One-Time Commercial Transactions

In the consideration of business relationships, it seems to me that I left several loose threads in regards to isolated transactions. While it is reasonable that there are expectations in an ongoing relationship, and that violations of these expectations are violations of trust by virtue of their being grounded in experience, it is not clear whether these same ethical standards apply to a one-time (or first-time) commercial transaction.

Primarily, the nature of most transactions is voluntary. It may be argued that a person is "forced" to enter into a transaction against their will, but my expectation is that this is highly unusual, and the logic behind such an assertion highly dubious. In the context of business, both buyer and seller enter into the transaction voluntarily and may opt-out prior to obligating themselves to the transaction.

The obligation arises in the promise to perform an action in exchange for the promise of another party to perform an action in return. Before promises are exchanged, no obligation exists. It can even be argued that there is a period after the exchange of promises, but before either party has acted, in which the transaction can be voided - though this merits consideration.

The motivation of entering into a transaction is to obtain something of value. The fact that obtaining this objective requires the actor to provide something of value in return is a necessary condition of the transaction - the value each party receives from the other is their motive for undertaking an action at all.

The primary source of ethical consideration in transactions occurs when one party fails to deliver on its promise to the other party after the point at which they become obligated by the promise or initiation of action inherent in the transaction. A seller who accepts payment and does not deliver goods has acted unethically, as they have obtained the payment based on a false promise. A buyer who accepts goods and does not deliver valid payment has likewise failed to deliver on their ethical obligation.

The notion of failure to deliver an agreed-upon value when the value provided is a currency payment is relatively straightforward - though there is one wrinkle in the case of methods of payment whose value is received at a later time (the payer may tender counterfeit currency, a bad check, a fraudulent payment card, etc.) So long as the payment is accepted by another party (generally, a bank into which it is deposited), it can be said to be validated, and the obligation fulfilled unless it is later discovered to be fraudulent.

The notion of failure to deliver an agreed-upon value when the value provided is a material good or service is less straightforward. This is generally experienced from the buyer's role, in which an item received either does not have the qualities they expected, or does not deliver the ultimate value they expected (in that a good is used as a resource in later actions).

The ethical responsibility of the capability of an item to deliver the expected value is not entirely borne by the individual who provided the item, nor by the individual who accepted it, but is subject to the communication that occurs between them prior to entering into the transaction agreement.

It reasonable to hold the provider of the item responsible for the items failure to deliver any value that was communicated to the recipient in an unsolicited manner. If the provider indicates "this is a gold ring" and it later turns out to be brass, he has deceived the recipient into providing greater value than would have been given if the true nature of the item were known.

It is likewise reasonable to hold the provided responsible for providing complete and valid information in instances where expectations are communicated. If the recipient asks if the brass ring is gold and the provider says "yes," he has likewise provide false information. Even if he claims not to be aware, when he knows the ring to be made of brass, he has misled the recipient.

However, it is not reasonable to expect the provider of an item to know the interests or desires of the recipient that are not communicated to him, as he has no sense of the recipients beliefs about the quality of the item, nor any knowledge of the use to which the recipient intends to put the item, until it is communicated to him by the recipient.

In this sense, the recipient bears responsibility for initiating communication related to the item he will receive. There is no ethical transgression on the part of the provider for failure to provide information that has not been requested by the recipient - and the suggestion that the provider "should have known" what the recipient might have wanted to know bears little validity in the majority of instances.

The exception to this would be in the instance of a repeated transaction. In such instances, the provider of the item can reasonably be expected to understand, even without explicit communication, that the recipient expects the item to have the same qualities as a functionally identical item that was previously received from the same provider.

As a final note, it is worth mentioning that the notion of "caveat emptor" has largely been inverted in the competitive marketplace. The sellers of items often guarantee satisfaction while being unaware of the buyer's expectations, and refund purchases without arguing the reasons. This can be attributed to the seller's interest in retaining the buyer's business (outside the immediate transaction) or avoiding damage to their own reputation, which is a matter that bears separate consideration. However, the motivation of the seller to assume this responsibility is external to the immedaite transaction.

Trust and Business Relationships

It's been considered that the notion of a relationship between two parties adds complexity to their interactions, and that in its most basic sense, a relationship arises from a series of interactions (11/28) that create individual periods of obligation that overlap, giving the sense of an ongoing commitment between two parties. However, the notion that a relationship is something "more" than a series of transactions is not uncommon.

I'd like to explore this notion further, though at the same time to isolate it from the broader sense of relationships. The "relationship" between members of a community is of interest to ethics in a political sense, but is largely out of scope in the context of business (except in the relationship between business and community), and domestic and social relationships also seem to be beyond the scope of business ethics.

It's also my sense that any party who interacts with another party in the context of business could be said to have a relationship (stockholder, employee, executive, competitor, etc.), and these may merit separate consideration. For the present, I'll focus on the ongoing relationship between vendor and customer.

Not all commercial transactions take place in the context of a relationship. There is the notion of the one-time sale, in which the obligation of the buyer and seller end at a specific time, and the lack of a repeat purchase leaves both parties with the impression that they are "done" with the other.

Granted, there are various stipulations and expectations inherent in such a transaction, which may vary according to the nature of the good or service that is purchased, and there are instances in which a buyer may be dissatisfied with the transaction and seek redress. But provided that all goes well and both parties are satisfied, the transaction is completed.

