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92 Cards in this Set
- Front
- Back
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What are the two types of defense (for breaching a contract)?
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1. Formation defense
2. Performance excuse |
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What is "formation defense"?
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saying you're not breaching anything because there was not a contract to begin with
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What is "performance excuse"?
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yes there was a contract, but there are circumstances that allow me to get out without liability
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Why do people want to engage in cotract?
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because like perfectly competitive markets, you can realize gains from trade
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What are the 5 potential deviations from perfectly competitive markets?
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1. Individual Rationality
2. Lack of Free choice 3. Informational Assymmetrics 4. Monopoly 5. Externalities |
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What are the defenses ass. with "Individual Rationality"?
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Incompetence
(children, insane, mental retardation, transactional incapacity |
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"lack of free choice" -> Defenses PRECEDING the bargain?
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1. duress
failure to bargain destroys something of value usually by someone's actions 2. necessity failure to bargain entails the destruction of something of value (through reenaction) ex. blackmail (RESCUES) 3. mutual mistake of facts |
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What are the three types of rescues?
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1. fortuitous rescue (coincidence)
2. anticipated rescue (aware and prepare) 3. planned rescue (deliberation) --> the higher the level of preparedness corresponds with efficiency/investment in human lives |
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"lack of free choice"--> Defenses AFTER THE bargain?
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1. impossibility (acts of god)
physical and/or economic impossibility 2. frustration of purpose contract valid but the REASON why contract done isn't htere anymore 3. mutual mistake |
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"informational asymmetrics"--> defenses
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1. Unilateral mistake
enforce contracts w/ differences in productive information, but NOT differences in redistribution info. 2. duty to disclose safety->non-diclosure would lead to continual damages 3. fraud and misrepresentation there must be some sort of threshold; in general courts don't look at contract terms(fairness) to make decision |
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"monopoly"->defenses
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1. contracts of adhesion
reduces freedom of contract; bind you to making contracts with me 2. unconscionability judge looks at contract and says that his own conscious prevents him from enforcing it. ->procedural ->substantive |
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Two types of "unconscionability"?
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1. procedural
something leading up to the negotiations wasn't quite fair 2. substantive contract is written but contract terms (usually price) is unfair |
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"externalities"--> defenses
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1. contracts that derogate public policy
(i.e. Cartell agreements; Ford/UAW/GM) |
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What are "Cartell agreements"?
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2 firms say, let's both overprice our customers
third party effect: ripping off customers |
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What are the 7 types of remedies?
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1. Expectation damages
2. Reliance damages 3. Opportunity cost damages 4. Restitution 5. Disgorgement 6. Specific Performance 7. Liquidation damages |
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expectation damages?
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baseline is "the contract"
leaves the victim indifferent between fulfillment and breach guarantees Pareto-optimality |
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Reliance damages?
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baseline is "no contract"
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Opportunity cost damages?
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baseline is "next best contract"
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Expectation damages + reliance damages --> relationship?
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Expectation damages always GREATER THAN reliance damages
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Opp. cost damages + Expectation damages --> relationship?
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Opportunity cost damages always LESS THAN OR EQUAL TO expectation damages
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Opp. cost damages + reliance damages --> relationship?
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Opportunity cost damages should be GREATER THAN reliance damages
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Restitution?
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a remedy
type of reliance damage that tries to make everything undone |
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Disgorgement?
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remedy
breach of trust/fidiciary duties in addition to liability, must lose benefits of contract too? |
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Specific performance
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remedy
"one of a kind" item...must give that back? rare book dealer |
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Liquidation damages
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remedy
damages parties agree on themselves |
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tort?
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an accident/mishap
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two types of torts
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1. involuntary torts
2. voluntary torts |
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"involuntary tort" examples
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car accident, product malfunction
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"voluntary tort" examples
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bar fight, discrimination laws
(victim also has right to sue in add. to prosecutor) discrim laws->victim is active person |
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3 defining characteristics of Involuntary Torts
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1. harm must have occurred
2. defendant must have caused the harm 3. the defendant must have breached a duty vis-a-vis the plaintiff |
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Negligence with contributory negligence
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pedestrian has have had exercised due care in order to collect
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strict liability with contributory negligence
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it will always be the case that motorist has to pay, unless the pedestrian used No Care
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Punitive damages
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damages paid to state or victim
'punish' the person mcdonald's coffee |
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'Normative' Coase Theorem
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1. Structure law so as to remove possible impediments to private agreement. (try to shape clear laws to facilitate bargaining)
2. Structure law so as to minimize the damage caused by failures of coming to private agreements (structure so trans. costs are low) |
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if trans costs lower than cooperative surplus?
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outcomes are efficient through bargaining
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if trans costs greater than coop. surplus?
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outcomes inefficient
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What are two options to move from inefficient outcomes to efficient ones?
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1. (best) reduce transaction costs
2. reduce cooperative surplus to become lower than trans costs |
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what do remedies affect?
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threat values
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How do remedies facilitate efficiency?
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1. can i avoid conflict to begin with
2. lets people better anticipate what would happen if we went to court |
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two types of civil remedies
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1. legal remedies
2. equitable remedies |
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legal remedies?
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compulsatory monetary damages; distinct from punitive damages
in general, backwards looking (preferred remedy for contracts and torts) |
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equitable remedies?
