Certain requirements must be present in order to have a contract, as discussed in this posting.  Now, suppose that a “real” contract does not exist.  Sometimes, courts will pretend that a contract is created. 

One approach that courts use to reach that result is to find a contract-like relationship exists. 

Quasi-Contract

In a quasi-contract situation, either there is no contract or there is an unenforceable contract.  Courts are more likely to imply a quasi-contract if:

1. One party confers a benefit on the other.
2. The party conferring the benefit reasonably expects to be paid.
3. The party conferring the benefit did not act as a volunteer in providing the benefit.
4. Allowing the recipient to keep the benefit without paying for the services or products would result in unjust enrichment.

How does this play out in a real world situation?  Suppose that Joe is jay walking and gets hit by a car.  If Michelle, a doctor, sees Joe get hit and races to provide him with emergency medical care, many courts in the US would say that Joe is obligated to pay Michelle for the services she provides.

Psychological Contract

Psychological contract is a way of looking at relationships from a slightly different perspective.  ”Psychological contracts” originated in the context of employment relationships.  Employees expect to be treated fairly in exchange for the services they perform.  To the extent that this expectation is satisfied, employees are motivated and loyal.

Paul Pavlou and David Gefen extended the concept of a psychological contract from employment relationships to the online marketplace, looking at eBay and Amazon in this article.  Essentially their theory is that buyers are typically willing to transact business in an online community when the community is perceived as honest, reliable, and trustworthy. 

Pavlou and Gefen found that buyers who have not experienced psychological contract violations are more likely to act based on trust while buyers who have experienced such issues are more likely to seek IT-enabled institutional structures.

What does this mean for online businesses?  If one is contemplating an online business, what steps might one take to better manage expectations, avoid issues, and build trust?

Filed by Coleen Davis at 7:19 pm under Networking, Resources