CONCEPT
Relational Contracts
The implicit, context-dependent agreements between firms and stakeholders—employees, communities, suppliers—too complex to specify in formal contracts, sustained by trust and consistency, and tested with unprecedented severity by AI.
Relational contracts are the unwritten but deeply consequential agreements that govern stakeholder relationships when formal contracts are incomplete. A relational contract with employees might include the understanding that the firm will invest in development, maintain employment stability during downturns, and treat workers as long-term assets rather than variable costs—not because a contract specifies these obligations but because the firm's culture and history make them expected. Relational contracts are fragile: they depend on trust, and trust depends on consistency between stated values and observable behavior. Henderson's research shows that firms with strong relational contracts attract better talent, generate more innovation, and build institutional resilience. AI tests relational contracts because AI makes it possible to defect at scale and speed—violating implicit agreements in ways that capture short-term gains while destroying long-term assets.
In The You On AI Field Guide
The concept originates in contract theory—the recognition that formal contracts cannot specify every contingency, and that parties to ongoing relationships develop shared understandings that govern behavior in the spaces