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A primer on default logic

John F. Horty

in Reasons as Defaults

The goal of this first chapter is to motivate and develop a very simple prioritized default logic. The chapter begins by introducing default rules as well as prioritized default theories. It then ... More

The goal of this first chapter is to motivate and develop a very simple prioritized default logic. The chapter begins by introducing default rules as well as prioritized default theories. It then moves through a series of definitions leading to the crucial notion of an extension for such a theory, and finally explores the relation between this concept of an extension and the more usual logical concept of a conclusion set.Less

Endogenous Preferences

F. H. Buckley

in Fair Governance: Paternalism and Perfectionism

Preferences are endogenous to the legal regime when they are shaped by it, as they would be when populist legislation makes people more envious. Legal rules might also shape our preferences when they ... More

Preferences are endogenous to the legal regime when they are shaped by it, as they would be when populist legislation makes people more envious. Legal rules might also shape our preferences when they are taken to provide a persuasive moral guide, as where civil rights legislation weakens prejudices. However, legislative attempts to shape preferences can be abusive, as the experience with Canadian human rights codes shows. Default rules, which presume that we will make a particular choice unless we opt out, importantly affect how we choose, and this has been thought to make a case for “libertarian paternalism”. However, default rules are not libertarian unless they mimic the kinds of choices people would prefer if they thought about it; and in that case they're not paternalistic.Less

Filling in the gaps

Jules L. Coleman

in Risks and Wrongs

This chapter addresses the question of how incomplete contracts are to be interpreted and by what principle are incomplete contracts to be complete. When transaction costs make an explicit agreement ... More

This chapter addresses the question of how incomplete contracts are to be interpreted and by what principle are incomplete contracts to be complete. When transaction costs make an explicit agreement to costly ex ante, the court should apply a default or gap-filling rule that ‘mimics’ the outcome of a hypothetical contract between them. The hypothetical contract is the one the parties would have made had the transaction costs not made their deal so irrational. The chapter presents a theory that invites characterizing the ex ante contract in rational bargaining terms: If the actual contract expresses what the parties take to be a rational agreement between them, then when their agreement is incomplete and needs to be interpreted or filled in by a court it should express what it would have been rational for the parties to agree to. The move from actual to the hypothetical should not change the content of the principle.Less

Modeling Legal Rules

Richard Holton

in Philosophical Foundations of Language in the Law

Building on earlier work, this chapter develops a model of legal rules that admit of exceptions but are nonetheless governed by classical logic. The account is defended against alternative accounts ... More

Building on earlier work, this chapter develops a model of legal rules that admit of exceptions but are nonetheless governed by classical logic. The account is defended against alternative accounts that construe legal rules as generics, or as default rules.Less

The Implied Terms of Contracts: Of ‘Default Rules’ and ‘Situation-Sense’ 1

Todd D Rakoff

in Good Faith and Fault in Contract Law

This chapter addresses the question of how courts should deal with the process of gap filling by what are variously called ‘background terms’, ‘default rules’, or ‘implied terms’. The issue may arise ... More

This chapter addresses the question of how courts should deal with the process of gap filling by what are variously called ‘background terms’, ‘default rules’, or ‘implied terms’. The issue may arise in standard situations such as landlord and tenant, seller and buyer, or employer and employee, or in more individual or ‘one-off’ contracts in which there is a gap in the terms. The chapter is concerned with the first of these and discusses the difficulties and abstractness of a number of approaches, including ‘fairness’, ‘a common sense notion of implied consent’, a ‘hypothetical bargain’ test, and an efficient risk-allocation test. It proposes a ‘situation sense’ approach, which depends on a considerably more explicit, tight, and structured model of the transactional situation at issue in its societal context.Less

Legally Induced Reference Points

Eyal Zamir

in Law, Psychology, and Morality: The Role of Loss Aversion

Chapter 5 analyzes the contribution of loss aversion to our understanding of how legal norms affect human perceptions and behavior—that is, how loss aversion is sometimes the output of legal norms. ... More

Chapter 5 analyzes the contribution of loss aversion to our understanding of how legal norms affect human perceptions and behavior—that is, how loss aversion is sometimes the output of legal norms. One prime example of this is the powerful “default effect” of legal norms on human behavior in contexts such as posthumous organ donation. Similarly, the chapter argues that the burden of proof in civil litigation is much more than a tiebreaker for cases of evidentiary tie—it sets the baseline against which judges assess the evidence presented to them. Finally, the chapter discusses the use of temporary legislation as a means of overcoming objections to legal reforms—legislation that in turn changes people’s reference point and hence tends to become permanent.Less

