Efficient Partnership Dissolution Under Buy-Sell Clauses Articles uri icon

authors

  • FRUTOS CASADO, MARIA ANGELES DE
  • KITTSTEINER, THOMAS

publication date

  • September 2008

start page

  • 184

end page

  • 198

issue

  • 1

volume

  • 39

International Standard Serial Number (ISSN)

  • 0741-6261

Electronic International Standard Serial Number (EISSN)

  • 1756-2171

abstract

  • Buy-sell clauses are commonly used contractual provisions to determine the terms of dissolution of partnerships. Under them, one party offers a price for the partnership and the other party chooses whether to sell her share or buy her partner's share at this price. We point out that the selection of the proposing partner is essential for the performance of the clause. Moreover, if partners negotiate for the advantage of being the chooser, then buy-sell clauses result in an ex post efficient outcome. Such endogenous selection is consistent with how buy-sell clauses are drafted in practice.