7 - The legal framework

Summary

The time has come to look more directly at the underlying national institutions and social norms which predispose firms to enter into ACR-type or OCR-type trading relations. We begin, in this chapter, by examining the national legal framework. Our evidence in chapters 4 and 5 showed a considerable degree of similarity between British and Japanese practices with respect to contractualism, and the rationale behind those practices. Some supplier companies emphasised the importance of responding flexibly to customers' requirements for short leadtimes which may result in producing (and even delivering) before written contracts are received. A case-by-case resolution in the event of quality defects or late delivery was also said to be necessary because apportioning clear-cut responsibility on either side may not always be feasible.

There were, however, some major differences between British and Japanese practices. In Britain, the norm of short-term trading meant that a written agreement with a duration of up to five years was required to enforce long-term commitment. No such long-term written agreements were found in Japan; more common was a basic contract lasting twelve months, with automatic annual renewal if neither side notified to terminate the contract. In Britain, suppliers tended to have their own terms and conditions of sale, which might create a ‘battle of forms’ with their customers' terms. In Japan, no such terms and conditions of sale were found in the industries examined empirically.