Framing Incomplete Contracts

in Calculating Promises: The Emergence of Modern American Contract Doctrine

Incomplete contracts and the implication of terms in contract disputes are the subjects of a considerable debate in legal scholarship and judicial opinion. This debate plays an indirect role in a ... More

Incomplete contracts and the implication of terms in contract disputes are the subjects of a considerable debate in legal scholarship and judicial opinion. This debate plays an indirect role in a cultural conflict over the individual subject and has centered on questions of how courts should supply missing contract terms, as well as what those missing terms should be. This chapter discusses the significance and effects of this debate by looking at the major attempts to deal with the problem in the scholarly literature, and also examines the relationship of the various scholarly discussions of incompleteness to the implied covenant of good faith. Furthermore, it considers the division of functions between interpretation and the determination of legal relations, or construction. Finally, the chapter comments on hypothetical bargain theory and default rules analysis.Less

What Should We Do?

Edward A. Zelinsky

in The Origins of the Ownership Society: How the Defined Contribution Paradigm Changed America

This chapter explores our choices for molding the defined contribution paradigm as it evolves and identifies which of those choices are best. The first and most important imperative for the future is ... More

This chapter explores our choices for molding the defined contribution paradigm as it evolves and identifies which of those choices are best. The first and most important imperative for the future is to do no harm. Second, we should amend Section 401(k) to require employees to opt out of 401(k) participation. We should also restore fiscal balance to the Social Security system to reduce that system's projected benefit payments. Pushing back the early and normal retirement ages at which individuals may collect social security benefits seems more politically palatable than is an economically equivalent reduction of annual payments commencing earlier. Fourth, the coverage of the Section 25B savers' credit should be expanded to subsidize, not just retirement contributions, but to reward contributions to HSAs, educational savings accounts, and Section 529 programs if the taxpayer prefers any of these instead. Finally, the ten percent (10%) limit on employer stock should apply to all defined contribution plans.Less

Contract Law

Eyal Zamir and Doron Teichman

in Behavioral Law and Economics

This chapter presents an overview of the behavioral analysis of contract law. It first presents a behavioral theory of contracts that highlights the role of values such as promise-keeping and trust, ... More

This chapter presents an overview of the behavioral analysis of contract law. It first presents a behavioral theory of contracts that highlights the role of values such as promise-keeping and trust, and examines how the role played by those values depends on whether the contract is a product of negotiation or not (i.e., a standard-form contract). The chapter then discusses specific issues in contract law from a behavioral viewpoint—including pre-contractual negotiations (with special emphasis on the role of default rules and other reference points), contract formation, contract interpretation and supplementation, performance, and remedies for breach of contract, including agreed-upon remedies.Less

Optionality

Martijn W. Hesselink

in Justifying Contract in Europe: Political Philosophies of European Contract Law

This Chapter focuses on a distinctive characteristic of an important portion of contemporary rules of contract law that sets them apart not only from public law but also from other branches of ... More

This Chapter focuses on a distinctive characteristic of an important portion of contemporary rules of contract law that sets them apart not only from public law but also from other branches of private law (e.g. property and family law), i.e. that these rules can be set aside freely by the contracting parties. Contrary to national civil codes, however, positive EU contract law does not include many instances of non-mandatory rules. This raises the question of what exactly justifies the existence of such optional rules: should public institutions be providing elaborate sets of contract law rules if private parties can set them aside as they please, and, if so, what kind of considerations should determine the content of such rules? Similar questions can be asked with respect to other instances of optional contract law, such as choice of law in cross-border contracts.Less

The Use and Abuse of Historical Narrative: Debates over Incomplete Contracts

in Calculating Promises: The Emergence of Modern American Contract Doctrine

The debate over incomplete contracts pits two sides (dubbed right and left poles), both of which rely on a common historical narrative to generate opposing normative conclusions. This historical ... More

The debate over incomplete contracts pits two sides (dubbed right and left poles), both of which rely on a common historical narrative to generate opposing normative conclusions. This historical narrative is consistent with the widespread notion that up until well into the twentieth century, explicit consent was the lynchpin of contractual obligation, and that enforcement of contracts was based on explicitly specified intent at the time the agreement was made. The right pole is comprised of an uneasy coalition of autonomy theorists and proponents of the economic analysis of the law, who argue in favor of a contract law that more closely approximates classical law. Randy Barnett provides the most detailed elaboration of autonomy theory on incompleteness in his theory of default rules. On the other hand, the left pole, which includes Lisa Bernstein and Robert Scott, argues that the socialization of contract was, and remains, a necessary result of changed economic conditions. The common historical narrative is based on three interrelated ideas: unlimited freedom of contract, contract as private lawmaking, and completion of incomplete contracts.Less

What Is Corporate Law?

