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This chapter discusses the main streams of contract philosophy in order to elucidate the extent to which boilerplate is a permissible means of creating contractual obligation. In particular, it considers the deep embeddedness—the ineradicability—of the notion of voluntariness. It also compares and contrasts the economic efficiency theory of contract with the various theories based more directly on freedom of the will. The chapter first provides an overview of contract theory, focusing on autonomy (rights) and welfare theories, reliance theory, and equivalence of exchange theory. It then describes the basic premises of the economic theory of law, the role of incentives in maximizing social welfare, contract law, and property and liability rules. It shows that the existing philosophical theories of contract depend on the core notions of voluntariness, freedom of choice, or consent, thus making it difficult to incorporate boilerplate into the theories of contract.

This chapter examines the classical liberal theory of rights, which holds that rights protect or secure a domain of autonomy. To have a right is to have control or liberty over that to which one is entitled. Guido Calabresi and others working within an economic framework have argued that rights can be secured either by property rules or by liability rules. Property rules secure rights by entitling people who hold rights both to exclude others from making use of protected property and to transfer protected property on terms agreeable to them. Liability rules secure rights by giving non-entitled parties the freedom to take what right owners possess provided they compensate ex post. There is an apparent conflict, then, between liability rules and the classical liberal conception of rights. The chapter offers a way of thinking about legal rights in which both prima facie plausible claims must be abandoned.

Chapter Seven proposes a more modest modification to the anti-commandeering rule, requiring judicial deference to consensual state-federal legislative bargaining over federalism entitlements. Constitutional federalism directives can be viewed as default rules that confer jurisdictional entitlements to state and federal actors, but the normative entitlement of a legal rule is always matched with an infrastructural component that designates how and whether the normative entitlement may be shifted. This chapter explores the extent to which federalism doctrine allows consensually negotiated exchange of these entitlements—such as waiver of Eleventh Amendment state sovereign immunity, or state waiver of enumerated powers limitations when accepting spending power deals conditioned on federal policies. It advocates more uniform use of the Calabresi and Melamed “property rule” remedy rule that enables bargaining with entitlements, rather than the inalienability or liability rule alternatives. When the Rehnquist Court created the anti-commandeering entitlement that states hold against Congress (in partially invalidating the Low-Level Radioactive Waste Policy Act in New York v. United States), it did not allow for consensual intergovernmental bargaining to shift the entitlement. Using New York as a case study, the chapter proposes that Tenth Amendment entitlements be harmonized with the rest of federalism doctrine to enable consensual legislative bargaining. Leaving the normative part of the anti-commandeering rule in place while enabling states to bargain with their entitlement would yield new possibilities for balanced interjurisdictional governance while retaining the most protective aspects of the rule. The bilateral nature of the exchange ensures that the negotiated balance reflects the interests of both state and federal actors. It also taps unique legislative resources for values-balancing in the fact-intensive policymaking contexts where legislatures outperform courts. By incorporating state and federal judgment, intergovernmental bargaining is preferable to the unilateral federal assertions of power or deference to state prerogative that characterize traditional political safeguards.

This chapter examines ownership as principle. It argues that invocations of ownership as principle differ from other aspects of juristic doctrine in that ‘ownership’, in common law systems, is not a term of art. Ownership interests derive their imprecise and fluctuating import from the wider culture of the community in which the property institution is situated. Ownership and trespassory rules, ownership and property limitation rules, and ownership and expropriation rules are discussed.

This chapter suggests that the legal status of human tissues is still evolving. The question of whether a human tissue deserves protection or what legal category underpins that protection often depends on one or more paradigms generally applied towards the analysis of human tissues. Accordingly, the chapter sets out to identify and explore the tripodic frameworks which usually animate the analysis of human tissues. It suggests a trend towards a more inclusive use of all analytical models, in contrast to the monolithic approach inspired by the no-property rule.

Liability rules have decided advantages over property rules in harnessing private information when bargaining is not possible. This “non-consensual” advantage of traditional liability rules can be found in Guido Calabresi and Douglas Melamed's Cathedral article itself and has been neatly formalized by Louis Kaplow and Steven Shavell. The harnessing result can be accomplished by a wide variety of allocatively equivalent (but distributionally different) single-chooser rules. This chapter shows that liability rules may induce both more contracting and more efficiency than property rules, and that liability rules possess an “information-forcing” effect that property rules do not. Ronald H. Coase showed that when transacting is costless, the choice between property and liability rules does not affect efficiency. Calabresi and Melamed followed by showing that when transaction costs make consensual transfer prohibitively expensive, liability rules (because of the harnessing effect) are likely to dominate property rules.

