The Right to Change Your Mind? Rethinking the Usefulness of Mandatory Rights of Withdrawal in Consumer Contract Law

13 Pages Posted: 3 Dec 2010 Last revised: 5 Sep 2011

Jan M. Smits

Maastricht University Faculty of Law - Maastricht European Private Law Institute (M-EPLI)

Date Written: December 2, 2010

Abstract

Both in Europe and the United States, withdrawal rights are increasingly part of mandatory legislation to protect consumers. Withdrawal rights allow the consumer to terminate the contract within a set ‘cooling off-period.’ This paper offers a threefold analysis of these rights. First, it makes a comparison between statutory withdrawal rights in Europe and in the United States. Second, it presents the results of a modest survey of the voluntary use of withdrawal rights in general conditions of retailers. Third, it evaluates the usefulness of mandatory withdrawal rights. The paper shows what can be the effect of introducing such mandatory rights on the behaviour of both retailers and consumers. The main reason why a retailer voluntarily grants withdrawal right to a consumer is that it creates trust and thus enhances the willingness of the buyer to purchase products. This trust building process can be undermined if the legislator imposes statutory withdrawal rights, leading to crowding out effects. Finally, the consequences of this finding for the optimal design of withdrawal rights are discussed.

Keywords: Contract Law, Withdrawal Rights, Cooling Off-Periods, Crowding Out, Consumer Behavior, Altruism, Multilevel Lawmaking

Suggested Citation

Smits, Jan M., The Right to Change Your Mind? Rethinking the Usefulness of Mandatory Rights of Withdrawal in Consumer Contract Law (December 2, 2010). Penn State International Law Review, Vol. 29, pp. 671-684, 2011; Maastricht Faculty of Law European Private Law Institute (M-EPLI) Working Paper No. 2011/01. Available at SSRN: https://ssrn.com/abstract=1719104

Jan M. Smits (Contact Author)

Maastricht University Faculty of Law - Maastricht European Private Law Institute (M-EPLI) ( email )

P.O. Box 616
Maastricht, NL-6200 MD
Netherlands

HOME PAGE: http://www.jansmits.eu

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