Defining the relational charter for commercial project contracts

Abstract

Contracting is an integral part of project management. The contract stipulates the legal and commercial relationship between the two engaging parties. The dynamics of this mutual, contractual agreement is contextualized in the principle-agent theory. In practice, the effectiveness of executing the contractual agreement is dependent on relationship management between the principal and agent, which does not necessarily form part of the formal agreement. This paper aims to identify variables that define the principle-agent relationship and formulization of that in a relational charter. A conceptual model is developed to assess the validity of the agency and relational variables and their interrelationship towards the formation of a relational charter. This paper provides insight into the literature review and conceptual model to be used in field research.