This chapter examines the assembly and division of property entitlements. It starts with eminent domain, a forcible land assembly mechanism that has been employed to avoid holdout or “anticommons” problems, but has also produced outrage, as seen following the 2005 Supreme Court case of Kelo v. City of New London. Similar controversies arise in intellectual property contexts, as where patent licenses must be assembled. The law must determine whether the initial rights-holder will be protected against an involuntary transfer (property rule protection), or whether she can be forced to relinquish her claim upon compensation (a liability rule solution). The chapter also examines settings where co-owned land or other assets must be split up among claimants, as through judicial partition. These two types of problems—assembly and division—are not distinct, nor is one inherently harder to solve than the other. Instead, they share a common structure: each requires both assembly (of consent by the affected stakeholders, or an overriding of their lack of consent) and division (of the surplus that is thereby created). After examining factors that influence the difficulty of reconfiguration efforts, the chapter weighs various approaches, including explicit options, to address configuration challenges.

Most of this book has been concerned with discovering new types of liability rules and identifying which ones are likely to be most efficient in particular contexts. This chapter explores a more traditional question: when are liability rules more efficient than property rules? Liability rules delegate allocational authority—allocational options—to privately informed disputants. The delegation effect gives us strong reasons to believe that liability rules do a better job than property rules in harnessing the private information of disputants. Liability rules are not only options, but those delegated options can also be seen as a specialized form of auction. This harnessing effect can persist in the shadow of bargaining, especially because liability rules have information-forcing qualities unknown to property rules. Guido Calabresi and Douglas Melamed opened our eyes to the fact that both property- and liability-rule protections have had enduring and widespread (but not all-encompassing) usage in virtually every field of law. The chapter shows that transaction costs, investment incentives, correlated values, multiple takings, speculative values, and behavioral theories do not withstand closer analysis.

Scholars have often conceived the core difference between property rules and liability rules as the difference between protecting by deterrence and protecting by compensation. Property rules protect legal entitlements by deterring non-consensual takings, while liability rules compensate entitlement holders if a non-consensual taking occurs. This chapter reorients the debate by showing how the various forms of liability rules are allocative devices that harness the litigants' private information when a court is imperfectly informed as to their valuations. This “harnessing” result clarifies and formalizes the pioneering work of Guido Calabresi and Douglas Melamed. It overthrows one of the most basic tenets of law-and-economics scholarship—the idea (distilled from Calabresi and Melamed) that property rules are presumptively more efficient than liability rules when transaction costs are low. This chapter first distinguishes the empirical and theoretical aspects of the tangibility thesis. It then argues that George Akerlof's celebrated “lemons” model shows how correlated values can inefficiently strand legal entitlements protected by property rules with low-value owners and how the lemons (correlated-value) problem might be mitigated by liability rules.

Guido Calabresi and Douglas Melamed began a scholarly revolution by showing that legal entitlements have two readily distinguishable types of protection: property rules and liability rules. These two archetypal forms protect an entitlement holder's interest in markedly different ways—via deterrence and compensation. Property rules protect entitlements by trying to deter others from taking. Liability rules protect entitlements not by deterring, but by trying to compensate the victims of nonconsensual takings. Understanding liability rules as a distinct category of entitlement allowed Calabresi and Melamed to see that there was a missing category in the ways courts resolved nuisance disputes. This chapter discusses put options and call options. Call options when exercised give rise to “forced sales,” whereas put options give rise to “forced purchases.” The chapter first looks at the normative case for puts and then describes their descriptive prevalence. It also analyzes the permanent-nuisance doctrine, the numerosity problem, and the costs of determining property rights.

This chapter discusses one of the most fundamental issues that every legal system must address: the form of protection that should be given to legal entitlements, including property rights. The chapter summarizes the debate regarding the choice between property rules and liability rules, and its underlying assumptions. It then shows how behavioral studies offer important considerations that should influence the legal discussion. Generally speaking, psychological studies invite more optimism about people's ability to reach mutual agreement under property rules and suggest that miscalculations of damages under liability rules may be a graver danger than presently realized. These studies caution us against increasing the use of liability rules and lend additional support to the use of property rules when transaction costs are low.

As a matter of theory, liability rules might be more efficient than property rules even when bargaining is possible. But there are reasons to be skeptical of the result. This chapter describes the results of experiments conducted in seven different classes at five law schools. The students were divided into pairs of bargainers and assigned to play the roles of a drive-in owner and a racetrack owner in a dispute inspired by a real case. The dispute concerned the external effect of a racetrack on a neighboring drive-in theater. In the bargaining game, the only issue for negotiation was whether the racetrack would operate at night. The track could increase its profits by operating at night, but doing so would decrease the profits of the adjacent drive-in (because the lights diminish the clarity of the picture). The disputants had private information about their valuations. The results show that liability rules evince a strong information-forcing effect, with high-value plaintiffs trying to bribe and low-value plaintiffs trying to sell. More important, liability rules produce slightly higher allocative efficiency.

