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Opportunistic Termination

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Author Info

  • Alexander Stremitzer

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Abstract

If a seller delivers a good non-conforming to the contract, Article 2 of the UCC as well as European warranty law allows consumers to choose between some money transfer and termination. Termination rights are, however, widely criticized, mainly for fear that the buyer resorts to "opportunistic termination", i.e. takes non- conformity as a pretext to get rid of a contract he no longer wants. We show that the possibility of opportunistic termination might actually have positive ef- fects. 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 increases welfare by enabling a more efficient output level in a setting with multiple buyers.

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File URL: http://www.wiwi.uni-bonn.de/bgsepapers/bonedp/bgse7_2007.pdf
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Bibliographic Info

Paper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse7_2007.

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Length: 37
Date of creation: May 2007
Date of revision:
Handle: RePEc:bon:bonedp:bgse7_2007

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Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
Fax: +49 228 73 6884
Web page: http://www.bgse.uni-bonn.de

Related research

Keywords: contract law; warranties; breach remedies; termination; harmonization;

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Cited by:
  1. Nell, Mathias, 2007. "Contracts induced by means of bribery: Should they be void or valid?," Passauer Diskussionspapiere, Volkswirtschaftliche Reihe V-53-07, University of Passau, Faculty of Business and Economics.
  2. Mathias Nell, 2009. "Contracts obtained by means of bribery: should they be void or valid?," European Journal of Law and Economics, Springer, vol. 27(2), pages 159-176, April.

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