law and economics

How personal property is acquired

purchase, possession, production, accession, gift

how real property is acquired

purchase, inheritance, condemnation, adverse possession, gift

3 common breaches to property rights

nuisance, theft/conversion, trespassing

nuisance case

spur v del webb

theft/conversion case

haslem v lockwood

trespassing case

fountainbleau hotel v 45-25 or naan v nolan because they thought it was trespassing at first but it turned out to be adverse possession

butterfield v forrester

forrester = defendant placed pole

man riding at night, hits pole, too easy for defendants, no incentive to change

butterfield should have seen it under ordinary care

not very fair - he did not have a good chance to avoid

davies v mann

man riding kills donkey, last clear chance, economically efficient, overturns butterfield

haslem v lockwood

manure case, once plaintiff started heaping manure he could take possession, he added value to it by heaping and 24 hours is a reasonable amount of time to take it away

pierson v post

fox case, must kill and take fox to own, reduces transaction costs significantly, oil example (A,B) - because pierson v post we know the law so people can figure out the rest and produce goods efficiently, useful development of resources

flood v kuhn

baseball case, challenged reserve clause, court used stare decisis to rule against flood. Too much money at stake. Ruling in favor of flood would have put mlb at risk. exempt from antitrust laws. Fair = no, economically justified = yes. Courts said don't want to get involved, this is a problem for congress (is there any legal way to keep the status quo)

coase theorem

in a world of perfect competition and no transaction costs, an efficient outcome will be reached, regardless of initial entitlements/ how property rights are assigned. When property rights are involved, parties naturally gravitate towards the most efficient outcome

- lowest cost solution

- = no need for courts, courts are transaction costs

but we don't live in a world of zero transaction costs

in the presence of positive transaction costs, allocation of entitlements matters

- transacting is costly, thus law matter

Coase example

farmers w/o transaction costs get the same result regardless of entitlement (damages to crops)

with transaction costs, different result (build fence)

naab v nolan

adverse possession, 10 + years and fits requirements,

encourages new land owners to check property and titles, reduces transaction costs, incentives land owners to be watchful of encroachment

5 requirements of adverse possession

continuous, hostile, open & notorious, actual, exclusive

White v samsung

samsung add with robot portraying vanna white, in california so that might influence decision, ruled that they violated her right of publicity because they depicted her in a specific setting where she could not be confused for anyone else, she has put time and effort into creating her intellectual property right, she gets an injunctive remedy, kozinski dissent

kozinski

overprotecting intellectual property rights is harmful

creativity is impossible without rich public domain

each new creator builds off the work of those before him. Overprotection stymies creative forces

generally ruling have been against vanna white

what to do with intellectual property

encourage ideas - patten where you have monopoly or no protection where encourage free market behavior

fontainebleau hotel v. Forty-five Twenty-five

sunglight case, fountainblue wants to build another story but will block sunlight from next door hotel and thus no sun for the pool. Other hotel says trespassing on right to sun. ruled that zoning ordinances are better suited for this. here, no legal right to sun, light, air. No damages or injunction. Encourage building things that benefit people. pierson v post: have to CAPTURE it to own it. right to build stronger than right to have someone else not build. Plus issue was raised only when structure was almost complete, should have raised complaint earlier

spur v webb

feedlot + retirement case. Spur has feedlot, webb residential community. Injunction issued against spur for public nuisance (breeding place for flies rodents which carry disease), but webb has to pay damages

coming to the nuisance cases - webb brought people to the public so he must indemnify spur

spur must move not because of wrongdoing but because of regard for public

poletown v city of detroit

eminent domain - public use (Know 5th amendment)

kelo v city of new london

eminent domain - public use (Know 5th amendment)

differences from poletonw (Us supreme court vs state courts - doesn't have to abide by new state rulings

more coase

person with lowest transaction costs should deal with it

coase cases

- spur v del webb (too much for people to move out)

- atlantic cement v boomer (lowest cost avoider is people not cement company)

