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Non-Contractual Relations in Business: A Preliminary Study: Comment
Author(s): William M. Evan
Source: American Sociological Review, Vol. 28, No. 1 (Feb., 1963), pp. 67-69
Published by: American Sociological Association
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COMMENT ON MACAULAY 67
contract if the firm'slarge customer prefers
not to be bound to anything. Firms that
supply General Motors deal as General
Motors wants to do business, for the most
part.Yet bargainingpoweris not size orshare
of the market alone. Even a GeneralMotors
may need a particular supplier, at least
temporarily.Furthermore,bargainingpower
may shift as an exchange relationship is
firstcreatedand then continues.Even a giant
firmcan find itself bound to a small supplier
once production of an essential item begins
for theremay not be time to turn to another
supplier.Also, all of the factors discussed in
this paper can be viewed as components of
bargainingpower-for example,the personal
relationship between the presidents of the
buyer and the seller firms may give a sales
managergreatpowerovera purchasingagent
who has been instructed to give the seller
''every consideration." Another variable
relevantto the use of contractis the influence
of third parties. The federal government,
or a lender of money, may insist that a
contract be made in a particulartransaction
or may influencethe decision to assert one's
legal rights under a contract.
Contract, then, often plays an important
role in business,but other factors are signifi-
cant. To understandthe functionsof contract
the whole system of conducting exchanges
must be explored fully. More types of busi-
ness communitiesmust be studied, contract
litigation must be analyzed to see why the
nonlegal sanctions fail to prevent the use of
legal sanctions and all of the variables sug-
gested in this paper must be classifiedmore
systematically.
COMMENT *
WILLIAM M. EVAN
Massachusetts Institute of Technology
IT is relativelyrarethatlegalscholarssup-
plement their doctrinalapproachto law
with the so-called behavioral approach.
Macaulay's paper shows the wisdom of go-
ing beyond an exegesis of legal doctrines to
a study of how law is affected by, and, in
turn, affects social relationships.
Macaulay's paper in effect points to con-
tract law as a sociologically significant area
of inquiry. For a contract is by definitiona
type of social relationshipwhose function is
to ensurepredictabilityand security in busi-
ness transaction.
His major finding-that contract law is
often ignored in business transactions-re-
quires further specification as to the fre-
quency of such non-contractual relations;
the conditions under which business organ-
izations do or do not resort to contracts;
and the conditions under which different
degrees of "contractualness"are found in
business transactions. When contracts do
govern business relations, how often and
* Presented at the annual meetings of the Ameri-
can Sociological Association, August, 1962, in Wash-
ington, D.C.
between what kinds of parties are disputes
settled by means of litigation or commercial
arbitration?
Macaulay's preliminaryfinding that non-
contractualrelationsare commonin industry
is of interest to students of organization
theory as well as to students of the sociology
of law. One problem area in organization
theory that we have very little knowledge
about is the dynamicsof inter-organizational
relations. Macaulay's paper deals with the
problem of inter-organizationalrelations as
regards the use or non-use of contracts in
business transactions.In fact, legal and non-
legal norms relative to contracts may be
viewed as mechanisms for regulating inter-
organizationalrelations.
Two factors affectingthe use or non-useof
contracts to which Macaulay does not give
sufficient weight are the difference in the
relative bargaining position of the parties
to the contract and the difference in the
relative power of the parties.' Bargaining
1 Cf. William M. Evan, "Power, Bargaining, and
Law: A Preliminary Analysis of Labor Arbitration
Cases," Social Problems, 7 (Summer, 1959), pp.
5-16.

