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Authors : 1. Oren Bar-Gill,
Professor of Law and Economics
Harvard University, Cambridge, Massachusetts, USA
2. Omri Ben-Shahar,
Professor of Law
The University of Chicago, Chicago, Illinois, USA
Exit from contract
Objective: to study the procedure of exiting the contract, its costs and benefits.
Methods: statistical method, comparative analysis.
Results: free exit from contract is one of the most powerful tools for the consumer rights protection. The procedure frees consumers from bad deals and keeps businesses honest. Yet consumers often choose transactions with lock-in provisions, trading off exit rights for other perks. This article examines the costs and benefits of free exit, as compared to the lock-in alternative. According to the authors, the present regulation of exit penalties (in the USA) is poorly tailored to address concerns about lock-in, particularly in light of increasingly ubiquitous market-based solutions. The article also calls (regulatory) attention to loyalty rewards, which are shown to be as powerful as exit penalties, and equally detrimental.
Scientific novelty: the article reveals a paradoxical state of the law: exit regulations in the USA are used most where they are needed least. Termination penalties present an obvious target for regulatory intervention, while loyalty programs seem benign, not warranting any regulatory attention.
Practical significance: the article is of interest for the Russian juridical science and law-making authorities, as in Russia the issue of exiting the contract is as topical as in the USA, and requires solution which would impair neither the rights of consumers nor the rights of the sellers of products and services.
Keywords :
Civil law; Contract; Loyalty programs; Early termination fees; Zero contract
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Original publication: https://academic.oup.com/jla/article/6/1/151/2937230
Citation :
Russian version: Bar-Gill O., Ben-Shahar O. Exit from contract, Actual Problems of Economics and Law, 2016, vol. 10, No. 2, pp. 192–216.
Type of article : The scientific article
Date of receipt of the article :
18.03.2016
Date of adoption of the print :
30.04.2016
Date of online accommodation :
15.07.2016
