Friday 26 April 2013

Express and Implied Terms



Express and Implied Terms

Distinction between Express & Implied Terms


  • Terms may be express or implied, they must be incorporated to be a term.
  • If the terms are not fulfilled there is a breach of a contract
  • In L’Estrange v Graucob, the party was still bound by terms event though she did not read the contract.

Is it a binding term, has it been incorporated?

  1. Is it a mere puff or an invitation to treat such as Fisher v Bell.
  2. Why was the promise in Carlill held to be of legal significance? 
  3. Or was it an expression of an opinion? Bisset v Wilkinson [sheep case] or Esso Petroleum v Mardon

  • Parole Evidence rule 

  • Where there is agreement in writing, presence of other alleged terms of the agreed cannot be abducted.
  • The only ways to avoid this role are:
    • Part of contract: J Evans v Andrea Merzario, transportation case involving an oral promise suggesting how the machines would be carried
    • Collateral Contracts (rarely used):  This is where the first contract is say oral and second is written, the first one is called a collateral contract
    • Entire Agreement Clauses: To avoid having other terms looked at; Inntrepreneur Pub v East Crown

  • Importance of the term 
  • Couchman v Hill [calf case]
  • Bannerman v White [beer case]


  • Knowledge of the statement maker

  • Dick Bentley Productions v Harold Smith [car dealer + miles]
  • Esso Petroleum v Mardon - buying a petrol station site where petrol station would be build, was made on the assumption that cars could enter from the main road.

  • Was reasonable notice of the term given?

  • Parker v South Eastern Ry [Clockroom case + objective test]
  • Chapelton v Barry UDC [beach chair case]

  • Is the term onerous?

  • Interphoto Picture Library v Stiletto Visual Programmes [holding charge]
  • Denning in Speerling v Bradshaw, the more onerous the term the more notice you have to give.
  • AEG v Logic Resources

  • Timing?

  • Term must not come too late 
  • Olley v Marlborough Court [hotel]
  • Thorton v Shoe Lane Parking

  • Incorporation by course of dealings

  • McCutcheon v David MacBrayne
  • Petrotrade v Taxaco

  • Incorporation by common understanding

  • British Crane  Hire v Ipswich Plant Hire [contract sent after crane]




Finder's Title




Costello v Chief Constable of Derbyshire Constabularly 2001
Facts: The defendant seized a car from the plaintiff under statute as they believe the car to be stolen because the true owner was unknown. However, the defendant never brought criminal proceedings and neither did they return the car.  
Judgement:
The Court of Appeal ruled that police under statute had a possessionary title to the car for a specified statutory period which had ended, and the plaintiff whether he was the owner or not had a superior possessor claim to the car than the defendant as he demonstrated intention to possession and control of the car.
Importance:
In the English legal systems even the paper owners and those who acquire land through possession hold relative titles. If no one else, our titles will always be relative to the crown. In Australia, the British Crown had got ‘Radical Title. This title was relative and that is why at the time it could exist alongside ‘Native Title’. However, the Crown transformed this into a full-beneficial title by mixing their labour and thus extinguishing ‘Native Title’

Re Cohen 1953
Facts: A husband and wife lived in the property of the wife. After both died (at different occasions) banknotes in unusual places such as kitchen cabinets were found. 
Judgement:
The courts said that this money should go to the wife’s estate as she is the landowner, exercised control over the property even when the husband past away.
Importance:
This case established the legal principle that the landowner, the person who possessed the land is also the owners of chattels found on it, subject to the condition that possession and control can be demonstrated. 
Waverly BC v Fletcher 1996
Facts: The defendant was using a metal detector in a park owned by the claimant council and found a broach. He reported the broach and the Corner decided that the broach was not a treasure trove. The issue then was who did he broach belong to?
Judgement:
The Court of Appeal held that the claimant had a better right to the broach as it was found within the land, it was attached to the land rather than on the surface. It belonged to the party who owned the soil.
Importance:
This and the Parker case are cases which show that possession of a good is not sufficient, whether the owner has exercised contract and the positioning of chattels is important too. They are a good cases to compare adverse possession too. 

