Chapter 4: Unilateral Termination
4. Unilateral Termination This chapter surveys economic literature on the unilateral termination of contracts, and by providing an efﬁcient optimal model rule, challenges widely accepted comparative premises, and critically examines the unilateral termination law of France, England, the USA and Germany. The main propositions of the comparative law and economics analysis in this chapter are the following: (1) an economically-inspired optimal model rule provides an additional rationale for permitting unilateral termination in instances of open-ended contracts or where such a right is expressly provided for, and for banning it in instances of ﬁxed-term contracts; (2) in principle, and not unconditionally, efﬁciency requires permitting unilateral termination of open-ended contracts, as in ﬁxed-term contracts where the right to unilaterally terminate is expressly provided for, and requires banning it in instances of ﬁxed-term contracts; (3) it reveals that the compared legal systems differ less than comparatists tend to believe; (4) it reveals that wealth maximization is the main driving force behind judiciary decision-making, which conﬁrms the hypothesis that decisions invariably tend toward efﬁciency; and ﬁnally (5) while addressing the general and statutory provisions it reveals the source of possible inefﬁciencies of all compared jurisdictions concerning the unilateral termination of open-ended, continuous contracts, and so an from economic point of view it offers signiﬁcant room for improvement, where a path for statutory reform is clear. 4.1. INTRODUCTION The comparative legal and economic analysis concludes with the problem of unilateral termination of open-ended and ﬁxed-term contracts, where the contractual...
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