A person-organization discontinuity in contract perception: Why corporations can get away with breaking contracts but individuals cannot

Most legal systems in the world follow the principle of corporate personhood, which grants organizations the same legal status as natural persons. Although debate over the notion of corporate personhood has been fierce, whether and how this principle is applied in people's beliefs and intuitions has yet to be empirically examined. This work addresses the gap in the literature, in the context of formal contracts. While contracts are typically seen as either morally binding promises or morally neutral business instruments, the data presented here show that contracts of individuals are associated more strongly with promises than are contracts of organizations. As a result, breach of contract by an individual is seen as a moral transgression. The same behavior by an organization, however, is viewed more as a legitimate business decision. This paper also finds that contractual obligations should be phrased in "promise" terms to eliminate this person-organization discontinuity. Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc. 2013.1745.