'A Rationale of the Limitation Period in Sales Law'
|Date||13 September 2010|
|Time||11:45 - 13:15|
The limitation period in sales law cuts off the buyer's remedy some period of time after purchase. It has often been criticized for leading to unfair and inefficient outcomes when the buyer can prove that a dysfunctional good was defective at the time of purchase. This article argues that the limitation period can be given an efficiency rationale based on normal wear and tear of (physical) goods. For any good, the number of dysfunctions is likely to increase while the number of dysfunctions that can be considered defects will tend to decline from some point in time onwards, due to wear and tear. Hence, the incentive rationale of allowing claims will tend to become less important over time while the administrative costs of handling claims will not be reduced correspondingly if a fraction of the increasing number of dysfunctions leads to unwarranted claims. At some point in time the administrative cost of handling unwarranted claims will outweigh the incentive effect. The rationale is supported with empirical evidence from a recent lengthening of the limitation period following the implementation of a EU-directive.