68 AMERICAN SOCIOLOGICALREVIEW
position might be translated into the group
attribute of "completeness,"a concept re-
cently analyzed by Merton.2 In this con-
text, "completeness" could be operation-
alized as share of the market of each of the
parties in their respective business spheres.
On the other hand, the degree of relative
powerof the parties might refer to the capa-
city of each party to use extra-legal means
of persuading, influencing, or coercing the
other party. The principal means of power
in this case is presumably the threat of
economicsanctions.
In terms of these two factors, I would
hypothesize that the greater the bargaining
position differential between the organiza-
tions, the more likely their transactionswill
be contractual in nature. In addition, the
greaterthe powerdifferentialbetweenthe or-
ganizations, the less likely conflicts between
them arisingout of a contractwill be settled
by legal methods, whether by litigation or
arbitration,unless the organizationthat has
less poweris capable of pooling its resources
with other organizations similarly disad-
vantaged by the powerof the party in ques-
tion.
These two hypotheses would seem to be
relevant for an understanding,for example,
of manufacturer-dealerrelationshipsin vari-
ous industries. In the case of the auto-
mobile industry the manufacturersnot only
have a vastly superior bargaining position
than the dealers-each of the Big Three
controls one-fourth to one-third of the mar-
ket comparedto the infinitesimalproportion
of the marketeach dealercontrols-but they
also have vastly more power to influencethe
action of the dealers.Smallwonderthat rela-
tions betweenmanufacturersand dealers are
highly contractual and that many of the
clauses in contractspertain to the conditions
underwhich their relationshipscan be termi-
nated. In self-defenseagainst their disadvan-
taged position, the dealersin the automobile
industry-not unlike factory workers-have
organized themselves into a trade associa-
tion, the National AutomobileDealers Asso-
ciation,whichhas succeededin severalstates
in bringing about new legislation and in
obtaining court decisions safeguarding
2 Robert K. Merton, Social Theory and Social
Structure (revised and enlarged edition), Glencoe,
Ill.: The Free Press, 1957, pp. 314-15.
dealers against the imposition of unilateral
contracts by manufacturers and the arbi-
trary terminations of their franchises.
Macaulay also finds a difference in ori-
entation among departments in a business
organization toward the use of contracts,
with the sales department being more nega-
tively disposed to contract, on the one hand,
and the financial or controller department
being more positively disposed, on the other.
Of particular interest in this connection are
the attitudes and behavior of sales personnel
and purchasing agents. These people are
among the foreign affairs personnel, as Wil-
bert Moore would say, of an industrial or-
ganization. The nature of their work brings
them into contact with comparable and com-
plementary occupational groups in other or-
ganizations. As staff officials they probably
have a greater degree of inter-company mo-
bility than do line officials and hence may
perform the role of "culture carriers" in
the diffusion of norms between organizations.
Given a high degree of interaction, partic-
ularly among staff specialists but also among
line executives of different business organi-
zations, we would expect, on the basis of
Durkheim's analysis of occupational groups,
that an "occupational morality" would de-
velop, with its own set of binding norms
that can either support or contradict the
legal norms of the society as a whole. As
Durkheim put it:
Where restitutive law [of which the law of
contract and the law of torts are prime ex-
amples-W.M.E.] is highly developed, there
is an occupational morality for each pro-
fession. In the interior of the same group of
workers, there exists an opinion, diffuse in the
entire extent of this circumscribedaggregate,
which, without being furnished with legal
sanctions, is rendered obedience. There are
usages and customs common to the same
order of functionaries which no one of them
can break without incurring the censure of
the corporation.3
With the development of such norms of
a non-legal nature in the "business com-
munity," it is understandable that con-
tractual relationships can be dispensed with
under some conditions, which, as I suggested
before, require specification. Some of the
3 The Division of Labor in Society, trans. by
George Simpson, Glencoe, Illinois: The Free Press,
1960, p. 227.

CIVIC EDUCATION, NORMS, AND POLITICAL INDOCTRINATION 69
non-legal norms mentioned by Macaulay
may be interpreted as part of the occupa-
tional morality of businessmen. Let me re-
peat the norms he cites: "commitmentsare
to be honoredin almost all situations"; ''one
does not welsh on a deal"; "one ought to
produce a good product and stand behind
it"; "a man's word or handshake . . . is
the equivalent of the bindingness of a con-
tract." These and other norms comprising
the occupationalmorality of business execu-
tives and some staff specialists may function
as counter-norms, from the point of view
of the legal system, as the recentprice-fixing
case in the electrical industry suggests.
Eventually, some of these new and emerg-
ing non-legal norms may supersede the law
of contract.
Historically, it is noteworthy that as
mercantilists and early entrepreneurscame
into conflict with one another they gradu-
ally developed a body of law in England
called the "law merchant." This body of
private self-regulatory law was eventually
incorporatedinto the common law of Eng-
land and subsequentlyinto the commonlaw
of the United States. After giving rise to
this elaborate system of law, the modern-
day successors to mercantilists and entre-
preneurs-as Macaulay has discovered-
often find it convenient to disregard the
labors of their predecessorsin going about
their daily transactions. Will some of the
non-contractualnorms that are evolving as
part of the "occupationalmorality" of busi-
nessmenlay the groundworkfor a new body
of law for the regulation of business?
We sociologists may be tempted to con-
clude that Macaulay's paper is merely a
gloss on Durkheim's well-known analysis
of the non-contractualelements in contract.
I think that it is more than that. This study
adds to our understandingof the relation-
ship between legal and non-legal norms in
society andof the relationshipsamongformal
organizations.
CIVIC EDUCATION, COMMUNITY NORMS, AND
POLITICAL INDOCTRINATION
EDGAR LITT
Boston College
A content analysis of civic education texts, interviews with community leaders, and ques-
tionnaires administered to civic education classes and control groups were conducted in
three communities having different socio-economic characteristics. In each community dif-
ferences were found among political themes in civic education texts, attitudes of community
leaders, and effects of courses on student political attitudes. In the upper middle-class com-
munity students were oriented toward a "realistic" and active view of the political process,
stressing political conflict; in the working-class community students were oriented toward a
more "idealistic" and passive view, stressing political harmony.
ALL nationaleducationalsystems,"ob-
serves V. 0. Key Jr., "indoctrinate
the coming generationwith the basic
outlooks and values of the political order."1
But this indoctrination is not uniform. Do
different socio-economic communities, for
instance,differin the kinds of textbooksthey
employ in civic education? Do differing
political attitudes and norms in these com-
1 V. 0. Key, Jr., Public Opinion and American
Democracy, New York: Knopf, 1961, p. 316.
munities affect the process of indoctrina-
tion?2 To answer these questions, we ana-
2 On the relationship between education and poli-
tics, consult H. Mark Roelofs, The Tension of
Citizenship, New York: Holt, Rinehart, 1957,
Charles E. Merriam, The Making of Citizens, Chi-
cago: University of Chicago Press, 1931, Franklin
Patterson, High Schools for a Free Society, Glencoe:
The Free Press, 1960, James S. Coleman, The Ado-
lescent Society, New York: The Free Press of
Glencoe, 1961, William Gellerman, The American
Legion as Educator, New York: Teachers College,
Columbia University, 1938, George A. Male, "The

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