Contract theory,given prominence by McNeil(1980),discusses the bases of contracts that combine, on the other hand, freedom for both parties to changing circumstance but that, on other hand, must reduce the temptation for one party to exploit the other. In general, details about the whole range of rights and obligations cannot be defined in advance for complex transactions and it must be recognized that a formal contract is just a part of the process of governing relations between parties. Overlying this is a shared understanding that arises when parties develop longer-term relationship with each other, rather than making a series of one-off transactions with different parties. Developing on this, Williamson, in his book Markets and Hierarchies, addressed the question 'Why do organizations exist?' He argued that organizations are created in order to reduce uncertainty and opportunism in the marketplace (Willamson 1975). By extension, networks of cooperating organizations reduce the cost and uncertainty associated with acting alone as isolated business units through series of one-off transactions.