When It Is Good to Be Vague: The Strategic Use of Contract Ambiguity in Franchise Relationship Management

摘要

Contracts seldom exhaust all possible states in a verifiable way. Often times, they are simple and vague. Although the role of contract has been well studied in economics, business and legal literature, little has been done on why firms use vague terms when drafting contracts and how the vagueness affects outcomes of the contractual relationship. Building upon the literature of interorganizational governance and legal studies on vague contracts, this study aims to examine the mechanisms through which contract ambiguity affect the contractual relationship. We leverage the context of franchise, which is prone to frequent disputes while the franchise contract often remains consistent across franchisee and over time.