Parker v British Airways Board 1982
Facts: An air passenger found a gold bracelet in the international executive lounge of an airport. The lounge was leased to the defendants. When the gold bracelet was handed in, the plaintiff requested that it be returned to him had the true owner not been found.The defendants sold the bracelet for £850 as the true owner was not found and kept the returns. The plaintiff appealed.
Judgement:
The court of appeal said that the air passenger had a better right to the gold bracelet than the occupiers - British Airways Board, because it was found that the Board did not have a policy of searching for lost articles. The plaintiff was awarded £850 in damages and £50 in interest.
Importance:
The plaintiff in taking the bracelet into his care and control acquired possession which was against everyone but the true owner. By handing it in he acted honestly discharging his duties of a finder. The only way the defendants could demonstrate an interest is if they showed such care and control over the things in the lounge which looking at their policy they did not.

Thursday 25 April 2013

The Procedure for Adverse Possession




  1. The future rights of an adverse possessor arise out of the Limitation Act 1980 s.15 (1) “No action shall be brought by any person to recover any land after the expiration of twelve years from the date on which the right of action accrued to him or, if it first accrued to some person through whom he claims, to that person.”
  2. First adverse possession must be established via factual possession and animus possidenti.
  3. Then identify if the land is registered or unregistered
  4. Then identify is the adverse possession is a case pre-2003 or post 2003
  5. If it is pre-2003 and unregistered, after 12 years the land automatically becomes the adverse possessors under s17 of The Limitation Act.
  6. If it is pre-2003 and registered, after 12 years, the land is held on trust under s75 Land Registration Act, an extra three years is required for procedural reasons and after 15 years  the possessory title is changed.
  7. If the 12 years end after 2003, the unregistered rules do not change.
  8. If the 12 years end after 2003 and the land is registered, after 10 years the adverse possessor can apply to the land registry and the paper owner is given 65 working days to respond. If he does not respond, then the land becomes the squatters otherwise the owner is given two years to chuck the squatters out. 
  9. In September 2012, criminalization of adverse possession in residential areas can into form.
  10. Also note that under LRA 2006 Sch 6  para 8(2)  no application for adverse possession can be made where the registered propriatrator is mentally disabled, ill or abroad does not matter. 

Requirements of Adverse Possession






What is adverse possession
  1. Adverse possession can be explained as the process of possession that changes the ownership of land from the paper owner to the possessor.
  2. It arises out of the s.15 (1) Limitation Act 1980. 
  3. What is needed to establish adverse possession?
  • Factual Possession - where there is strong physical evidence that somebody is in possession of the land e.g. that may include fencing and locking the land. 
  • In Powell v McFarlane, Slade J provides an in-depth explanation on what factual possession means.
  • This explanation was accepted by the House of Lords in Pye v Graham, here the judges reinforced the need for appropriate degree of physical control to count as factual possession.
  • Contrast this to Tecblid v Chamberlin Ltd where children playing on the land and tethering of ponies was not sufficient. 
  • Important to ask is the land being possessed or merely used for profits as in Powell v McFarlane. 
  • Animus Possidendi - an intention to possess . How do we prove this?
    • The actions by which the owner has made the intention clear, Buckinghamshire CC v Morgan 1990 and Powell v McFarlane 1977
    • Affirmation that outward conduct is demonstration of intent, Prudential Assurance Co Ltd v Waterloo Real Estate Inc [1999]
    • Land must be used for the squatter’s advantage and locking/blocking access to land is an indefinite evidence for the intention to possess and factual possess, Buckinghamshire CC  v Morgan 1990, Pye v Graham 2003 and Powell v McFarlane 1977
    • Key is intention to possess not acquire, in Lodge v Wakefield 1995, the mistaken belief that you own the land combined with factual possession was sufficient to prove that adverse possession had taken place. 
    • Furthermore, in Pye v Graham it is made clear that if the possessor offers to pay rent or agrees (so long as he actually hasn’t given it), is  fine for adverse possession because it is an intention to possess not acquire.
    • Often, intention is intertwined with factual possession but in Pye v Graham, the distinction is made clear between the two. An example is provided; X is in occupation of a locked house which he has agreed to look after for a friend, whilst friend is away. He may have factual possession but the intention which is very much linked to the third requirement is missing and thus cannot be adverse possession. 
  • (Possession must be adverse as with consent that would not be adverse possession)
  1. If however, the paper owner forced you off the land, or decides to enter into a licensing agreement then adverse possession is no longer possible. This is because in the first case the squatter fails to assert a better claim and in the second the possession will no longer be adverse.
  2. It was actually the case of Leigh v Jack which was held in Beaulane Properties Ltd v Palmer  that the old doctrine stated the use must be different to the paper owner’s. This was of course rejected in Pye v Graham where the notion of an implied license was too.
  3. The justification for adverse possession lied in the Lockean principle that if you mix your labour with resources then the end product should become yours.
  4. It is important to note that, even derivative title at some point came from an original source which was ‘possession’ so adverse possessors aren’t some distasteful sect of society we should shun, so some argue. Lord Brown-Wilkinson, makes this point clear in Pye v Graham 2002. He says that much confusion would be avoided if we didn’t refer to adverse possessors as those who behave badly - it is just possession and the process of possession creating title. It is similar to a licensee where temporary possession is given not future rights. 
  5. From a Human Rights prospectus it was found that adverse possession does not infringe human rights in Pye v Graham, as adverse possession was justified control of use of land than a deprivation  of possession and was within margin of appreciation. Another point is that under Article 8 of ECHR sometimes arguments can be made that English law breaches the right to respect for home and family by not allowing adverse possession.
  6. In registered land, any rights in the course of being acquired by adverse possession count as overriding interests which means that any third party purchaser say, is also bound by the rights of the possessor.

