AVOIDING LITIGATION IN A LITIGIOUS CULTURE

In the United States, business is based primarily on law, contracts, rules and regulations, and very secondarily on trust and relationships. In most other countries and cultures, business is based primarily on trust and relationships and secondarily, on law and contracts. For example, we are currently doing significant business in Europe with no signed contracts, just email memos between the parties. We trust each other and value that trust sufficiently that no one wants to risk losing it which is what contributes to the durability of the agreements and relationship.

In America, we put our trust in the judicial system abrogating any need for personal relationships and trust. In describing the United States approach, Jonah Blank in Foreign Policy Magazine (June 3rd 2013) puts it well when he writes: “Americans view a deal in coldly contractual terms: You give me this, I give you that in return, we shake hands and may never see each other again. Americans buy cars from complete strangers and refinance houses with banks that are bankrupt. This can be done because there is trust in the overall system: rule of law, functioning courts, policemen accountable to the public rather than the local warlord. The system gives Americans the confidence to entrust their credit card numbers to call centers staffed by prison inmates. (You didn’t know that? Yes, it’s true.)”

While strong arguments could be made in favor of both the legal/contractual based system of commerce and the trust/relationship based one, the legal/contractual based system falls short however, and becomes costly, cumbersome and inefficient when a dispute arises.