One of the chief indicators of transactional satisfaction is the willingness of the buyer to repurchase from the same supplier (and conversely, the willingness of the seller to enter into a transaction with the buyer). While there may be some argument that satisfaction does not have to be complete in every way for this to occur, and that one or both parties may be accepting some compromises for the sake of convenience, it would be difficult to assert that parties who seek to repeat a transaction are significantly dissatisfied with their previous encounter.

The significant difference between an initial purchase and a rebuy transaction is that the latter implies a degree of trust. Each party assumes that the repeat transaction will be essentially the same as the one before, and has a reasonable expectation of the other party that the repurchase will be essentially the same as the initial purchase.

In this regard, it is reasonable to assert that the expectations of each party constitute an obligation on the part of the other party to undertake the responsibility to ensure the uniformity of the transaction to previous experience, or to provide information to the other party if it is foreseen that it will be different than before. To withhold or conceal information that would make the other party aware of a difference is a form of deception.

To some degree, the same can be said of the initial transaction, but the responsibility to provide information is not as compelling, as there is no previous experience between the parties. As they are unknown to one another, each assumes a certain level of risk in entering into a transaction, and should things go awry, there is no established trust to be violated. However, once this transaction is completed, it is reasonable for each party to assume future transactions will be measured against this standard.

It seems to me that this is what is meant by the notion of "trust" among parties who are in a relationship. In some situations, it may be arguable that trust creates additional obligations, but at the minimum, trust is based on consistency of transactions between two parties that routinely interact.

Duration of Obligation

With the exception of the imperative to do no harm, obligations are limited in their term. At some point, the obligation is fulfilled. In some instances, an obligation is fulfilled at the completion of an act; in others, it has greater longevity. Ultimately, it seems to reason that the duration of obligation is negotiable, but the duration varies greatly. The example of a commercial transaction is sued to illustrate this notion:

The obligation of the buyer is fulfilled upon receipt of payment. To split hairs, the obligation is not satisfied by merely tendering payment, as a buy who tenders payment in the form of a rubber check or counterfeit currency has not satisfied his obligation. In most instances, the payment is accepted and validated in a short amount of time, and the buyer's obligation is fulfilled.

The obligation of the seller, meanwhile, has greater longevity. In most instances, their obligation to the buyer is not fulfilled by delivering a physical good or performing a service, but persists for a reasonable amount of time afterward. Primarily, if the seller has misrepresented the nature of the good itself, this is fundamentally no different than a buyer who has presented counterfeit currency.

Beyond that, the seller remains obligated until the item has been consumed or a reasonable amount of time has passed, such that age or usage could reasonably be expected to devalue the item for its intended purpose. The qualification of "reasonable" indicates that there is some variance that I will not presently explore. There is also the notion that the seller must share responsibility for any harm that arises from the use of an item that he has provided to a buyer, but this is a separate matter from the sales transaction.

And so, in the context of a single transaction the obligations between buyer seller are limited in their duration. In a basic sense, the buyer's obligation terminates on receipt of payment, and the sellers obligation terminates on the consumption of the goods provided.

An ongoing relationship between buyer and seller can be seen in a basic sense as a chain of transactions, with the obligation of seller to buyer renewing on each purchase (though to be precise, each obligation is entirely separate, so it is not a renewal of the same obligation but the initiation of a separate obligation, similar to the previous one).

It is in this sense that obligations take on persistence: it is understood that the buyer will be inclined (of importance - "inclined" and not "required") to return to the same seller, and that the seller will be inclined to serve the same buyer, so long as each fulfills their obligations in the previous transaction. And given the experience of successful transactions, a level of trust will arise for mutual obligations to be fulfilled. And until such time as the trust remains, the relationship persists.

My sense is I've digressed to a separate topic (relationships) which merits further consideration on its own - but in the context of the duration of obligation, it's significant to note that an "ongoing" obligation arises through repeat transactions - it is not separate and independent of the individual transactions.

Transactions

Thus far, the notion of "action" has largely been considered as precipitating from the independent decision of a single party. However, the context of business is a social one, and seldom ever involves a single party's decision to undertake an action without considering the expected actions of others.

A decision is made to sell a good, but this is based on the expectations that others will decide to purchase it. Hence the decision to sell must consider the factors that are taken into account in the decision to purchase, which is made by another party. In this sense, the action of the business is influenced by the perceived future action of the intended customer.

The same can be said of virtually any action undertaken by a business - and "virtually" is a concession to the possibility that there may be some action that is taken independently, though I am presently unable to conceive of such a thing.

The transactional nature of business adds yet another level of complexity to the consideration of ethics in this context: when an item is offered for sale, and it is assessed that the selling of the item is unethical, is the ethical failure to be ascribed to the business that decided to sell the item or the customer who decided to purchase it?

My sense is that this is an important consideration, and is inherent in most real-world situations in which the subject of ethics is raised. However, for the present, I feel it's necessary to separate the two decisions - to treat the decision to sell and the decision to buy as two separate decisions, each of which is made by a different party, each of which must be considered in and of itself.

There are dependencies between them, but it becomes a chicken-and-egg argument: would the customer decide to buy if the item were not for sale, or would the business decided to sell if there were no consumer demand? My sense is that either may be considered true, depending on context.