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Breaking the letter vs. spirit of the law: How the interpretation of contract violations affects trust and the management of relationships

Authors

  • Derek J. Harmon,

    Corresponding author
    1. Department of Management and Organization, University of Southern California, Los Angeles, California, U.S.A.
    • Correspondence to: Derek J. Harmon, University of Southern California, Department of Management and Organization, 3670 Trousdale Parkway (BRI 306), Los Angeles, CA 90089-0808, U.S.A. E-mail: djharmon@usc.edu

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  • Peter H. Kim,

    1. Department of Management and Organization, University of Southern California, Los Angeles, California, U.S.A.
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  • Kyle J. Mayer

    1. Department of Management and Organization, University of Southern California, Los Angeles, California, U.S.A.
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Abstract

Contract violations are ubiquitous. There has been little attention, however, dedicated to understanding the mechanisms involved in making sense of and addressing such occurrences. Two experimental studies investigated how people interpret contract violations and how these interpretations affect trust and the management of relationships. By drawing on the distinction between violations of the letter versus spirit of the law, we show that letter violations are more difficult to overcome than spirit violations, due to higher perceived intentionality. These effects generalized across different populations, levels of contracting experience, types of contracting contexts, levels of ambiguity within the contract, and degrees of contract complexity. The results yield important implications for understanding contract violations, trust, and organizational responses as a relationship management capability. Copyright © 2014 John Wiley & Sons, Ltd.

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