Exchange, Relational Contract, and Mutual Recognition

Abstract

Abstract The relational theory of contract after Ian Macneil has generally been interpreted as identifying a ‘specie’ of contracts, the relational contract, distinct from standard, or discrete, contracts. Stewart Macaulay’s pathbreaking empirical analyses of contractual action have generally been interpreted as demonstrating the ‘non-use’ of contract or the use of ‘non-contractual relations’. These interpretations are very partial, for neither Macaulay nor Macneil sought what Gilmore famously called ‘the death of contract’, and both were fundamentally concerned with the reform of a positive law of contract which they saw as inadequate to its regulatory task, the inadequacy being particularly clear in the case of, but not limited to, those complex contracts which are now called relational. The main point of the relational theory, however, is not that some contracts are relational, but that all contracts are relational in the sense that they rest on, and take their form from the attempt to legally institutionalise a moral relationship between the parties, whose pursuit of self-interest in welfare enhancing ways is facilitated by this relationship. This relationship is best described as one of mutual recognition, the term being derived from Karl Marx’s analysis of exchange. Some perception of this moral relationship underlies the always present but always denied concept of good faith in the positive law of contract. Walford v Miles, the main authority for the claim that the English law does not recognise good faith, is itself shown to require good faith to give effect to the requirements of voluntary agreement.