Thursday 18 April 2013

Undue Influence

Remedies of Duress and Undue Influence


Remedies
  • The contract is voidable
  • The court may order rescission ( repeal of an agreement).
  • However, rescission may be lost through 
    • Affirmation of the contract
    • Lapse of time
    • Where rescission would prejudice third parties
    • Damages may be awarded in lieu of recession.

Exogenous Theory of Money





What is it?

  • Idea that money is a neutral thing which is not determined by the real economy and thus can be controlled and manipulated by central banks. 

  • This idea was greatly ties to the Quantity Theory of Money which is believed and used in the 70/80s when there was an inflation crisis. 

  • It is based on the notion that banks will only lend what is in reserves that is the only factor that determines lending . Thus to grow deposits can be increased through open market operations which essentially gives the public money to deposit. 

- It is a market led understanding as they state that banks are the best allocator of capital and the government has minimal role in stabilization, mainly there for open market operations. 

How is this different to Neo-Keynesianism and the endogenous theory of money?

In endogenous theory of money, money supply is determined by money demand not some monetary aggregate set by the bank and this is essentially because neoclassicist do not believe money is demanded as an asset too.

History?

Evidence/Justifications 

  1. It is justified on the basis of a theory of bank behavior. The theory is generally known as the deposit multiplier or the bank credit multiplier. The theory does not necessarily yield the conclusion the money supply is exogenous, but it will do so if we assume that (i) bank reserves are exogenously determined and (ii) there is a rigid link between bank reserves and money supply. Obviously, these are far-retching assumptions but that is what the theory states. In this theory, idea is that government puts money into the hands of the public through open market operations and they reserve the excess money in deposits which the bank can lend out.
  2. Controlling money supply did tame inflation in 70s/80s so although the unemployment that was resulted provides evidence for endogenous growth money, it cannot be denied that some level of control can be made. 


Economic Duress

In this video I explain economic duress by looking at different cases.


Introduction to Duress

In this video I introduce the notion of duress.

 

Wednesday 17 April 2013

Exogenous Theory of Money


Exogenous Theory of Money

What is it?

  • Idea that money is a neutral thing which is not determined by the real economy and thus can be controlled and manipulated by central banks. 

  • This idea was greatly ties to the Quantity Theory of Money which is believed and used in the 70/80s when there was an inflation crisis. 

  • It is based on the notion that banks will only lend what is in reserves that is the only factor that determines lending . Thus to grow deposits can be increased through open market operations which essentially gives the public money to deposit. 

- It is a market led understanding as they state that banks are the best allocator of capital and the government has minimal role in stabilization, mainly there for open market operations. 

How is this different to Neo-Keynesianism and the endogenous theory of money?

In endogenous theory of money, money supply is determined by money demand not some monetary aggregate set by the bank and this is essentially because neoclassicist do not believe money is demanded as an asset too.

History?

Evidence/Justifications 

  1. It is justified on the basis of a theory of bank behavior. The theory is generally known as the deposit multiplier or the bank credit multiplier. The theory does not necessarily yield the conclusion the money supply is exogenous, but it will do so if we assume that (i) bank reserves are exogenously determined and (ii) there is a rigid link between bank reserves and money supply. Obviously, these are far-retching assumptions but that is what the theory states. In this theory, idea is that government puts money into the hands of the public through open market operations and they reserve the excess money in deposits which the bank can lend out.
  2. Controlling money supply did tame inflation in 70s/80s so although the unemployment that was resulted provides evidence for endogenous growth money, it cannot be denied that some level of control can be made. 

