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Commercial Relations, Contract, and Litigation in Denmark: A Discussion of Macaulay's Theories

Published online by Cambridge University Press:  01 July 2024

Britt-Mari Blegvad
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Abstract

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The concept of thematization—the process by which actors select a frame of reference for their communications—captures an aspect of dispute resolution that is fundamental to Macaulay's description of noncontractual commercial relations and to many recent dispute resolution studies. Thematization both describes the identification of events as relevant to relations between the parties and links these events to special resources and sanctions. In the thematization process managers apply their knowledge of commercial relations and of transaction structures to ensure freedom to choose between modes of handling matters. A pilot study of Danish firms illustrates the workings of the process. The author's preliminary analysis suggests that thematization within the firm determines how various forms of norms are applied at different times. Businessess continue to employ laws and litigation when other forms of governance of economic relationship fail. Thus law is still an important source of power in business.

Type
Part III: New Theory for Longitudinal Trial Court Research
Information
Law & Society Review , Volume 24 , Issue 2: Special Issue: Longitudinal Studies of Trial Courts , 1990 , pp. 397 - 411
Copyright
Copyright © 1990 The Law and Society Association.

Footnotes

I am grateful to Stewart Macaulay who enlarged my perspective on contractual relations in comments and suggested revisions to earlier drafts. My Danish colleague Asmund Born made important suggestions about the presentation of the material. I also want to acknowledge Clare Cotton, who revised an early draft.

References

1 Exploration of the link between dispute resolution in commercial transactions and the internal organizations of the firm will lead to better understanding of issues that are often overlooked in dispute-processing research (see Mather, 1990), among them, the role of organizations as actors and the effects on dispute resolution of ideology and unequal power. Equally important, knowing how business firms create and maintain relationships with other entities will help us comprehend the evolution of a pervasive form of private governance, namely, commercial transactions, and their relationship to law. Such comprehension promises, in turn, to contribute to our understanding of changes over time in the content and frequency of trial court litigation and may also provide a larger picture of change in the role of the judge and the courts in modern society.

2 Niklas Luhmann has (1982) described the creation of interaction systems (actor-actor dealings over time) as a process of selecting mutual responses from among possible alternatives. The selection of appropriate forms of interaction from a theoretically infinite set of mutual responses in social interactions must be focused on a more limited range of responses by the actors' need to achieve mutual meaning in the face of an incomprehensibly complex environment. This is made possible through the existence of systems of thought or ideology, like law,

systems that, in an inordinately complex environment, hold constant a less complex network of expectations and that are thereby able to orient action. ... In social systems thus defined, positive law and ideology acquire the function of reducing the complexity of the system and its environment. (Luhmann, 1981: 92–93)

According to Luhmann, other major systems of meaning compete with law, for example, economics. The process by which actors through mutual communication arrive a framework that provides mutual significance for the interaction is called thematization. In addition to the ordering provided by law and economics, which are fundamental to Luhmann's theory, other frameworks for thematization are conceivable as well, drawing on other sources of normative order and both folk and formal, utilitarian and spiritual (e.g., Greenhouse, 1986; Friedman and Ladinsky, 1967; Moore, 1978).

3 In much of the dispute-processing literature, an event is initially thematized as an injury or a grievance and an event is assumed to have been perceived as the initial stage of a conflict. Thematization describes actor selection among a potentially broader array of perceptions of events, including frameworks that make particular events problematic as well as frameworks that may make the event unproblematic for relationships with other actors. An actor's perception may often be plural in that competing alternative responses are perceived (e.g., Engel, 1984; Yngvesson, 1985a; Friedman, 1985). The perception of alternatives and the necessity for choice among them creates an important source of change in continuing relationships and patterns of conflict resolution over time.

