AbstractIf 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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Bibliographic InfoPaper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse7_2007.
Date of creation: May 2007
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contract law; warranties; breach remedies; termination; harmonization;
Other versions of this item:
- Stremitzer, Alexander, 2008. "Opportunistic Termination," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 226, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
- C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
- L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
- D30 - Microeconomics - - Distribution - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-06-11 (All new papers)
- NEP-LAW-2007-06-11 (Law & Economics)
- NEP-REG-2007-06-11 (Regulation)
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- 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.
- 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.
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