Designing Effective Contracts: Exploring the Influence of Framing and Expectations

How a contract influences the exchange and ongoing relationship between parties is an unresolved issue. While some suggest contracts negatively or positively influence the exchange and relationship, we argue that the contract frame determines its impact. Using regulatory focus and expectancy violation theories, we argue that promotion- and prevention-framed contracts induce different emotions, behaviors, and expectations, leading to different exchange outcomes and relationships, depending on the context. By considering contract framing, we provide new research opportunities in areas that use contracts to achieve desired outcomes.