- fontainebleau because already building

2 qualifications for eminent domain

1. has to be for public use, benefit the public

2. must pay fair market value for it

boomer v atlantic cement company

permanent damages...too much at stake to issue injunction as would normally be expected when there is a severe nuisance....problems with permanent injunction...license a wrong

vincent v lake erie

- damages to dock...picked boat over dock...economiccaly just + dissent

contract

a legally enforceable agreement between two or more persons, which creates an obligation to do or not do a particular thing

types of contract

bilateral (promise for promise)

unilateral (promise for act)

express (formed by words)

implied (conduct of parties),

enforceability

valid: contract satisfies legal requirements, void: no contract exists

voidable: one party has an option of avoiding or enforcing the contract

unenforceable: a contract exists, but cannot be enforced because of a legal defense

** Contact Elements **

1. Agreement: offer and acceptance

2. consideration: giving something of value

3. Contractual capacity: requirement of competent parties

4. Legality: purpose must be lawful

5 .No Defenses: Form, fraud, mistake, etc

statue of frauds

certain contracts must be in writing

1. relating to marriage

2. buying or selling real estate

3. sale of goods more than $500

Some Contract rules

agreements to agree aren to binding but can become binding if not careful - pennzoil case

(Contract) Remedies

1. compensatory damages: compensate for the loss

2. consequential damages: foreseeable damages that result from a parties breach

3. liquidated damages: amount parties designate in contract

4. punitive damages: to punish or deter wrongdoing (mcdonalds case)

Torts

acts which invade a protected interest of a party for which society provides a damage remedy

intentional tort

must be intended. Intended to commit act that causes harm. They why does not matter

defamation

false statement of fact to 3rd party that damages reputation

slander

oral

libel

written

fraud

false representation of fact

tortious interference

intentional interference with business relations

**Fraud Elements**

1. a false representation

2. of a material fact

3. made with the intent that it be relied upon

4. that is in fact relied upon by the injured party to their detriment

5. resulting in actual harm (damages)

Tortious interference with contract

1. an existing valid and enforceable contract

2. an intentional and knowing act of interference with the contract for the purpose of advancing...

intentional torts against property

trespass to land

trespass to personal property

conversion - wrongful taking of anothers personal property

disparagement of property - slander, defamation...etc

negligence

negligence is the omission to do something which a reasonable man would not do

not intentional

conduct that creates a foreseeable risk of injury

conduct that is unreasonable on the particular context

a failure to keep up with ones duty

**Negligence Elements**

1. Existing Duty of care

2. a breach of that duty

3. causation (but for, proximate)

4. damages

breach of duty

3 standards

1. reasonable man standard

2. hand formula

3. standard duty in that practice

Hand Formula

P*L>B = negligence

proximate cause

was the injury a result of a foreseeable risk from defendants conduct occurring in a natural and continuous sequence of events

Damages

compensatory

punitive

see above

Defenses to negligence

- assumption of the risk: knowledge of the risk, voluntary assumption of the risk

- superseding cause: unforeseen intervening event

contributory negligence: go through and prove from other point of view - still need to establish negligence

strict liability

no breach needed - still need duty and causation and damages - this is when actives are inherently dangerous (fireworks?)

desert cab v marino

plaintiff = marino (cab driver for yellow cab)

defendant = desert cab

case where marino injured by cab driver from desert cab

sues desert cab

1. duty - clear duty to hire quality people

2. breach - what you do to hire good people (maybe)

3. caution - yes, prox cause (if guy has history)

4 .damages - yes

- not just or efficient if automatically liable for a guy whose actions are nor even in the scope of employment

another way to analyze: if they did not vet hires properly then they didn't have enough of a burden according to hands formula. If they do vet then good!! what else can company do? Very inefficient result here: what can the cab company do.

riggs v palmer

will with grandson killing grandfather

francis palmer will give small legacies to his daughters and leave his estate to his grandson, elmer palmer. Elmer knew of details of will and killed grandpa so will could not be changed.

ruled one cannot take property by inheritance or will from an ancestor or benefactor whom he has murdered

common law says elmer should not profit from his crime

if not for the murder, no guarantee elmer gets property

dissent: criminal law establishes punishment for the murder, no written statute for this situation

Econ: economic incentive to honor wills in that it reduces transaction costs, could have reached same conclusion by going through contract analysis (step 4, legality)

the easiest and most efficient thing to do is to do what the contract says

not going with the contract imposes high transaction costs

1. agreement (offer/acceptance) don't exist in will

2. consideration - don't exist in will

3. contractual capacity - yes

4. legality - no

5.

