Abstract: The traditional definition of contract emphasizes the law and commitment; while in reality, people are always trying to avoid a lawsuit, first through private settlement, and the legal mechanisms are always the last resort for help. McNeil believes that all contracts have no real meaning unless they are positioned in social relations; each contract must be a relational contract. The cost of rule-based governance is declining with the expansion of the size of transactions, while the cost of relational governance is on the contrary. Therefore, relational governance will eventually give way to rule-based governance.

Key words: relational contracts; relational governance; rule-based governance