
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.
Item Type: | Paper |
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Keywords: | contract law, warranties, breach remedies, termination, harmonization |
Faculties: | Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > A5 - Unvollständige Vertragsbeziehungen und die Gestaltung von Residualrechten |
Subjects: | 300 Social sciences > 330 Economics |
JEL Classification: | K12, C7, L40, D30 |
URN: | urn:nbn:de:bvb:19-epub-13326-0 |
Language: | English |
Item ID: | 13326 |
Date Deposited: | 10. Jul 2012, 13:08 |
Last Modified: | 04. Nov 2020, 12:53 |