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Contracts that manage uncertainty

October 13, 2020

On October 19th, I will host a webinar ‘Relational Contracting – a risk too far?’ It features discussion with partners from top law firm Cameron McKenna and explores recent court decisions and guidance on the application and use of relational terms. If you would like to join our discussion, please write to me at

Here, I offer some further background.

Relational contracts provide a range of operational mechanisms that often improve the chances for success – but where they really come into their own is in environments of extreme uncertainty or unpredictability.

Logically, in the current business environment, we might expect to see rapid growth in the adoption of relational contracting – but I see no evidence that this is the case.

What is holding us back?

Relational agreements are different. They require a shift in the focus of negotiations and a greater commitment to transparency. By their nature, they impose a heightened level of cooperation and more thoughtful approaches to the way risks are managed.

But I suspect the resistance to adoption goes deeper than a reluctance to accept change. I think there is a level of fear that relational contracts bring with them a degree of uncertainty and unpredictability – and that fear is based on a series of court decisions that appear inconsistent.

In the webinar, we will explore the characteristics that make a contract ‘relational’, when their use may be appropriate and what to watch out for when drafting or implementing relational terms. Our conversation will also reference recent legal decisions, in particular from the English courts.

  1. Owen James Davies permalink

    I wish you luck but in my experience relational contracting is frowned upon by lawyers who require certainty at all times and this means the pre allocation of risk in all circumstances other than formal dispute resolution; this is at odds with agile contracting and prevents parties taking a balanced approach to inevitable unforeseen issues. I have drafted many governance clauses on the sell side that have been challenged by the lawyers and mean that contracts are delayed and flexibility is thwarted.

    • You are right that classical law pushes for certainty and models such as agile or relational create concern. However, the real point here is that you choose agile and relational precisely because they bring certainty in uncertain situations. Experienced lawyers typically get the point if it is well enough explained and if you can demonstrate how risks will be controlled.

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