Ruane, Christopher --- "Protecting Supplier Interests through English Company Law" [2005] ELECD 200; in Tully, Stephen (ed), "Research Handbook on Corporate Legal Responsibility" (Edward Elgar Publishing, 2005)

Book Title: Research Handbook on Corporate Legal Responsibility

Editor(s): Tully, Stephen

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781843768203

Section: Chapter 6

Section Title: Protecting Supplier Interests through English Company Law

Author(s): Ruane, Christopher

Number of pages: 18

Extract:

6 Protecting supplier interests through
English company law
Christopher Ruane



Company law and supplier protection
Imagine a scenario in which S supplies a product or service to P. This trans-
action will possess many contractual characteristics, whether or not any legal
contract in fact exists. Let us assume for simplicity that efficient market theory
holds true. If both S and P contract voluntarily, we may characterise their
transaction as efficient. To regulate the transaction, it must be contended that
the transaction contains imperfections, despite its efficiency. This contention
may employ the policy argument that mere efficiency is an inadequate norma-
tive benchmark for such transactions (Cheffins, 1997: 142­57). Alternatively,
it may involve a more specific critique of the bargain struck. Perhaps, for
example, threatened transaction costs led to gaps in the terms of the transac-
tion, which only a regulator using a hypothetical bargaining model could fill
efficiently (ibid.: 264­307).
One response would be self-regulation. For example, a supplier who
achieves efficient pricing through low-wage production may voluntarily agree
to a code of practice regulating his employment practices. The relational
nature of much business transacting may in itself allow for a degree of supplier
protection. An alternative is legal regulation. As a response to the incomplete
contracting identified above, this could apply on either side of the transaction.
Suppliers and purchasers may each suffer from contractual gaps. Thus,
purchaser protection may provide a valid justification for regulation. The
scope of the present chapter, however, is limited ...