable consequences. Transactions are planned and legal sanctions are used when the gains are thought to outweigh the costs. The power to decide whether the gains from using contract outweigh the costs will be held by individuals having different occupational roles. The occupational role influences the decision that is made.
This article was original published in American Sociological Review 28 (1963), 55–69. Reprinted with permission.
Revision of a paper read at the annual meeting of the Americal Sociological Association, August, 1962. An earlier version of the paper was read at the annual meeting of the Midwest Sociological Society, April, 1962. The research has been supported by a Law and Policy Research Grant to the University of Wisconsin Law School from the Ford Foundation. I am grateful for the help generously given by a number of sociologists including Robert K. Merton, Harry V. Ball, Jerome Carlin and William Evan.
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Notes
- 1.
The reasons for this limitation are that (a) these transactions are important from an economic standpoint, (b) they are frequently said in theoretical discussions to represent a high degree of rational planning, and (c) manufacturing personnel are sufficiently public-relations-minded to cooperate with a law professor who wants to ask a seemingly endless number of questions. Future research will deal with the building construction industry and other areas.
- 2.
For the present purposes, the what-difference-does-it-make issue is important primarily as it makes a case for an empirical study by a law teacher of the use and nonuse of contract by businessmen. First, law teachers have a professional concern with what the law ought to be. This involves evaluation of the consequences of the existing situation and of the possible alternatives. Thus, it is most relevant to examine business practices concerning contract if one is interested in what commercial law ought to be. Second, law teachers are supposed to teach law students something relevant to becoming lawyers. These business practices are facts that are relevant to the skills which law students will need when, as lawyers, they are called upon to create exchange relationships and to solve problems arising out of these relationships.
- 3.
The following things have been done. The literature in law, business, economics, psychology, and sociology has been surveyed. The formal systems related to exchange transactions have been examined. Standard form contracts and the standard terms and conditions that are found on such business documents as catalogues, quotation forms, purchase orders, and acknowledgment-of-order forms from 850 firms that are based in or do business in Wisconsin have been collected. The citations of all reported court cases during a period of 15 years involving the largest 500 manufacturing corporations in the United States have been obtained and are being analyzed to determine why the use of contract legal sanctions was thought necessary and whether or not any patterns of “problem situations” can be delineated. In addition, the informal systems related to exchange transactions have been examined. Letters of inquiry concerning practices in certain situations have been answered by approximately 125 businessmen. Interviews, as described in the text, have been conducted. Moreover, six of my students have interviewed 21 other businessmen, bankers and lawyers. Their findings are consistent with those reported in the text.
- 4.
However, the cases have not been selected because they did use contract. There is as much interest in, and effort to obtain, cases of nonuse as of use of contract. Thus, one variety of bias has been minimized.
- 5.
Compare the findings of an empirical study of Connecticut business practices in Comment, “The Statute of Frauds and the Business Community: A Re-Appraisal in Light of Prevailing Practices,” Yale Law Journal, 66 (1957), pp. 1038–1071.
- 6.
See the case studies on cancellation of contracts in Harvard Business Review, 2 (1923–24), pages 238–40, 367–70, 496–502.
- 7.
Annual Report of the Director of the Administrative Office of the United States Courts, 1961, p. 238.
- 8.
State of New York, The Judicial Conference, Sixth Annual Report, 1961, pp. 209–11.
- 9.
My colleague Lawrence M. Friedman has studied the work of the Supreme Court of Wisconsin in contracts cases. He has found that contracts cases reaching that court tend to involve economically-marginal-business and family-economic disputes rather than important commercial transactions. This has been the situation since about the turn of the century. Only during the Civil War period did the court deal with significant numbers of important contracts cases, but this happened against the background of a much simpler and different economic system.
- 10.
New York Law Revision Commission, Hearings on the Uniform Commercial Code, 2 (1954), p. 1391.
- 11.
The explanation that follows emphasizes a considered choice not to plan in detail for all contingencies. However, at times it is clear that businessmen fail to plan because of a lack of sophistication; they simply do not appreciate the risk they are running or they merely follow patterns established in their firm years ago without reexamining these practices in light of current conditions.
- 12.
Even where there is little chance that problems will arise, some businessmen insist that their lawyer review or draft an agreement as a delaying tactic. This gives the businessman time to think about making a commitment if he has doubts about the matter or to look elsewhere for a better deal while still keeping the particular negotiations alive.
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© 1963 American Sociological Association (ASA)
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Macaulay, S. (1963). Non-contractual Relations in Business: A Preliminary Study. In: Campbell, D. (eds) Stewart Macaulay: Selected Works. Law and Philosophy Library, vol 133. Springer, Cham. https://doi.org/10.1007/978-3-030-33930-2_14
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