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Opportunistic Termination

Author

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  • Stremitzer, Alexander

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.

Suggested Citation

  • Stremitzer, Alexander, 2007. "Opportunistic Termination," Bonn Econ Discussion Papers 7/2007, University of Bonn, Bonn Graduate School of Economics (BGSE).
    • Handle: RePEc:zbw:bonedp:72007
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    File URL: https://www.econstor.eu/bitstream/10419/22982/1/bgse7_2007.pdf
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    Citations

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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.
    3. Mathias Nell, 2008. "Contracts Induced by Means of Bribery: Should they be Void or Valid?," Working Papers 042, Bavarian Graduate Program in Economics (BGPE).

    More about this item

    Keywords

    contract law; warranties; breach remedies; termination; harmonization;
    All these keywords.

    JEL classification:

    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • D30 - Microeconomics - - Distribution - - - General

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