To bind or not to bind

Abstract

This article discusses the formalization of collaboration through partnering contracts in the construction industry in the USA, Great Britain and Denmark. The article compares the different types of collaborative partnering contracts in the three countries, and provides a conclusion on whether the collaborative partnering contract should be binding or non-binding, based on the three empirical contracts analyzed in this article. The partnering contracts in Great Britain and Denmark are legally binding, while in the USA the partnering agreements are non-binding charters or letters of intent. This article discusses, in a theoretical perspective, the legal reasoning behind the different partnering approaches, both from a historical and contract law perspective, and furthermore applies a game theoretical approach in evaluating binding versus non-binding partnering contracts. The analysis focuses on private collaborative multi-partner partnering contracts in the construction industry and compares contractual clauses from US, British and Danish partnering contracts. The article argues that from a legal and a game theoretical perspective, the collaborative partnering contract should be legally binding in order to minimize the risk of self-optimization and improve joint utility through the contract, and thus recommends that the US partnering regime should shift from a non-binding partnering agreement to a legally binding partnering contract.