Tuesday 9 April 2013

Assumptions of the Harrod Domar Model





  1. There is a direct relationship between size of total capital stock, k, and total GDP Y, it follows that any net additions to the capital stock in the form of new investment will bring about corresponding increases in the form of national output. 
  2. Assume unemployed labor, so there is no constraint on the supply of labor. 
  3. Production is proportional to the stock of machinery. 
  4. The Harrod-Domar model assumes that savings and investment are all that is needed to generate growth. In reality, several complementary factors are required – for example, a healthy and educated workforce, growth in infrastructure (roads, water, electricity etc) to support growth in production, political stability, and the existence of financial institutions such as banks to channel savings into investment. Institutional factors have been assumed to be given in these models. But the reality is that economic development is not possible without institutional changes in such countries. Therefore, these models fail to apply in underdeveloped countries.
  5. An implicit assumption of the Harrod-Domar model is that there are no diminishing returns to capital.
  6. These models start with the full employment level of income but such a level is not found in underdeveloped countries. There exists disguised unemployment in such countries which cannot be removed by the methods suggested by Harrod-Domar. Thus the main assumption of the Harrod-Domar models being absent in underdeveloped countries, these models are not applicable to them.
  7. The Harrod-Domar models are based on the assumption that there is no government intervention in economic activities. This assumption in not applicable to underdeveloped countries because they cannot develop without government help in such countries the role of the state as a 'pioneer entrepreneur' in starting large industries and in regulating and directing private enterprise has been increasingly recognized.
  8. The Harrod-Domar models are based on the assumption of a closed economy. But underdeveloped countries are open rather than closed economies where foreign trade and aid play very crucial roles in their economic development. Both these factors are the bases of their economic progress.
  9. These models are based on the unrealistic assumption of a constant price level. But in underdeveloped countries price changes are inevitable with development
  10. Capital depreciation and gestation lags break the equation : S=I.
  11. Difficulty to define the determinants of the saving rate. No perfect policy to raise it. 

Implications of the Harrod-Domar Model




What are the implications for developing countries?

  • The main obstacle to development according to HD is the relatively low level of new capital formation in most poor countries. 
  • To grow we must increase savings and the productivity of investment e.g. via technological changes.
  • The “savings gap” can be facilitated through foreign aid or private foreign investment. 
  • Similar to the rationale behind the Marshall Plan, the MP was the American program to aid Europe in which the US gave economic support to help rebuild European economies of WW2 to prevent the spread of soviet communism . The plan was in operation for four years beginning in April 1948. The goals of the USA were to rebuild a war devastated region, remove trade barriers, modernize industry and make Europe prosperous again.
  • The model implies, therefore, that the promotion of investment by government planning and command is needed to accelerate economic growth in low-income economies. Infact, the Harrod-Domar model provided a framework for economic planning in developing economies, such as India's Five Year Plan.

The Harrod Domar Model in 7mins




 What is HD model?

 The Harrod Domar Growth model is a model not a growth strategy. A model helps to explain how growth has occurred and how it may occur again in the future. Growth strategies are the things a government should be doing to try and replicate the outcome suggested by the model. The model, developed in the late 1930s states that the rate of growth of GDP is determined by the savings ratio (the marginal propensity to save) in the economy and the capital output ratio (the amount that has to be spent on capital to produce £1 worth of national output (productivity of investment)

There are 10 assumptions of the HD, which also provide the main criticisms of the HD model. 

1. There exists a relationship between capital and growth, the evidence on this is mixed and questionable. 

2. There is unlimited supply of unemployed labour, this assumption fails to take into consideration the informal sector. 

3. That production is proportional to the amount of machinery 

4. The model discuss the need for savings and investments for growth, this implicitly assumed the existence of institutions. 

5. Capital has no diminishing returns, what about depreciation identified in the Solow model. 

6. No government intervention. 

7. There is a closed economy. 

8. Price levels are constant

9. Due to depreciation and gestation lags, this is not necessarily true that savings is equal to investment 

10. Savings is no way define, making it problematic to apply. 

 FORMULA

 Rate of Growth of GDP = Savings ratio/Capital output ratio

 S = sY - savings is a function of national income

 I = ∆k - net investment is defined as changes in capital stock

 but as we assume direct relationship between k and y, we get the ratio of k/y = c 

 c is the capital output ratio thus ∆k/∆y or ∆k= c ∆y I= S, S=sy , ∆k= c ∆y so we get sy= c ∆y

 divide by c and y ; s/c = ∆y/ y 

 changes in growth = savings ratio/capital ratio (affect of investment on national productivity) 

 It concluded that: 

Economic growth depends on the amount of labour and capital. 