John Armour, Henry Hansmann, Reinier Kraakman, and Mariana Pargendler

in The Anatomy of Corporate Law: A Comparative and Functional Approach

This chapter introduces the book’s analytic framework, which focuses on the common structure of corporate law across different jurisdictions as a response to fundamentally similar legal and economic ... More

This chapter introduces the book’s analytic framework, which focuses on the common structure of corporate law across different jurisdictions as a response to fundamentally similar legal and economic problems. It first details the economic importance of the corporate form’s hallmark features: legal personality, limited liability, transferable shares, delegated management, and investor ownership. The major agency problems that attend the corporate form and that, therefore, must be addressed, are identified. The chapter next considers the role of law and contract in structuring corporate affairs, including the function of mandatory and default rules, standard forms, and choice of law, as well the debate about the proper role of corporate law in promoting overall social welfare. While almost all legal systems retain the core features of the corporate form, individual jurisdictions have made distinct choices regarding many other aspects of their corporate laws. The forces shaping the development of corporate law, including evolving patterns of share ownership, are examined.Less

Procedural Law

Hong-Lin Yu

in Commercial Arbitration

This chapter explains the role of procedural law in arbitration. Aside from the arbitrators, the language, and the substantive law, the principle of party autonomy affords the parties to arbitration ... More

This chapter explains the role of procedural law in arbitration. Aside from the arbitrators, the language, and the substantive law, the principle of party autonomy affords the parties to arbitration the freedom to choose the procedural law. In order to attract more cross-border arbitration business to Scotland, the policy clearly sets the tone that the choice of procedural law can be different from the choice of the substantive law. For instance, parties to arbitration may choose Swiss law to govern disputes arising from the main contract between them but to have procedural matters governed by Scottish arbitration law. In Scotland, the choice of arbitrating in accordance with the Arbitration (Scotland) Act 2010 does not affect the parties' choice of substantive law other than Scots law to determine the substantive issues. This chapter discusses issues relevant to procedural law in arbitration, including the seat of arbitration, default rules, mandatory rules, and the debate over delocalisation theory concerning the seat of arbitration in international commercial arbitration. It also considers jurisdictions where delocalisation theory has received support, such as France, Switzerland and Belgium.Less

Personalized Regulatory Techniques

Omri Ben-Shahar and Ariel Porat

in Personalized Law: Different Rules for Different People

This chapter expands the demonstration how personalized law would transform existing legal institutions. The chapter shifts the focus from specific doctrines to regulatory techniques. These are ... More

This chapter expands the demonstration how personalized law would transform existing legal institutions. The chapter shifts the focus from specific doctrines to regulatory techniques. These are generic approaches to the design of legal interventions, used in every area of law. The chapter examines the personalization of several techniques: default rules, mandated disclosures, compensatory damages, and bundles of rights. With each of these tools, the law presently prescribes one-size-fits-all rules, designed to either best fit the average person, or to promote the interests of a specific subgroup of the population. By shifting to personalized rules, the law could simultaneously advance the interests of different groups and individuals. The chapter shows that designing personalized default rules, disclosures, damages, or bundles of rights would promote the goals underlying these interventions. Personalized default would mimic peoples’ preferences more successfully and reduce the incidence of opt-out. Personalized disclosures stand a chance of being more useful to people. Personalized compensation would come closer to making victims of wrongs whole. And personalized bundles of rights would recognize the diversity of people’s interests and aspirations.Less

The Merchant Who Would Not Be King: Unreasoned Fears about Private Lawmaking

Gilles Cuniberti

in Private International Law and Global Governance

Private powers increasingly legislate for themselves, and one could fear that the autonomy that they gain as a consequence might be misused. While the breadth of the production of private norms ... More

