Section 1
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unconscionability
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Last updated
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Date created
Mar 1, 2020
Cards (103)
Section 1
(50 cards)
unconscionability
a defense against a contract when holding the participants to the terms would be very unfair to one side - the value of the consideration to the aggrieved would be disproportionately low
specific performance cont..
- offers potential for fewer lawsuits - eliminates the cost of estimating damages - preserves the rational parties own valuations - captures the intentions/market valuations of parties who made the agreement
covenant
a private agreement that limits the way in which an entitlement to property can be used - could be used to preserve the way a certain property looks or functions
property rule - injunction
forces the least cost avoider to cease rights to property
trespass
the invasion of someone else's property by entering without the owner's consent
holdouts
parties that impede the outcome of a transaction by waiting for a better offer from the purchasers
intellectual property
intangible property, inventions protected by copyright such as texts, patents, trademarks
immaterial breaches of contract
non-performance may have little or no bearing on the goals of the parties and are considered minor breaches - one party would have substantially performed their duties
nuisance
the use of property in a way that causes damage or annoyance to others without physical invasion - divided into two private nuisance and public nuisance
public nuisance
involves interference with the public at large
microeconomics
a study of individuals, households and firms
performance excuses
excuses for incorrectly assessing future events - it may be inefficient or unfair if one side is allowed to rescind
liability rule - monetary damages
forces the least cost avoider to pay monetary damages
types of damages for contact breach 4
1. expectation damages 2. reliance damages 3. restitution 4. liquidation damages
Practical Coasean View
externality problem is a joint problem which would not exist without both parties - for this reason, the law should assign entitlements such that the least cost avoider pays for the externality
inalienability rule
rights that cannot be transferred - through statutes, governments often pass legislation prohibiting the allocation or use of private property in the interest of social welfare - hence are governments the ultimate owners of all entitlements
reliance damages
refers to the cost a plaintiff incurs as a result of relying on a broken promise
private nuisance law
property rights restricted - enhancing the welfare of private property owners
contract
a legally binding agreement between parties about a future transfer of an entitlement in exchange for another entitlement - must include an offer, acceptance and consideration
macroeconomics
study of the economy as a whole
free riders
use public goods at no cost to themselves
neoclassical economic theory
allocation of entitlements will be efficient because the world is a perfect place - markets are perfectly competitive - buyers, sellers act rationally - no control over price - have complete information - firms enter and leave market with ease - zero transaction costs
problem of scarcity
not able to curtail an individuals want with scare resources
mistake - formation defense
unilateral mistake - mean failing to reward those who had acquired costly information
material breach of contract
allow the aggrieved party to ask for performance and/or substantial damages or nullification of the contract
strict liability
one party to a dispute is deemed liable regardless as long as they are responsible for the situation involving the damage they are liable - product damage, applies to extraordinary dangerous activities like the transportation of explosives
incompetence/incapacity - formation defense
disqualifies a person from making a contract since they may not understand what they are agreeing to
restitution damages
at times - benefits are sometimes conferred on the breaching party who has failed to perform their promise in the contract - in such cases, the court might ask for the return of the benefit to prevent the enrichment - returning a purchasers deposit
specific performance
an order to comply with the terms of a contract so that transactions for mutual gains can be completed - an equitable remedy which theoretically can be efficient and can be efficient
formation defenses - 5
1. duress 2. mistake 3. incompetence/incapacity 4. fraud 5. unconscionability
negligence
applied to dispute resolution, liability is determined based up fault - party liable if they did not exercise enough care
monetary damages
most cases monetary damages are awarded to solve breach of contracts - to leave the injured in the same position had the terms of the contract been completed
expectation damages
the most obvious form of damages when a contract is breached - what one should reasonably expected to receive under the terms of the contact
remedy for violations of property rights - 2
1. a property rule - injunction 2. a liability rule - monetary damages
personal property
movable
tragedy of the commons
a valuable resource with no rights and open access will attract users to the point where the resource becomes depleted and is of no use to society - an inefficient outcome
Kaldor - hicks efficiency
winners win more than losers lose
expropriation/eminent domain
refer to the regulatory takings of private land by the government for public use with or without the consent of the property owner - taking must have social welfare implications and property owners must receive just compensation
efficient breach
rationale is that the opportunity to employ resources to their optimal use may require aborting the contract, in which case there are net gains to be realized from an efficient breach of contract
fraud - formation defense
one party gains an unfair or dishonest advantage as a result of their actions or lack thereof
duress - formation defense
one party agrees without adequate consideration since their decision was made under dire circumstances - forced to enter contract against their will
Pareto efficiency
no way to make one person better off without making another worse off
real property
non-movables such as houses, land, building
Pigou's Theory of Welfare
advocated taxes in the amount of the hidden cost to society on the party causing the negative externality - reducing the equilibrium ... subsidy for positive externalities - raising the equilibrium
zoning
refer to laws setting limits on how people can use their property - all levels of governments use zoning laws to preserve areas, shape development or the look of the community
private nuisance
refers to impediments to an individual's use or enjoyment of land
public nuisance law
property rights restricted - enhancing the welfare of public, community or country - improving social welfare
liquidation damages
an amount agreed upon by the parties in contractual relations to be paid in the event of a breach - if very high, may cause parties to perform
acceptable reasons to contract breach 2
1. formation defenses 2. performance defenses
allocation efficiency
the distribution of output or entitlements among residents that yields the highest level of social welfare
Section 2
(50 cards)
tort
a violation of a non-contractual duty imposed by law in relation to the property rights of others - a civil wrong
Gary Becker's economic model of crime
criminals behave rationally, when benefit outweighs costs crime is committed - could reduce crime if benefits lowered or costs increased - administering programs cost society however
what are some common environmental problems
air and water pollution - smog, greenhouse gases, production processes and forest fires - create respiratory and pulmonary infections as well as lung cancer water pollution is additional material in water affecting it's quality - sewage, industrial waste, oil spills, acid rain, marine dumping, radioactive waste, leakages from underground storage, global warming and fertilizer runoff, bacteria and sediments that obstruct water flow
criminal procedures
In many jurisdictions, individuals charged with major crimes are presumed innocent until proven guilty. They are entitled to enter a plea and to a defence. There is no retroactive application of law. The rules are determined beforehand, so no legal consequences exist for acts done prior to laws taking effect.
