THE CONTRACTS OF INDIVIDUALS AND ORGANIZATIONS

In this paper, we juxtapose the prominent role of contracts in economic and organizational theory with emerging research on the psychological contracts of individuals. This paper focuses on promissory contracts and the organizational and psychological factors impacting the contractual elements of promise, payment and acceptance. We describe a continuum of contracts and terms from transactional to relational, which helps explain the divergent descriptions of contracts made in sociological models of contracts, agency theory, and transaction cost economics. In reviewing these models, the contract framework explicates the premises under which each perspective operates, and raises questions regarding the assumptions of economic and organizational theory for individual responses to contracting. Taking a behavioral view of contracts, we then review empirical research on psychological and implied contracts and its links to psychoeconomic models and non-pecuniary models of individual behavior. Finally, we outline the implications of a contract framework for organizational research, including propositions for the creation, change, violation, and fulfillment of contracts by individuals and organizations.