Document Type


Publication Date


Source Publication

Case Western Reserve Law Review. Volume 31, Issues 1 & 2 (1981), p. 51-83.


Recent legislation in the United States and Canada has cut back on the traditional insulation from consumer claims and defenses which has been enjoyed by third party financers. This Article examines the theoretical underpinnings of a rule which preserves consumer claims and defenses against third party financers, in light of the objective of optimal resource allocation, and defines those situations in which application of such a rule is appropriate. The Article advocates that the scope a preservation of defenses rule should include not only those situations in which the seller and financer have some form of an existing bargaining relationship, but also where credit is extended for a restricted use by independent lenders. The justifications for restrictions on a consumer's ability to assert claims and defenses and the extent of financer liability are also considered within an optimal resource allocation framework. The author concludes by proposing a model statute which implements his analysis of a proper preservation of consumer defenses rule.

Creative Commons License

Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.