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injunction->forcing someone to do something; force someone to refrain from doing something
-forward looking -most common/preferred when dealing with property disputes |
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why are equitable remedies good for property disputes?
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in the case of property law, usually ongoing law therefore forward-looking equitable remedy is better
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how do remedies affect incentives?
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LEGAL: efficient (pay monetary compensation) allow for rational cost-benefit analysis to potential violators
EQUITABLE - inefficient/prohibition--> don't have the option |
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Why would we have equitable remedies?
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transaction costs lower; in principle, facilitates bargaining
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which is more efficient, equitable or legal remedies?
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if bargaining can be facilitated, equitable is better since lower trans costs; if not then legal more efficient
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"fugitive property"
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anything that can be moved around on its own/or if its really hard to determine boundaries of something
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"Riparian owner"
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ownership in U.K.
rights to flowing water natural flow theory |
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"natural flow theory"
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cannot affect or obstruct flow of water
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"reasonable use theory"
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noone has right to natural flow
allowed to use it in riparian way and also in non-riparian ways (irrigate fields) not allowed to use water for un-reasonable/frivolous uses |
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what's the hard part about "information"?
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it's value can be hard to assess w/o having it
often easily replicated once obtained |
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information + rivalrous/excludable
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to some extent information is non-rivalrous and non-excludable
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what are goods that are non-excludable but rivalrous?
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roads, transportation
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Private goods-?
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excludable and non-rivalrous
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Pure Public Goods-?
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non-rivalrous, non-excludable
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3 types of gov. actions to establish efficiency (for changing public good into private good)
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1. govt production of information
2. subsidies 3. create enforceable property rights |
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3 types of intellectual property rights
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1. patents
2. copyright 3. trademarks |
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Patents; two types of innovations
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1. production
2. process |
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2 thresholds for patents
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1. has to be novel
2. has to be non-obvious |
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Good and Bad points of patents
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1. by protecting these innovations, guarantee investments to get to these innovations
2. create monopolies (prevent free entry and exit) |
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what is the most important aspect of perfectly competitive markets?
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free entry and exit
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rent-seeking behavior
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by preventing free entry, firms can maximize profits thus lower consumer surplus
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3 ways for firms to increase profits
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1. restrict entry
2. discover new market 3. discover cheaper way to produce |
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What do patents do?
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grants the right to license things
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two aspects to take into consideration for Patents
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1. duration: how long does a patent have to be good for
2. Patent Breadth: what exactly should the patent cover? how broad should it be? |
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Two types of patents
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Broad patent
Narrow Patent |
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Broad patent?
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Foundation Research: Little stand alone value
Developed Invention w/ Commercial Applications: Lots of use |
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Narrow patent?
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Foundation Research: lot of stand-alone value
Developed Invention: little use |
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Copyright->
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Constitutional right/Congress's responsibility
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Copyright vs. patent?
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Copyrights established upon creation of the work (no need to register) vs. Patents must be applied for and approved
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Copyright lengths
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people: valid for creators + 70 years
Company: period of time |
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Fair-use exclusion
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(under copyrights) people can take snidbits of things w/o having to get permission
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Trademarks
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representation of firm's reputation.
cannot sell without selling company with it. |
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"takings"
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5th amendment
no private good can be taken for public use w/o a.)just compensation and b.) due process of law |
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Zoning regulations
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NOT technically 'takings' therefore no compensation.
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"blighted" lands
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considered available for public use
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just compensation, market value
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just compensation should be a little higher than market value since land not put on market, assume that value it higher than market value
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How do you establish and verify obtaining of title?
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establish->sale
verify->posession |
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Adverse posession (conditions)
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1. exclusive posession
2. posession must be open and notorious 3. posession must be inconsistent with owner's rights/interests 4. usually time span on it (5.) paid taxes |
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"private necessity"
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compensated trespass.
cannot sue for trespassing due to 'private necessity' but can sue for compensation |
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"Inalienability"
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1. you are allowed to give away things but NOT sell
2. you can't sell OR give away (potentially inefficient) |
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Game theory
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using mathematics to analyze small group interactions
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Contracts: Legal theory of bargains (conditions0
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1. offer
2. acceptance 3. consideration |
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Gift promises...efficiency?
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lose efficiency since no court will upkeep gift promises
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Europearn Law and contracts
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"cause" -> the will/desire to be bound by the contract terms ex ante (beforehand)
--> Pareto efficiency |
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Remedies for Breach: Postitive Analysis
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Promisor's cost of performing, Liability from breach
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Remedies for Breach: Normative Analysis
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Promiser's cost of performing, Promisee's benefit from performing
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"reliance"
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acts (specifically investments) taken after the contract is made but before it is executed
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What does 'reliance' affect?
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payoffs from performance and from breach
take actions that would enhance value of payoff |
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when is increasing reliance efficient?
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when the expected increase in value of relying greater than the expected increase in cost due to reliance
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When is decreasing reliance efficient?
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when the expected increase in cost due to reliance is greater than the expected increase in value of relying
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Ration gaps
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the cost of identifying and allocating a risk is GREATER THAN [the cost of allocating a loss X prob. of loss occurring]
therefore, rational to leave a gap |