what is comparative advantage
determines which goods a country specializes in. This advantage can arise, according to Heckscher-Ohlin, by having relative abundance of a factor of production. It in turn allows countries to produce at relatively cheaper prices. Trade will then take place and gains are realized
what are some other common environmental problems
deforestation and natural disaster deforestation - clearing of land for agriculture, logging or firewood. Deforestation has been blamed for about 20% of carbon dioxide emissions in the world, since trees consume carbon dioxide and release oxygen. Without their consumption of gases like carbon dioxide, global warming increases. natural disaster - the impact which natural occurrences like floods, hurricanes, volcanoes and earthquakes can have on the environment. They require resources in efforts of risk management and rehabilitation.
Sir William Blackstone
an English jurist who referred to the right of an individual to a jury trial as the "the principal bulwark of our liberties". - robbery of Heathrow depot without a jury
environmental degradation
the decline in the natural environment's ability to sustain life as a result of pollution, inefficient resource use and natural disasters
Pareto improvement
A reallocation that improves at least one person without making anyone worse off
What is the solution to the costs of incariration
imprisonment can create costs which exceed the benefits, and that it does little to reduce crime. Within reason, efficiency requires an examination of the costs and benefits of alternative penalties such as fines/volunteer work for lower level crimes
adverse selection
Those representing a high risk seek insurance, causing premiums to rise for everyone. When premiums reach the point where it is inefficient for those representing a low risk to seek insurance, we are left with a large percentage of high risk individuals insured. The likelihood of accidents and claims increases again.
How many former prisoners return to crime upon release?
6 out of 10
how does environmental degradation effect the economy
can cause a depletion of the factors of production and the natural environment which gives rise to comparative advantage and gains from trade. Not only will this have an impact on our potential to earn foreign exchange, but it also threatens the domestic supply of the products which depend on the particular resource
environmental protection
the efforts we make to preserve natural resources and to prevent or reverse the destruction of the natural environment over time
neighbor test
You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbor.
what are the limitations of cost benefit analysis and the level of environmental protection
it is difficult to predict the benefits that could be realized from protecting the environment of degradation - eg...how many fewer individuals would die from cancer related deaths by reducing the levels of arsenic in drinking water the reason is that the benefits that result occur over time and it is very difficult to measure the results
learned hand formula
optimal level of precaution
costs of the death penalty
10 times more than imprisonment - length of time to finalize the punishment - bogs down the prisons, expensive lawyers
jury duty
used in most criminal cases - impartial jury of the defendant's peers to convict or exonerate
efficient tort system
according to Guido Calabresi, minimizing the sum of three types of costs: 1.Costs of precaution (secondary) 2.Costs of the tort (primary) 3.Costs of administering the tort system (tertiary)
comparative negligence
costs are allocated to the parties in accordance with their proportion of responsibility for the damage that has occurred
how are economics and the environment related
When we allocate scarce resources in an efficient manner to satisfy unlimited wants, we do so given existing environmental conditions which facilitate production and exchange. Environmental destruction adds to the economic problem in that it reduces our ability to produce goods and services over time. It can happen through direct depletion of resources by inefficient use (like over-fishing and deforestation), by polluting the environment (releasing harmful substances that alter the state of the land, air and water we require), or by inefficiency in failing to protect resources from natural disasters. The above paragraph clearly implies that environmental degradation can reduce potential GDP and hamper economic growth.
last clear chance
whose purpose is to control inefficient actions. If the defendant had the last clear chance to avoid the accident, they are liable and the plaintiff will recover damages - stance against contributory negligence
disadvantages of strict liability
- deter manufacture of goods - disincentive for plaintiffs to take precautions, asymmetrical information may never level know care plaintiffs took, reducing the likelihood of comparative or contributory negligence - moreover, the least cost avoider and deep pocket arguments can lead to cost spreading
crime may be optimal in society???
due to the substantial costs of administering programs to make it easier to catch criminals - the cost in relation to the benefit to society may not be worth the cost
unintentional tort
unintentional harm to the entitlements of others
moral hazard
This is an inefficient situation whereby those who have purchased insurance act carelessly because even if they are liable the insurance company pays. This increases the likelihood of accidents and tort claims.
what is the worldwide consensus regarding environmental destruction?
will impose costs on future generations, and that action is required today to preserve resources and to prevent or reverse the destruction of the natural environment over time.
