Opportunistic Termination

Alexander Stremitzer ()

Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems from Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

Abstract: If a seller delivers a good non-conforming to contract, European and US warranty law allows consumers to choose between some money transfer and termination. Termination rights are, however, widely criticized, mainly for fear that the buyer may use non-conformity as a pretext for getting rid of a contract he no longer wants. We show that this possibility of 'opportunistic termination' might actually have positive effects. Under some circumstances, it will lead to redistribution in favour of the buyer without any loss of efficiency. Moreover, by curbing the monopoly power of the seller, a regime involving termination might increase welfare by enabling a more efficient output level in a setting with multiple buyers.

Keywords: contract law; warranties; breach remedies; termination; harmonization (search for similar items in EconPapers)
JEL-codes: C7 D30 K12 L40 (search for similar items in EconPapers)
Date: 2008-08
New Economics Papers: this item is included in nep-law and nep-reg
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://epub.ub.uni-muenchen.de/13326/1/226_01.pdf (application/pdf)

Related works:
Journal Article: Opportunistic Termination (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:trf:wpaper:226

Access Statistics for this paper

More papers in Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems from Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich Geschwister-Scholl-Platz 1, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Tamilla Benkelberg ().