The chapter critically analyzes the contribution of behavioral findings to property law and theory. It starts with studies of basic notions, such as psychological ownership and the endowment effect; and moves on to discuss two major fields: constitutional property law and intellectual property. With regard to the former, the analysis shows how behavioral insights illuminate the distinction between governmental taking and giving of property, between physical and nonphysical takings, and between the taking of homes and other properties. With regard to intellectual property, the chapter deals, among other things, with inventors’ behavior and judicial decision-making in matters of intellectual property. Finally, the chapter discusses the broader issue of protecting entitlements through property rules versus liability rules.

Chapter 7 looks at Cultural Heritage and Intellectual Property Law. The appropriateness of intellectual property rules for protecting traditional cultural expressions and knowledge are addressed, with particular attention given to copyright law, patent law, and industrial property rights. The limitations of intellectual property rules for protecting for cultural heritage are identified. The application of intellectual property rules to traditional cultural expressions and knowledge is then examined with regard to both protection afforded by existing intellectual property treaties which are analysed here, and in relation to work that has been undertaken in the World Intellectual Property Organization (WIPO) since 2000 to develop sui generis rules that can afford better protection for traditional cultural expressions and knowledge. To this end, the WIPO Revised Provisions for Protecting Traditional Cultural Expressions (2014) and the WIPO Draft Articles on the Protection of Traditional Knowledge (2014), both in draft form at time of writing, are examined.

This chapter suggests shifting some of antitrust's responsibility to intellectual property (IP) law in areas where there is overlap. In the last quarter century, much of the judicial retrenchment of antitrust liability norms in the United States has been motivated by concerns over antitrust's institutional and remedial structure. Treble damages, lay juries, attorney-fee shifting, and other features create a concern that overly zealous antitrust enforcement will chill beneficial competition. There is also a perception that courts are ill equipped to police dominant firm behavior, for example, by limiting the prices a monopolist charges or the quality of its service, or by imposing the terms and conditions upon which it must deal with rivals. It is argued that IP law can address many of the issues that antitrust cannot (or will not) address in IP-intensive industries. For example, by shifting from property rules to liability rules for IP rights, courts can police market power without imposing an affirmative obligation to deal or (usually) directly engaging in rate regulation of dominant firms.

If individuals possess robust rights over their own persons and legitimately acquired possessions does any action on the part of another person that has any physical effect on the right-holder or her property to which the right-holder has not consented violate those rights? If so, it seems that almost every ordinary exercise of one’s rights—e.g., starting one’s car up in one’s own driveway, emitting some smoke while grilling in one’s own backyard—violate the rights of one’s neighbors. To avoid this conclusion must the libertarian theorist shift to a less robust understanding of rights? This chapter argues against the need for such a general attenuation of rights. Any sensible delineation of rights must leave moral elbow room for the exercise of those rights. So, a sensible delineation of rights will not construe the minor physical intrusions under consideration as moral boundary-crossings.

The introduction sets out the the rule that there is ‘no property in the human body’ and the growth of exceptions to it. The aim of the book, to determine the appropriate legal status of bodily material, is then explained, and its three inquiries introduced. The first inquiry concerns the distinction between ownership as a functional relationship between a person and thing, and the legal relationships between a rights-holder and duty-bearer that are constructed to protect ownership relationships, the second inquiry concerns an ambiguity in the body, and the third inquiry concerns a distinction between different sets, or spheres, of value. It then explains how individual chapters will address these questions, before setting out the parameters of the inquiry.

Liability rules applied to tangible legal entitlements might give rise to problems of reciprocal takings in which a plaintiff and defendant engage in a protracted (and potentially endless) series of destructive takings of the same entitlement from one another. Moreover, liability rules might induce multiple takers to threaten taking, thus undermining the incentives of an initial entitlement holder to bargain to retain her entitlement with any individual potential taker. This chapter argues that the potential for multiple takings poses a real problem, but that enlightened courts can structure liability rules to economize on the litigants' private information. It considers the “numerous-takers” problem in which the use of an entitlement by one person (or multiple people) affects the welfare of numerous others. The plume of pollution provides a classic example where one factory's smoke can damage numerous residents. Numerosity makes it harder for courts to use a liability rule to harness the private information of the residents. However, numerosity also cuts against the likely efficiency of property rules, as it will be harder to bargain for efficient allocations.