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German Working Papers in Law and Economics
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Volume 2004

AUTHOR:
Ulf Hansen

TITLE:
THE PROTECTION OF RELATION-SPECIFIC INVESTMENT IN LONG-TERM CONTRACTS WITH SPECIAL REFERENCE TO THE CAR INDUSTRY

SUGGESTED CITATION:
Ulf Hansen (2004) "THE PROTECTION OF RELATION-SPECIFIC INVESTMENT IN LONG-TERM CONTRACTS WITH SPECIAL REFERENCE TO THE CAR INDUSTRY", German Working Papers in Law and Economics: Vol. 2004: Article 34.
http://www.bepress.com/gwp/default/vol2004/iss1/art34


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ABSTRACT:

This paper is about the efficiency of the consequences of a termination of long-term contracts, in the case that the terminated party has made specific investment. After introducing the investment protection in the United States, in Germany and in Austria, it will be shown which restrictions regarding the type of investment, the type of termination and the form of contract are required from an economic perspective to discuss the varieties of investment protection. On this basis, an economic analysis will show that the legal design which generates a valid termination and the claim for the terminated party to be compensated corresponding to its positive interest is the efficient one compared to the other legal and contractual possibilities. On the ground of this insight, the introduced legal systems will be critically discussed with regard to efficiency.




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