Based on this importance, the paper emphasizes the need for further research into opportunities presented by effective designing of contracts. This paper dissects how framing and expectations of contracts influence the contract’s performance.
Various researches have attempted to look into the ubiquitous nature of contracts. Some have mentioned that contracts are merely necessary safeguards which secure parties involved in a contract against potential undesirable behaviors by the involved parties. This facilitates exchanges. Many scholars note that mitigation of the threats arising from contracts is dependent on contractual framing and expectations.
Recent evidence from researches suggests contract framing play an important role in determining how contractual application is implemented. For instance, contracts which are framed with a loss in mind in case of failure to meet threshold amounts to the involved parties making greater effort. Similarly, contracts framed with a gain in mind, the parties will also be motivated to work even extra hard. The expectation of something is seen to motivate an action in implementation of the contract.
Many contract theorists have begun systematic unpacking of behavioral implications associated with contract frame and expectations from the same (Weber and Mayer 56). A key emerging issue in design of effective contracts is the psychological impacts of framing and expectations of contracts. Despite widespread knowledge of the role of contracts in ensuring mitigation of hazards through development of safeguards, there exists little knowledge with regard to psychological impacts of the contracts. Contract framing offers a potential mechanism to psychologically affect the exchange or continuous partnerships.as revealed in the study, contracts aim at protecting the parties involved in a relationship against any form of opportunistic behavior thus boosting the confidence of the parties involved so that they can proceed with the