It is difficult to identify the exact inefficiency that broad termination rights create, particularly since it is not clear how often these rights are exercised. Still, contracts containing harsh termination terms represent a de-facto transformation of the long-term commitment into a series of short term agreements. In this reality, suppliers anticipate pressures from OEMs to reduce prices even after they have been awarded a contract. This creates a risk of hold-up by OEMs—“reduce your price or be terminated”—that makes relationship-specific investments less valuable.
in situations in which joint precautions by both supplier and buyer are necessary to prevent liability from mounting, or where suppliers can efficiently cure a defect, it is not surprising that the allocation of greater liability to the supplier reduces the OEM’s need for a quick solution to any quality issue. What is surprising is that not all contracts are designed to induce more participation of the suppliers in the warranty process, and thus fail to achieve efficiency¿Por qué los aceptan los proveedores?
It is plausible that many of these provisions, as we will argue below, are tailored to leverage the OEMs’ economic and bargaining power in the negotiation stage into advantages at theperformance stage, in which the parties are locked in a classic bilateral monopoly. The legal terms in the forms are the tail that is wagged by the business dog, not vice versa. It is clear that the American OEMs’ record-breaking losses have driven them to capture any opportunity to shift cost to suppliers.
as a condition for bidding, the supplier must agree to be bound by the boilerplate terms of the OEM’s form. Since the bidding occurs before the contract has been “issued” and at the time when the supplier’s position is the weakest—at the time when its refusal to commit to the OEM’s boilerplate could cost it the opportunity to bid—it is not surprising that most tier-1 suppliers agree not to engage in the battle of the forms and instead sign or otherwise agree to a form that binds them to the OEM terms