curtis v anderson

ring case - not in writing - in favor of anderson

curtis and anderson engaged, curtis breaks off engagement and says he should get ring back

statute of frauds says things pertaining to marriage must be in writing

rule in favor anderson (defendant)

1.agreement - offer and acceptance yes

2.consideration - yes

3. capacity - yes

4. legality - yes

5. no defenses - no must be in writing

dice k

dice k enomoto wants to purchase space flight from space adventure. they have contract and agree for payment at certain intervals. money at each interval is instantly transferred to russian federation. space adventure says he is medically disqualified because of kidney stones...bogus excuse

1. agreement: offer (training and concluding events) and acceptance (payment)

2. consideration: seat on craft in return for money (hazey because seat is kinda only is SA wants to)

3. capacity: yes

4. legality: yes

5. no defenses: yes

problem of russians not in the contract so hard to get that money back once it is transferred...which is almost instantaneous

alcoa v essex

aluminum case - long term contracts

plaintiff = alcoa defendant = essex

alcoa and essex entered into long term contract. alcoa would take alumina from essex and turn it into aluminum metal. essex then makes wire. long term contract (15 years) using a complex formula to determine pricing. alcoa had hoped or stable net income, but opec oil embargo caused massive rises in price of electricity and alcoa was set to lose 60 million under current contract

alcoa claims new pricing stuff

essex said alcoa failed to live up to contract

does mutual mistake apply?

when a mistake of both parties makes a contract voidable. when mistake of basic assumption of contract has a huge effect on performances the contract is voidable by the adversely affected.

doctrine of frustration: voidable if makes it impossible to do

problem of pricing scheme

CASE STATUS - if no remedy for long term contracts gone bad, might discourage companies from using them

modern business often deals with risk limitation

if courts enforce contracts as is, not a just result because intent was for both parties to gain/profit but that is not end result. but not an effect result because it incentivizes people to contest contacts and this imposes a ton of transaction costs in the cosign perspective

texaco v pennzoil

plaintiff = penzol, defendant = texaco

pennzoil and getty enter into agreement for merger

pennzoil and getty sign memo agreement

both issue press releases

now, texaco makes offer to acquire getty

getty cancels pennzoil agreement and accept texaco

pennzoil sues texaco, 3 bil for penzool awarded

did pennzoil and getty have a contract

sooooo

texaco and getty do have a contract

1. agreement: yes

2. consideration: yes

3. capacity: maybe - can they contract to sell what was already sold

4. legality: yes

5. no defenses: yes

BUT combo of MOA and press releases ruled to be equivalent to a binding contract, so pennzoil and getty did have a contract

1. MOA + press release

2. yes

3. yes

4. yes

5. yes

7 billion compensatory, 3 billion punitive awarded, most in history

palsgraf v LIRR

tort - no foreseeability

plaintiff = palsgraf, defendant = LIRR

man going on train, pushed in both directions by guards and he has a packaged that falls and explodes. Explosion causes scale at other end to fall and hit palsgraf

negligence case

1. duty - yes

2. breach - yes

3. causation (but for: yes) (proximate: not foreseeable so no)

4. damages: yes

she could have a better case going against the fact that they allowed dynamite

man could have won against LIRR if filed for loss of package

could also use hand to analyze if there was a breach

United states v carrol towing

origin of the hand formula/test

anna c in barge

carroll towing goes to park in barge and anna c moves out. this is done incorrectly by carroll

guy who lives on anna c and watches it did not show up for work

anna c, while unhooked, floats away and hits big boat

anna c has flour from us gov on it and anna c sinks

Negligence case:

1. duty - to move boats around safely without damaging property

2. breach - maybe

3. causation - but for (but for the incorrect yada yada, yes) proximate cause (it is foreseeable that if done incorrectly...yes)

4. damages- yes, flour lost

negligent when P*L>B

then sued back for contributory negligence because the guy was supposed to be living on the anna c and he did not show up. likely avoided if he shows up to work: go through same analysis from other perspective

1. duty

2. breach

3. causation

4. damages

Found partially liable

mccarty v pheasant run

rape case

plaintiff = mccarty, defendant = pheasant run

1981

mccarty checks into pheasant run hotel for sears business meeting. goes for dinner, comes back and is attacked, fends off attacker. she had left sliding glass door unlocked and only put the safety chain on.

