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Sequencing of Remedies in Sales Law

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  • Tim Friehe

    (Eberhard Karls University Tübingen)

  • Tobias H. Tröger

    (Eberhard Karls University Tübingen)

Abstract

This paper analyzes the effects of different sequences of remedies on the incentives of sellers to invest in product quality and on the probability of contract termination. Despite ambitious efforts by the EU to harmonize national legislation, sales laws still differ significantly in Europe. The analysis uses a stylized model to compare the pertinent features of German law with their counterparts in English law. The pivotal difference between these jurisdictions lies in the sequencing of remedies. We find that it is possible that investment incentives and the probability that contractual relationships initiated will be completed may be larger under either legal regime. We also scrutinize more specific scenarios to derive clearer results despite the general case's ambiguity and to illustrate their context dependence.

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Bibliographic Info

Paper provided by Berkeley Electronic Press in its series German Working Papers in Law and Economics with number 2008-1-1224.

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Handle: RePEc:bep:dewple:2008-1-1224

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Web page: http://www.bepress.com/gwp/default/

Related research

Keywords: Sales Law; Statutory Remedies; Investment Incentives; Contract Termination;

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  1. Ronen Avraham & Zhiyong Liu, 2006. "Incomplete Contracts with Asymmetric Information: Exclusive Versus Optional Remedies," American Law and Economics Review, Oxford University Press, vol. 8(3), pages 523-561.
  2. Emons, Winand, 1989. "On the Limitation of Warranty Duration," Journal of Industrial Economics, Wiley Blackwell, vol. 37(3), pages 287-301, March.
  3. Emons, Winand, 1988. "Warranties, moral hazard, and the lemons problem," Journal of Economic Theory, Elsevier, vol. 46(1), pages 16-33, October.
  4. Ayres, Ian & Madison, Kristin, 2000. "Threatening inefficient performance," European Economic Review, Elsevier, vol. 44(4-6), pages 818-828, May.
  5. John Kambhu, 1982. "Optimal Product Quality under Asymmetric Information and Moral Hazard," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 483-492, Autumn.
  6. Esther Gal-Or, 1989. "Warranties as a Signal of Quality," Canadian Journal of Economics, Canadian Economics Association, vol. 22(1), pages 50-61, February.
  7. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-83, December.
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