Contracting in global supply chains and cooperative remedies

First published online: August 11, 2015Contractual relationships may have different content and functions depending on whether the enterprises operate in global open markets or in ‘close’ global supply chains (GSCs). GSCs are characterized, at least for an important segment, by stable and long-term relationships, a higher level of interdependencies, risks of opportunism and the necessity of stronger coordination among players located in different jurisdictions. Intermediaries, including certifiers, play an important role and favour coordination and cooperation along the chain influencing joint problem solving. By looking at contractual practices and the interplay with certification schemes, the authors observe that a cooperative approach to remedies against breach in food global value chains may require: (i) redefining the performance/breach divide; (ii) giving priority to corrective measures and other remedies in kind over contract termination whenever the former are possible and proportionate; (iii) vesting the party in breach with a right to correct non-performance when contract termination would cause the waste of relevant investments; (iv) expecting the aggrieved party to cooperate in both preventing the breach and mitigating its consequences; and (v) expecting the parties to consider the option of renegotiating contract terms after a breach whenever agreement on different conditions enables them to address the consequences of the breach with mutual advantage in the long run. From this analysis the authors draw normative implications concerning some of the most commonly applied doctrines in transnational commercial contracts and suggest changes and integrations to increase the effectiveness of cooperation. The article suggests expanding both the number and scope of doctrines related to remedies and revisiting their content in order to better reflect the need for stability, the focus on compliance and the integration of third parties’ interest into commercial transactions. The suggested changes, of particular relevance for long-term contracts in agri-food GSCs, may have broader scope and be applied to other GSCs where similar developments have taken place