1. duty - keep guests safe

2. breach - no breach because of reasonable man and hand formula

3. causation - yes, yes (yes foreseeable if someone were to enter room they might harm guest)

4.damages - yes

hand formula as it applies: P*L > B = breach

1% * 1,000,000 = 10,000...but here B is greater than 10,000 (guards salary + locks...) so no breach

It is not efficient to prevent all accidents.

Fischer v red lions inn

electric shock case (breach of duty question)

plaintiff = Fischer, defendant = red lions inn

guy goes for swim and then goes to vending machine to get a drink. barefoot and still wet. puts money in machine and shocked. burning sensation and trouble with sex life. inspection yields not safe power chord.

there had been prior complaints to pepsi of shocks

1. duty - yes

2. breach - maybe

3.causation - yes

4.damages - yes

Reasonable man - don't have to prevent account, but have to take action as to not be considered negligent

P*L> B = breach - 1%, 1 million = 10,000 but right now B=0 so there is a breach. can get sued back for contributory negligence

1. duty - to keep self safe

2. breach - maybe...shoes still wet etc

3. causation yes

4. damages - yes

helling v carey

standard practice in profession v hands formula

optomologists failing to timely administer a glaucoma test

trial court in for of opthamologists

she had been on many visits with eye pain

at time, no requirement for this type of test for patients under 40

requirements do state that test should be given if continued complaints of symptoms of glaucoma are present

medical malpractice suit

1. duty - keep her safe, act as they do in medical field

2. breach - maybe

3. causation- but for yes, prox yes

4. damages- lose eyesight

P*L>B , B in this case is tiny so there is a breach, and for now on the test is given and peoples insurance goes up. insurance going up is a consequence to make sure everyone is safe. In general, they want incentive to have better practice, prevention is simple but the damages are so horrible

escola v coca cola bottling

plaintiff = gladys encolla, defendant = coca cola

escola is a waitress and a box of coke comes. she is moving bottle into fridge and one explodes in her hand and she is injured. it is noted that this type of activity has happened before to coke bottles.

product liability - sometimes becomes analyzed under strict liability

1. duty - yes

2. breach - not necessary here because strict but if apply hand formula then can argue should not be negligent because cost of inspecting every bottle is greater than the foreseeable damage

3. causation, yes, yes foreseeable as it had happened before

4. damages - yes

a manufactorer incures strict liability when he has placed an article on the market, knowing it has not been inspected, and this article hurts someone

publicly policy: placed where is will most effectively reduce the hazards of life and health inherent in defective products that reach the market

klein v pyrodyne

strict liability fireworks case

plaintiff = klein, defendant = pyrodyne

pyrotechnic company (pyrodyn) sets off fireworks on july 4. klein injured by a shell that went astray and exploded. it was ruled that the discharge of fireworks is an inherently dangerous activity and this calls for strict liability. Still have to go through a negligence case, but do not need to prove breach

1. duty - to keep people safe

2. breach - not necessary because this is a strict liability case

3. causation - but for the fireworks tipping over, the plaintiff would not have gotten hurt. proximate cause - it is foreseeable to pyrodyne that someone might get hurt

4. damages - yes

if use hand .01% 3m = 300 and this is way less than b so no negligence. but this does not matter here.

we want to incentivize both parties to prevent the accident. everybody will be paying some amount to prevent to accident. thus, strict liability needs to be narrowly defined.

on exam may need to say weather something should be held strictly liable: 6 factors.

ex: nuclear waste = strictly liable

liebeck v mcdonalds

mcdonaolds coffee case

plaintiff = liebeck, defendant = mcdonalds

old lady liebeck purchases drive thru coffee. she puts it between her lap to get cover off it spills and she is badly burned

coffee very hot at this place because truck drivers

1. duty - to not harm customers

2. breach - must analyze

3. causation - but for hot coffee no burns, it is foreseeable that coffee this hot can burn someone if spilled