As LDCs often have an abundant supply of labour it is a lack of physical capital that holds back economic growth and development.

More physical capital generates economic growth. 

Net investment leads to more capital accumulation, which generates higher output and income. 

Higher income allows higher levels of saving

Policy Implications 

In order to increase savings: 

1. Aid can be used

2. FDI 

3. This is similar to the Marshall Plan, where the US gave specifically for the redevelopment of Europe after the war and the aid was used via investment.

In order to increase the capital output ratio: 

1. Government planning should be used to facilitate savings 

2. HD would support the idea of economic investment planning as it ensures that capital can be used for investment , an example of this would be India's 5 year plan

Criticisms 
1.  The Marshall Plan worked for Europe because Europe possessed the necessary structural, institutional and attitudal conditions e.g. a well integrated money market in order to convert capital into output. 

2. In some countries it is inappropriate to suggest increasing savings when people are struggling to get enough food. 

3. Later on, Harrod repudiated the model as he did not see it fit with the idea of Long Run growth. 

4. Ignores labour productivity, technological innovation and levels of consumption. 

5. Thailand is a case study which experienced rapid growth despite the lack of savings. 

Monday 8 April 2013

UTCCR - Unfair Terms in Consumer Contracts Regulations 1999


- This regulation came into force on 1st October 1999,  there was an implemented EU directive on this, it seeks to regulate unfair contracts alongside the Unfair Contract Terms Act 1977. Please note, as you will see there is overlap between the two as well.

Outcome of the legislation

- Any term that is deemed to be unfair will be ineffective at binding the consumer and this can be found in regulation 8.


Effect of unfair term

8.—(1) An unfair term in a contract concluded with a consumer by a seller or supplier shall not be binding on the consumer.
(2) The contract shall continue to bind the parties if it is capable of continuing in existence without the unfair term.

What is a consumer?

- Someone who is acting for their own private interests as opposed to commercial reasons, see R3

“consumer” means any natural person who, in contracts covered by these Regulations, is acting for purposes which are outside his trade, business or profession;

 Case Example: Standard Bank London Ltd v Apostolakis

Facts: A wealthy couple from Greece (civil engineer & lawyer), made financial investments in order to make a profit. The question for the courts was whether they could be deemed to be consumers. 

Judgement: The courts found regardless of the profit motive they were consumers as they were acting for their own private interests and not within their own respective professions. 

What is a seller or supplier?

- Again  this can be found in R3, anybody who is selling or supplying for  the purposes of his own profession or trade
- This includes the sale or letting of land.  

“seller or supplier” means any natural or legal person who, in contracts covered by these Regulations, is acting for purposes relating to his trade, business or profession, whether publicly owned or privately owned; 


What is an unfair term?

- This can be found in regulation 5; 

—(1) A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer.
(2) A term shall always be regarded as not having been individually negotiated where it has been drafted in advance and the consumer has therefore not been able to influence the substance of the term.
(3) Notwithstanding that a specific term or certain aspects of it in a contract has been individually negotiated, these Regulations shall apply to the rest of a contract if an overall assessment of it indicates that it is a pre-formulated standard contract.
(4) It shall be for any seller or supplier who claims that a term was individually negotiated to show that it was.
(5) Schedule 2 to these Regulations contains an indicative and non-exhaustive list of the terms which may be regarded as unfair.

(1) It will be deemed unfair if the term is not individually negotiated, and does not have good faith causing an imbalance of rights to the detriment of the consumer. 

(2) If  the contract was drafted in advance,  then it will be deemed to be individually negotiated 

(3) If most of the contract is standard form then just because one term is individually negotiated doesn't mean that these regulations won't apply to it. 

(4) Burden of proof lies with the seller to show the contract is not standard form. 

(5) Schedule two gives a 'grey list' of examples of terms that would be deemed to be unfair under these regulations. 

Ambiguity 

If there is a doubt of what a term means it should be interpreted in favour of the consumer, following the contra preferendem common law rule, see R7 (2).

(2) If there is doubt about the meaning of a written term, the interpretation which is most favourable to the consumer shall prevail but this rule shall not apply in proceedings brought under regulation 12. 
 
How can these regulations be enforced? 

They can be brought forward in court. 

Or through the OFT ( Office for Fair Trading ), this is given in R10 , it is the duty of the OFT to look into complaints and they have the power to obtain an injunction, none of this is given in UCTA. 

