Contract as organisation : an economic analysis of the joint contracts tribunal's standard form of building contract 1980

Abstract

The objective of this thesis is to consider whether the institutionalist hypothesis that the choice of organisational form functions to limit the transaction costs of organising productive activities explains a major standard-form contract which is used in building production. I approach this task by demarcating three models of contract which represent different points along a "contracting continuum". Each of the three governance structures - classical contract, relational contracting and the firm - represents a distinct patterning of resource co-ordination and each generates its own configuration of transaction costs. Thus the contracting continuum provides a basis for comparing the cost-reducing strengths and weaknesses of governance structures that vary with respect to their characterisation of relations between economic actors, and of the form and substance of both planning and implementation of decisions. The second part of the thesis focuses on the standardform building contract and its location along the contracting continuum. This part of the thesis addresses the question of "transactional fit" between the building contract and the activity which it purports to regulate. The analysis proceeds by identifying sources of transaction costs in the context and in the practices of building production and examining the governance implications of the contractual responses to such costs. 11 In its conclusions the thesis attempts to evaluate the contribution of institutional analysis our understanding of legal conceptions of contract. By using an industry-wide standard-form contract as a focus, I hope to illustrate some of the strengths and also the limitations of this approach. Building contracts have received little academic attention in the UK., and transaction cost analysis of governance structures is a young science which has been pursued with more enthusiasm by economists than by lawyers. As yet there has been little attempt to relate substantive aspects of the lawyer's understanding of contract to the "new institutional economics". It is hoped that this thesis will make a contribution to that exercise.