CONFLICTING RIGHTS

Judicial rules

Externalities, Transaction Costs, and Remedies

1. Coase

   1. If trading were costless, then assets would always end up in the hands of those who value them most (efficient).

   2. This is based on the idea that parties benefit from trade (a higher value user could buy from a lower value user with both parties benefiting). This would be the most efficient allocation of resources.

   3. Corollaries:

      1. When transactions are costless, entitlements should be allocated on the basis of non-efficiency criteria (e.g., fairness).

      2. Externalities are reciprocal in nature.

      3. Transactional costs in real world:

         1. Negotiation and litigation costs

         2. Free-rider problem.

         3. Hold-out problem.

         4. Opportunism, bilateral monopoly.

      4. When transactions are costly, entitlements should be structured such that the higher value user gets the entitlement and the least cost avoider bears the liability (the cost of the problem)

      5. Therefore, we want to structure the law to reduce transactions costs and promotion of private agreements of parties to bargain for their mutual benefit (define clear entitlements, disseminate information)

2. Calabresi & Melamed, Property Rules, Liability Rules, and Inalienability (p. 281-287) – When there are externality conflicts, the courts can resolve the conflict in one of two ways – either through a property rule solution or a liability rule solution. A property rule gives the right to one of the parties and allows those parties to bargain with those rights. A liability rule imposes a settlement on the two parties at a price determined by the court.

Personhood personal fungible (easy to calculate value)

Trespass, Nuisance, and Remedies

1. Trespass – A trespass is a physical invasion (i.e., an encroachment) that usually has a strict liability rule (liability is placed on trespasser regard of intent or reasonableness)

2. Remedy usually is monetary

3. For permanent trespass (encroachment)

4. Nuisance is an activity (non-trespassory, i.e., not physical invasion) that substantially interferes with another’s use and enjoyment of his land.

   1. Usually negligence liability (not liable if source’s action was reasonable).

   2. Public nuisance: an unreasonable interference with a right common to the public.

      1. Legal action usually must be brought by public official.

      2. Some nuisances are both public and private nuisances.

   3. Private nuisance: Substantial invasion of another’s use and enjoyment of land that is either (1) “intentional and unreasonable” or (2) “unintentional and otherwise actionable under the rules controlling liability for negligent or reckless conduct, or for abnormally dangerous conditions or activities”

      1. Intentional: purpose or substantial certainty

      2. Unreasonable if:

         1. “gravity of harm” to the P outweighs the “utility of the D’s conduct.”

         2. harm to P is serious and compensation would not make D’s conduct infeasible

      3. substantial: slight inconveniences or petty annoyances are insufficient to establish nuisance liability

      4. use and enjoyment of land

5. Strict liability and negligence

   1. Negligence: Negligence – D is liable if D’s conduct was unreasonable (harm > utility); P bears the residual risk (incentive for P to avoid)

   2. Strict Liability – D is liable regardless of the reasonableness; this means that D bears the residual risk and there is an incentive for D to invest in safer alternatives

Neighbor’s rule

Social Norms

1. Social norms can be at least as important as formal legal rules and institutions in understanding the governance of resources, creating the structure in which people live and work, and resolving disputes.

2. Ellickson:

   1. Lumping: resident should put up with minor damage stemming from isolated trespass incidents.

   2. Mental Accounting: keep records to prevent repeated violation

   3. Self-Help (like lobster gangs of Maine)

   4. Cooperation

3. What Makes Social Norms Work?

   1. There were repeat players (so reputations got around & identities formed)

   2. There was a sense of reciprocity

   3. Monitoring costs were low

   4. There were multiplex relationships (issue linkage),

   5. Tiered sanctions

   6. High cost to resort to the legal system (legal sanctions were cost prohibitive)

4. What Makes Social Norms Fail?

   1. The influx of outsiders (less likely to abide by social norms & inability to exercise right to exclude)

   2. Conflicting, non-reciprocal uses (not repeat players)

   3. More extensive & expensive monitoring costs

   4. Inadequate sanctions (think of what happened to the lobster gangs of Maine)

   5. Nearing end of relationship

      1. Cooperation is stable as long as foresee relationship continuing.

      2. Cooperation may unravel when relationship about to end

5. When are Social Norms Efficient

   1. Want to minimize sum of costs of conflict and costs of resolving

   2. cost to outsiders are high

      1. High price for access (e.g., monopoly, cartel)

      2. Discrimination

   3. Slow adaptation to new circumstances

   4. Sanctions too strong: self-help may be violent

6. Should courts defer to social norms?

   1. Advantages: could be more efficient

   2. Disadvantages

      1. Costs to outsiders and dissenters

         1. Higher prices, less access (monopoly)

         2. Unfairness (especially if race-, gender-biased)

      2. Lags (slow adaptation to social change)

      3. Self-help sanctions may lead to violence

Easement

1. Easement is a nonpossessory right to use land of another

   1. Owner of servient tenement ay not revoke the easement at will or interfere with easement holder’s use of the property.

   2. Easement does not necessarily create an exclusive right (both easement holder and landowner may use same land).

   3. Dominant tenement: The property/parcel/owner who benefits from the easement.

   4. Servient tenement: The property that is burdened by an easement

2. Types of easement:

   1. Affirmative – give the holder of the right to go onto the servient estate for a specific purpose (e.g., right of way).

   2. Negative – gives the holder the right to prevent the possessor of the servient estate from doing some otherwise lawful act on the servient estate (e.g., restriction).

      1. Historically were limited to: Air, light, lateral support,...

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