Complaints – consideration by Director

10.—(1) It shall be the duty of the Director to consider any complaint made to him that any contract term drawn up for general use is unfair, unless–
(a)the complaint appears to the Director to be frivolous or vexatious; or
(b)a qualifying body has notified the Director that it agrees to consider the complaint.
(2) The Director shall give reasons for his decision to apply or not to apply, as the case may be, for an injunction under regulation 12 in relation to any complaint which these Regulations require him to consider.
(3) In deciding whether or not to apply for an injunction in respect of a term which the Director considers to be unfair, he may, if he considers it appropriate to do so, have regard to any undertakings given to him by or on behalf of any person as to the continued use of such a term in contracts concluded with consumers.

Core Terms 

- Some terms are not regulated and those are called "core terms" , see R6(2)
- Courts will not intervene in the market practices and not for the substance of the contract. This is because it is intended to preserve market forces 
- The only way unfair pricing would be subject to modification is if it not written in 'plain intelligent language'
- Intelligibility  is to be measured by reference to ordinary members of the public; e.g. legal words and phrases should be avoided, long sentences and cross referencing within a document should be avoided and some long contracts may require a summary 

(2) In so far as it is in plain intelligible language, the assessment of fairness of a term shall not relate–
(a)to the definition of the main subject matter of the contract, or
(b)to the adequacy of the price or remuneration, as against the goods or services supplied in exchange.

Sunday 7 April 2013

In defence of private property


“It is not the commoners that are tragic, but the commoners who continue to uphold such as inefficient means of allocating precious resources” Discuss

The debate on how resources should be allocated is not just one that lingers among economists, but lawyers too. This is because lawyers are constantly faced with problems of how property rights should be allocated and so questioning the validity of the private property regime our capitalist economy is founded on is absolutely crucial. Land in particular is especially important as it indestructible, immovable and necessity for human survival. In this essay, I will be looking at the debate between communal and private property and concluding that ultimately both ownership systems are infested with problems but private property provides an arguably smaller problem and thus it is tragic that commoners in communal systems refuse to move from an inefficient means of allocating precious resources.

Communal property ownership can be defined as an ownership shared by more than one legal entity, they do not have the right to exclude as would exist in a private regime, they have the right not to be excluded. Infamously, the economist Hardin proposed the “Tragedy of the Commons” within which he aimed to demonstrate why communal ownership is inefficient and should be transformed into a private regime. He argued that open unowned properties will be overused and exploited as no person bares the direct cost of their use/actions on the land but they will directly benefit. He gives two examples: one of a pasture land that is open to all and ends up overgrazed and useless as farmers keep bringing more cattle on the land. And the second is pollution, he says people will not be careful about how much pollution and external cost they are adding to the land as they bare no cost of polluting. He suggests that there are two ways we can solve this and that is by moving to either a private property regime or a state owned property regime. However, again with state property, the problem is that the decision makers do not directly benefit or become disadvantaged on the basis of their decisions and so their decision will not be the most efficient ones. That leaves a straightforward argument for why we should move to such a regime. 

However, the theory itself is infected with substantial problems. For example, the example given only works on the basis that the cattle is privately owned, and it is private property that drives profit maximisation and makes each farmer to ignore the communal cost and focus on individual benefits. Furthermore, had the cattle also be communally owned then perhaps the land would not become overgrazed as farmers would not be able to keep adding to the herd.   I would question this criticism, however. This is because, profit maximisation incentive also exists in communal ownership. If all the cattle was part of the land then the farmers would still seek ways in which they can maximise their benefit from the land, the only difference is that costs would be higher because there are larger negotiation costs when you have more than one person. If the farmers were able to and could see the profit coming in from herding sheep on the land, they would find ways to bring in more cows. Ultimately, it is human nature to strive for something better. It also important to note, that as lawyers we can forget that economics is built on mathematical models which includes a number of assumptions, one common one being that individuals are rational i.e. they strive to maximise utility whether it is through consumption or profit maximisation. On these grounds I would uphold the statement that it is tragic that the commoners still wish to hold onto the communal method of ownership. 

Nevertheless, critics are quick to point out that overgrazing and long-term detrimental effects are not limited to communal or state ownerships, they do happen in private property systems too. This is also true, most of the Western world exists on the foundations of private property and yet most of the pollution also comes from the Western world. However, it seems that the more subtle point about allocation of resources is being missed. Such impacts happen on a much smaller scale were private property is in practise and this is because costs are much lower e.g. third party negotiation and transaction. This means that any addition cost such as pollution or exploitation makes a much bigger impact than situations where already costs are quite high. Furthermore, as a private owner you are incentives to find ways to improve the quality of your land and cost minimise as you are aware that if you do not care for your land, no one else is, you are the sole responsible owner. In communal systems not only do the costs impact you less, giving less incentives to improve the land, you will always be relying on the next person to create a cost-minimising way and say you do there will be large negotiation costs before it will be accepted and implemented as you can’t exclude others of their rights to use the land which may not be compatible with you own mechanism. 