4 Macaulay (1963: 66) describes these orientations for different roles in the firm's decision structure:

The decision whether or not to use contract—whether the gain exceeds the costs—will be made by the person within the business unit with the power to make, and it tends to make a difference who he is. People in a sales department oppose contract. Contractual negotiations are just one more hurdle in the way of a sale. Holding a customer to the letter of a contract is bad for “customer relations.” Suing a customer who is not bankrupt and might order again is poor strategy. Purchasing agents and their buyers are less hostile to contracts but regard attention devoted to such matters as a waste of time. In contrast, the financial control department—the treasurer, controller or auditor—leans toward more contractual dealings. Contract is viewed by these people as an organizing tool to control operations in a large organization. It tends to define precisely and to minimize the risks to which the firm is exposed. Outside lawyers—those with many clients—may share this enthusiasm for a more contractual method of dealing. These lawyers are concerned with preventive law—avoiding any possible legal difficulty. They see many unstable and unsuccessful exchange transactions, and so they are aware of, and perhaps overly concerned with, all of the things which can go wrong. Moreover, their job of settling disputes with legal sanctions is much easier if their client has not been (too) casual about transaction planning. The inside lawyer, or house counsel, is harder to classify. He is likely to have some sympathy with a more contractual method of dealing. He shares the outside lawyer's “craft urge” to see exchange transactions neat and tidy from a legal standpoint. ... Yet, the house counsel is more a part of the organization and more aware of its goals and subject to its internal sanction. ... He must sell his services to the operating departments, and he must hoard what power he has, expending it on only what he sees as significant issues.

5 A manager's function and training influence selection among transaction goals, or more fundamentally, among systems of thought that govern interpretation of and responses to actions of others, even before transaction goals become specific. At same time, these choices call for decisions that are not determined by position or training alone. At one time, a manager has many problems on his desk that may call for different decision styles. A long-term discussion about entering a new market calls for one type of argument and timing unlike that called for by a critical situation on the factory floor which quickly could develop into a strike. Further, different strategies employed at different times for handling a single issue in a continuing relation may call for different thematizations to support the strategies (Yngvesson, 1985a). Further, a manager's thematization of communication with another firm may be complex. The manager may use a legal vocabulary while suggesting an economic strategy. Legal rights may be surrendered as a gesture of solidarity with the other firm (S. Macaulay, 1987, personal communication; Moore, 1978).

6 Different theoretical perspectives and time orientation may offer an explanation. The normative thinking of the sales manager is linked to consequences and future-oriented perspectives. The normative thinking of the lawyer, in contrast, is backward looking in the sense that one applies norms that require analysis of events that have already occurred (Blegvad, 1987).

7 Firm #3, like the rest of the graphics industry, has labor problems. The firm's labor relations illustrate yet another type of long-term economic relationship and a mixed bilateral-trilateral governance structure. As a member of the central employer's association (Dansk Arbejdsgiverforening), Firm #3 must turn these problems over to the association for action. There are, however, large individual differences between graphics firms about the stage of a conflict at which the firm turns to the association. Usually one first tries to read an understanding at the local level. The association holds a firm grip on the situation, however, as it controls the possibilities for financial support if an open conflict erupts (Blegvad, 1986; Case report 3, 1986).

8 It is possible for a manager to have various types of contracts on his desk simultaneously. Also a transaction within a certain area may start as a discrete contract and become a relational one, as MacNeil reports (1985).

9 To understand a firm's capacity for bilateral governance, it is not enough to understand the initial contract-generating situation. The researcher must thus be prepared, like Daintith (1987), to follow the life of a contracting relationship as a “continuing relation” (Yngvesson, 1985a).

10 The statistics from the Danish high courts are difficult to analyze in detail because of the absence of detailed breakdowns of case types (Blegvad and Wulff, 1984, 1989). We therefore decided to conduct a detailed study of a special court, namely the Danish Maritime and Commercial Court, which functions as a special court for commercial matters. Cases filed with a high court may be transferred to the Maritime and Commercial Court, but the reverse is rare. The high courts are overburdened with a backlog of about a year, while the delay before the special commercial court is from three to six months (Blegvad and Rasmussen, 1975; Blegvad, 1987). The commercial part of the court has a professional judge as chair and two or four lay judges drawn from a panel of fifty people nominated by the large trade organizations. During the period between 1981 and 1985 about 40 percent of the cases entered were called commercial, but today practically any legal problem can be labeled that way if the parties agree to do so.

A brief statistical summary by the chief administrator of the court reports a risk workload even if the figures do not so indicate, because the complexity of the cases has increased (Maritime and Commercial Court of Denmark (1986)).

11 This practice has a long tradition in Denmark. Until the 1950s when the practice was abolished, civil cases were presented to special settlement commissions. (In some areas the district courts served as such commissions.) A similar procedure has since been developed that allows more flexible treatment, a procedure that the legal community views as a sensible way of keeping the workload down and the docket short (cf. Von Eyben, 1987). The decisive point is whether cases of fundamental relevance are notified and settled in court, as such outcomes, like the out-of-court settlements, are confidential. They cannot, therefore, be used to generate new legal norms. A balance between the need for clarification of the law as compared with the practical gains for the parties is called for.

12 Evidence from the United States also suggests that important changes may be taking place in the patterns of disputing and litigation arising out of business transactions (Galanter and Rogers, 1988).