1 in 100 adult Americans
in jail or in prison - costing $50 billion/yr
how much money was spent on wild life related recreation in US
$108b in 2001
strict liability efficiency
save time and reduce the court costs of determining liability through negligence. Parties may also be inclined to settle out of court - saving litigation costs when liability is predetermined. Fewer trials reduce the costs of administering the tort system. Moreover, strict liability places the onus on manufacturers to develop safer products which would result in fewer accidents and hence fewer claims.
jury summons
call to jury duty - costly and individuals are shrieking their obligation - in Ontario, no pay for first 10 days and only $50 for the next 39 days
intentional tort
those where the "tortfeasor" (the person committing a tort) intentionally commits a wrongful act. There is little ambiguity surrounding intentional tort. The overwhelming view, on the basis of fairness as well as efficiency, is that liability should rest with those who committed the harm.
negligence 2
the standard used to determine liability in many cases of unintentional tort, based on a test of reasonableness. The more unreasonable the act, the higher the likelihood of liability
contributory negligence
where a defendant is relieved of the liability when the plaintiff materially contributed to their own harm, i.e., the plaintiff's actions were unreasonable or negligent.
alcohol prohibition 1920s
Failure of prohibition meant that its costs outweighed its benefits. From an economic perspective, there was a market for alcohol and profit to be made from its sale - in this regard prohibition cost us social welfare. Additional costs include the loss of a major source of tax revenue from a good with inelastic demand, a strain on government spending - it costs society to police and punish crime, and some users switched to more dangerous drugs like marijuana and cocaine. As for the benefits of prohibition, "no measurable gains were made in productivity or reduced absenteeism
beyond a reasonable doubt
any stretch of the imagination
deterrents to moral hazard and adverse selection
the use of deductibles by insurance companies, mandatory insurance, alternative compensation schemes and no-fault insurance, have evolved over time.
gross negligence (extremely unreasonable)
a severe threat to social welfare, the price perpetrators pay should be higher. Hence, we reserve punitive damages as punishment for such actions. But in order for the price you pay to be appropriate, liability must be determined. Strict liability is a way of ensuring that costs rest where they belong - internalization of costs.
what would be our goal if we are to efficiently protect the enviroment
minimizing the costs of the action (that we concede is necessary) has to be the objective of society if we are to attempt to achieve efficiency - such costs include compliance costs and monitoring costs
Criminal offences
offences committed against society and are punishable by law. They are acts - or lack of action - contrary to law
Rylands v. Fletcher
"We think that the true rule of law is, that the person who, for his own purposes, brings on his land and collects and keeps there anything likely to do mischief if it escapes, must keep it in at his peril; and if he does not do so, is primâ facie answerable for all the damage which is the natural consequence of its escape
Rylands v. Fletcher
Rylands was the occupier of a mine and Fletcher the owner of a mill who constructed a reservoir on another piece of property. After some shafts under the reservoir broke, the water flooded Rylands' mine. Fletcher had not taken part in the construction of the reservoir and did not seem to be aware of the shafts. The trial court ruled in favour of the defendant, the mill owner Fletcher. The Appeals Court reversed and concluded that the plaintiffs should recover damages. They imposed strict liability on Fletcher. Justice Blackburn of the Appeals Court said
cost of keeping a man in prison
$110k per yr
Learned Hand Formula
If: P = probability of injury; L = amount of injury; B = burden of precaution, then the defendant is liable if B < P*L. This relationship is known as the Hand Formula. The idea is that the cost of precaution in B is inadequate or unreasonable if PL, the expected damage/benefit, is greater than B. For example, if there is a 20% chance of an accident in which you could cause $10 in harm, you should not spend less than (PL = 0.2$10 = $2) to safeguard against the damage. The optimal amount of precaution is found where B = PL.
what are statutes
Statutes are often enacted to address issues in previous rulings in order to provide more clarity, to override a precedent found in common law, or simply as a matter of prudence (e.g., in matters involving environmental preservation) in the interest of social welfare. In turn, judges can strictly apply statutes.
ultra hazardous activity
Strict liability applied to ultra-hazardous activity refers to acts that are so inherently dangerous that those responsible for the activity are held strictly liable for any resulting injuries. However, defendants who facilitate the danger are often required to pay resulting damages.
simple negligence
holds the defendants responsible for the tort if their actions were unreasonable under the circumstances, i.e., they did not exercise the care that would ordinarily be expected
What does Gary Becker propose for crime?
fines are superior to imprisonment since they are cheaper to society- not for more serious crimes
what are the roles of Agencies, boards or tribunals in relation to statutes
are created to enforce the statutes - in effect they interpret the laws.
Section 3
(3 cards)