Furthermore, Barzel provides a great real case study of how successful and efficient the private property system can be at allocating resources. In 1958, the North Sea was divided and separately owned by private companies and it resulted in a large amount of development and availability of oil that we did not have previously,  It is for this reason that today when the world is seeing environmental troubles, we are turning to Private property solution such as tradeable carbon rights to find an answer. 

An interesting type of property which also exists within the realms of communal property is anti-commons. Thus far we have discussed property, whereby everyone has the right not to be excluded and so they can use the land. However, in anti-commons, here everybody has a right to exclude but no personal right themselves to use the land. It was first identified by Michealman but later reformulated by Heller who uses the example of a communal garden to explain this. He says that imagine there is a communal garden given to handful of households to share, similar to the pasture land shared by farmers in tradegy of the commons. They might exclude others from the garden by inserting locks on the entrance but the problem is then they themselves cannot use the land as unlocking would infringe someone else’s rights. This means that land doesn’t get used and thus is inefficient. At first this seems theoretical, but Heller uses it to explain the situation in post-soviet Moscow. After the state ownership of shops ceased, shops in Moscow still remained virtually empty of consumer goods. Kiosks tended to operate illegally outside on the street. This was because property rights in shops were distributed among a number of different bodies in an attempt to placate or compensate socialist-era stakeholders, shops thus had become anticommons property: no single individual was given full ownership rights. 

Anticommons is another crucial demonstration of how difficult, impractical and inefficient communal systems can be and thus it is tragic that commoners continue to uphold such an archaic and inefficient system. It is only in the last few centuries we have seen radical growth and technology, private ownership of not just land but intellectual property, water and goods and services has a lot to do with this. In conclusion, I would argue that private property is way forward.

Private, Communal & State Ownership


Private, Communal & State Ownership

Clarke & Kohler pp. 35-42, 59-62, 75-78
Demsetz, “Towards a theory of property rights” C&K pp. 65-68
35-42
  • Communal property: property rights in things can be held by communities. 
  • Public or state property: the state may hold all the property rights in a thing, and allocate the use of things to particular citizens by administrative rather than property rules. 
  • Do note that there is no consensus over what constitutes state and public property - there is not even the distinction between private and state. 
  • Ownerless things or ‘no property’ are objects in which no one has property rights so you might have a priviledge of benefiting from it but not a right. Examples include: free newspapers, radio signals, downloadable material from the internet. In Hunter v Canary Wharf, the House of Lord decided that terrestrial television signals were an example of this. 
  • Communal property: This is where not only do persons have a priviledge to use the resource but a right not be excluded from using it. They can be open e.g. everyone in the world is a member or closed/limited where membership of the ‘community’ is limited. 
  • Open access communal property is not necessarily state owned e.g. a public right of way which is open access communal property may be owned by a private induvidual. Another way in which open access communal property differs from state is that if the user has the right not be excluded from the state then we can say this is open access communal property as state property can use facilities and merely license users by permission to use it.
  • The difference between allocation and provision of resources is this - allocation of resources sees what type of ownership is present should the facility be limited to a certain class or is free for all to use or is the public entitled to use it. Provision on the other hand whether anyone should be responsible for ensuring that the resources are available in the first place. 
  • Limited access communal property can be distinguished from private co-ownership. Private co-owners are usually identified by their transmissable property interest. Members of a community, on the other hand, are identified in reference to a particular defining characteristic and no induvidual member has a transmissable interest. However, this is not a clear-cut analysis that is always correct as with all other aspects with law there are exceptions and distinct situations where this does not hold.
  • If a communal property is that which no one has a right to be excluded and priviledge to use but cannot exclude others then the opposite is Anticommons property. 
  • Anticommons property was first suggested by Frank Michealman a property which everyone has a right to exclude but no right or priviledge to use themselves.  This concept became useful when it was reformulated by Micheal Heller, who described it as a situation where ownership rights are distributed to multiple owners in such a way that each owner can exclude others and hence cannot actually use the resource for himself. He gives the example of a communal garden which all households are given to share, they all put locks to exclude others but one person themself cannot use it as that would require asking the other households to remove their locks and thus infringing their rights. 
  • Thats why in England only up to 4 people to co-own land as to avoid some of the problem of the anti common. Thats why even with communal problem its 4 people. Anti common is an externality of communal ownership. 
  • The concept of the anticommons property is significant because it allowed Heller to demonstrate why post-soviet Moscow was inefficient. After the state ownership of shops ceased, shops in Moscow still remained virtually empty of consumer goods. Kiosks tended to operate illegally outside on the street. This was because property rights in shops were distributed amoung a number of different bodies in an attempt to placate or compensate socialist-era stakehlders, shops thus had become anticommons property: no single induvidual was given full ownership rights. 
  • No property - the point is to not be regulated. You can’t say you have a right to it. Its just there - you can use it - you can’t own it as you can’t loose it.