Private powers increasingly legislate for themselves, and one could fear that the autonomy that they gain as a consequence might be misused. While the breadth of the production of private norms cannot be disputed, the goal pursued by private powers issuing and relying on those norms has not been clearly ascertained. This chapter argues that it should be. Private lawmaking is cause for concern essentially because most scholars have assumed that private powers do not only produce norms and rules of conduct, but also claim autonomy from nation states. Yet, the fact that private powers lay down rules does not mean that they claim, and even less have, complete autonomy from nation states. It could perfectly well be that the major part of private norm production takes place in a framework designed by nation states, which would thus grant limited, and certainly always controlled, autonomy to these powers.Less

Loss Aversion: Normative Implications

Eyal Zamir

in Law, Psychology, and Morality: The Role of Loss Aversion

This chapter examines the policy implications of the various interactions between loss aversion and the law. It starts by claiming that loss aversion is not irrational per se, and that the ... More

This chapter examines the policy implications of the various interactions between loss aversion and the law. It starts by claiming that loss aversion is not irrational per se, and that the manipulability of reference points is limited. It claims that loss aversion not only explains, but also justifies, the law’s tendency to treat losses and gains differently. The chapter further argues that although the law should not try to negate loss aversion itself, it should discourage the manipulative exploitation of people’s loss aversion by others. It endorses the use of legal default rules to steer people’s decisions in the desirable direction. The chapter also notes that loss aversion provides a prima facie argument against legal reforms. Finally, it observes that legal decision-makers are also susceptible to framing effects, and this susceptibility may be exploited by interested parties. Conscious reframing of an issue in different ways may help overcome such manipulations.Less

Cohabitants, Choice, and the Public Interest

Robert Leckey

in Philosophical Foundations of Children's and Family Law

Through the narrow entry of property disputes between former cohabitants, this chapter aims to clarify thinking on issues crucial to philosophical examination of family law. It refracts big ... More

Through the narrow entry of property disputes between former cohabitants, this chapter aims to clarify thinking on issues crucial to philosophical examination of family law. It refracts big questions—such as what cohabitants should owe one another and the balance between choice and protection—through a legal lens of attention to institutional matters such as the roles of judges and legislatures. Canadian cases on unjust enrichment and English cases quantifying beneficial interests in a jointly owned home are examples. The chapter highlights limits on judicial law reform in the face of social change, both in substance and in the capacity to acknowledge the state's interest in intimate relationships. The chapter relativizes the focus on choice prominent in academic and policy discussions of cohabitation and highlights the character of family law, entwined with the general private law of property and obligations, as a regulatory system.Less

Nonstandard Communication

Bruno G. Bara

in Cognitive Pragmatics: The Mental Processes of Communication

Comprehension and response arise in situations which trigger default rules—that is, standard communication. However, a large number of interesting cases go beyond the bounds of normality, which may ... More

Comprehension and response arise in situations which trigger default rules—that is, standard communication. However, a large number of interesting cases go beyond the bounds of normality, which may be classified as non-expressive interaction, exploitation, deception, and failure. Each of these cases provides independent evidence in favor of cognitive pragmatics. This chapter examines nonstandard communication, which encompasses those processes that must have recourse to classic inferencing procedures because of their inability to apply standard default rules owing to the latter’s inappropriateness to the context. Among the different types of exploitation, it considers two cases: Irony and as-if situations.Less

Law and Social Change

Lawrence M. Friedman and Grant M. Hayden

in American Law: An Introduction

This chapter explores the relationship between law and social change. Law can affect behavior and promote social change in a number of ways, including the use of sanctions or, more subtly, by ... More

This chapter explores the relationship between law and social change. Law can affect behavior and promote social change in a number of ways, including the use of sanctions or, more subtly, by channeling behavior through default rules and other “nudges.” The law may also hold back social change by locking older patterns of race, sex, and class into place. A large part of this chapter is devoted to the role of the law in race relations, from slavery to affirmative action. The final part of the chapter looks at a number of recent examples of law and social change, including cohabitation, surrogacy, and same-sex marriage.Less

Substitution of New Debtor; Transfer of Contract

Nils Jansen and Reinhard Zimmermann

in Commentaries on European Contract Laws

While the example creates the impression that a change of debtor is a frequent occurrence, the legal reality is somewhat different. The creditor (C) may simply be reluctant to accept a new debtor. ... More

While the example creates the impression that a change of debtor is a frequent occurrence, the legal reality is somewhat different. The creditor (C) may simply be reluctant to accept a new debtor. Nevertheless, the substitution of a debtor may take place in relation to an ‘ordinary’ cross-border sales contract. Less