4. damages - yes

for breach go through standard practice it was 10 degrees to hot

if use hand can see that even though p is small it will be higher than b because b is 0, os there is a breach of duty

there were many punitive damages (3 times compensatory)

mcdonalds can sue back for contributory

1. duty - to keep self safe

2. breach - yes, spilled coffee

3. causation - yes yes

4. damages yes

court says she is 20% responsible

torres v reardon

gardner falling out of a tree case

playntiff = torress, defnedant = reardon

jose torres is a self employed gardner (jose torres gardening service)

he cuts grass for rear dons

reardon want his tree trimmed and hires torres

torres arrives to cut tree with one helper. Neighbor, boice was nervous tree branch would fall on his roof so he volunteered to help as well

torres not using proper safety equipment

he is up in tree and boice pulls a rope too fast and toreros falls out of tree and becomes paraplegic

torress sued reardons to recover from them for failing to provide workers compensation insurance

rear dons say he is an independent contractor and they are not liable to him

ruled torres is an indépendant contractor - hired to produce given result, means to get result to discussed. toreros had supplied equipment, not hired by day or hour, work done by toreros not in his oridairy duties, torres had employees who assisted him....

many possible cases

torres agasint reardon

no duty because he is an independent contractor

reardon v torres

yes but maybe no damages

torres v chainsaw manufacturero

no breach - because accident had nothing to do with the operating of the chainsaw

negligence against david boice

yes - once he started helping toreros he had duty to see it through. can use hand to see if breach

case of boice against torres

yes - similar as above

if torres and boice go to court likely their will be contributory negligence

life lesson: don't help people and keep independent contractors independent

hadley v baxendale

plaintiffs were flour millers and operated a steam engine. crank shaft broke so need to send out to get fixed. Baxendale hired to transport shaft. they were slow. plaintiff wanted damages yada yada. But there was no special contract between the parties. if there was, any breach would flow from the circumstances of that specific contract. in awarding damages, law give compensation to injured individual, but complete compensation is not to be awarded. Baxendale did not know hadley could not operate without shaft

1. Agreement: offer and acceptance (performance)

2. consideration: money for work

3. capacity: yes

4. Legality: yes

5. No defesnes: yes

sets precedent: breaching party is liable for all FORSEEABLE losses

awarded 2 pounds (actual/compensatory damages), not 300 pounds because not foreseeable

This case is economically efficient because it frees parties to contract without having to search and plan for everything

if not foreseeable, no recovery - foreseeable damages not necessarily recoverable, still need to be a valid contract

contracts and efficiency

in economics, more efficient to enforce contracts as is. when people know their rights, there are less court cases and lower transaction costs. but this is often going against what is just. might be economically efficient to come up with new rule as well. but could also be economically efficient to keep as is in contract.

strict liability

1. high degree of risk

2. likelihood of injury from risk

3. inability to eliminate risk with reasonable care

4. extent to which activity not common

5. innaproriateness of place

6. extent to value to community outweighed by danger

Demsetz

 When transaction costs create an impediment to bargaining, the efficient use of a resource depends on the initial assignment of property rights

Cooter

Private bargaining to redistribute external cost will not eliminate inefficiencies unless institutional mechanisms establish boundaries to possible terms of the contract

Low-cost avoider

 How can we avoid a negative externality at the lowest cost . Who should the liability be assigned to

Buyers Threat Value

 Maximum amount that they would be willing to spend on good

Sellers Threat Value

 Minimum that they would be willing to accept for the good

City of LA vs. Alameda Books (2002)

• LA wanted to enforce a zoning ordinance to restrict the location of adult businesses, including adult bookstores, adult video sellers, and other establishments

• The ordinance prohibited these businesses from being within a specific distance from schools, parks and recreational areas

3 Rules for establishing property rights in whales

1. Greenland - Right whales

   1. Fast fish - loose fish. As long as the harpoon stays in whale or rope stays attached to boat, the whale is yours.

2. Sperm Whale

   1. Iron holds the whales. Throw harpoons attached to massive barrels in order to prevent whales from diving as far down as possible.

   2. Ship that attaches the harpoon has property rights

3. Finback Whale

   1. Shared ownership

Babbington v. Yellow Taxi (1928)

Cop makes a taxi driver chase after a criminal who is getting away

While doing so, the taxi got into an accident at an intersection which killed the taxi driver

Yellow taxi wants to avoid liability for the drivers death, as he was technically no longer an employee of the company, but an agent for the police department at that time.

Question: Who is liable for this incident?

Findings: Cardozo (judge) uses the old precedent of hue and cry from Jordan v. Simon and wants to blame this on the Yellow Taxi company