59-62: Justifications for property rights
  • Lawrence Becker draws a distinction between two types of justifications: general and specific. General concerns why to have property rights in the first place and specific what sorts things people should own under what condition  (macro v micro).
  • Economist regard the institute of property as a means of solving these problems caused by scarcity of resources. 
  • Garrett Hardin put forward the justification of private property in “The Tradegy of Commons”. Where he essentially argued that open unowned properties will be overused and exploited as no person bares the direct cost of their actions on the land so if you have some form of ownership then there is someone who is responsible and bares the cost and thus ensures that this does not happen. He gives 2 examples: one of a pasture that is open to all and ends up overgrazed and useless and the second is pollution, he says people will not be careful about how much pollution and external cost they are adding to the land as they bare no cost of it.
  • There are several criticisms of Hardin’s justification. The first is that he fails to identify why private ownership is better than limited access communal ownership. This is probably because he does not make a distinction between no-property, open-access and limited access communal property. 
  • Demsetz looks at this proposal more closely saying that private property is not always the answer and that limited access communal property can be too. He says however the society this produces will be distinct from if there was private property and that regulation will tend to be through social convention as opposed to legal regulation. Furthermore, the nature of the resource and the prevailing environmental conditions will determine which type of ownership is more suited. 
  • Demsetz however failed to take sufficient account of state ownership which Hardin himself acknowledged that might provide some solution.
75-78: Yoram Barzel, Economic Analysis of Property Rights ‘The Conversion of the North Sea into Owned Property’
  • Barzel provides the example of when in 1958 the North Sea was divided and became private companies and as a result large development was seen in this area. 
  • Coase therom: the absense of transactions costs inhibiting the proper working of the market, the efficient allocation of resources will occur wherever the entitlement is first put. 
Demsetz, “Towards a theory of property rights” C&K pp. 65-68
  • The "main allocative function of property rights is the internalization of beneficial and harmful effects"
  • If you have a small community, this can work... but only if the cost of changing the grabber's behavior (i.e., transaction cost) is less than the harm the community is suffering. We must assume that this is a community of rational, economically-efficient people who will pay only if "cost < harm."
  • That is because the transaction costs of changing grabbers' behavior in large communities are higher than the externalities... thereby preempting internalization. 
  • In contrast, a "private property rights" system significantly reduces the externalities a society experiences. Let me illustrate using land as a type of property. Having exclusive ownership of a parcel of land incents one (by design) to manage it in such a way that society's interests are better addressed. For example, the owner now has access only to the portion of natural resources that are on his land. Therefore, by depleting his resources, the owner hurts only himself; the other parcel owners' resources are not affected. Therefore, the externalities of a given conduct are significantly reduced.
  • In a private-rights system, the transaction cost of reducing the externality is lower than under a communal-rights setup, because the private system recognizes a bundle of rights belonging to the neighbors. For example, if soot from the factory's pollution is deposited on a neighbor's land, the neighbor could sue the company for trespass. A private-rights system also implies a more efficient means of internalizing. For example, if the neighbors got together and pooled funds to persuade the company not to pollute, a private-rights system helps define which neighbors are required to be present in the negotiation 
  • At that point, society can introduce government intervention by either limiting someone's rights to use the land, or by requiring that certain types of property (e.g., factories) be government-owned and managed with society's broader needs in mind. Government intervention can further reduce externalities, though it may create others, such as limited freedom, limited enterprise, less-vibrant economy, etc. Demsetz did not elaborate on government regulation in the excerpt.
  • Demsetz's principles that civilized societies must be economically efficient and that an economically-efficient society has the duty to minimize externalities, aim to justify the transition from a communal-property legal system to one of private property rights and government regulation.