1 Agenda for 18th Class Admininstrative –Slides –No class on Wednesday, 11/4 –No office hours Th 11/5 Rights & Ordinary Understanding Assignment for Next Class Readings –## 79, –#85(stopping on the end of the 2 nd full paragraph on p. 325) –#86 –#88 (stopping after the first block quote on p. 336) –#89 –Optional. All other readings between ## 78 & 90 Questions to think about / Writing assignment –See next page

2 Assignment (cont.) Questions to think about / Writing assignment for Group 2 –What do you think is the right thing to do in the Trolley case? Why? –What do you think is the right thing to do in the Transplant case? Why? –P. 313 Question 7 –Until recently, California law mandated vaccination of children, but exempted children based on their parents’ religious or “personal” beliefs. A recent law eliminated those exemptions. Both the former and current law allow exemption for children with medical conditions that make vaccination unsafe. What do you think is better, former or current law? Why? Can you think of a law that is better than both former and current law? Why?

3 Last Class – Information 2 primary information problems –Moral hazard. Incentive problem after contract entered into –Adverse selection – Lack of information before contract entered into Principal-agent problem –Context in which moral hazard or adverse selection often occurs Gilson –Lawyer as Transactions Cost Engineer –Contracts address and lessen information problems Good lawyers can draft clauses that make deals –Representations and warranties lessen adverse selection –Covenants and conditions lessen moral hazard –Earn out provisions »overcome disagreements relating to valuation (adverse selection) »Incentivize good behavior during transition (moral hazard)

Rights Instrumentalism –Economic analysis and utilitarianism are “instrumentalist” theories Rules are justified by their consequences –E.g. impact on net benefits, happiness, etc. Utilitarians and economic analysts favor rights only to the extent that rights are helpful to their goals –John Stuart Mill is probably most famous instrumentalist/utilitarian philosopher Non-instrumentalist theories –Are not about consequences –Ordinary understanding –Corrective justice Justice requires injurer to compensate victim, even if doing so has no deterrent effect –Nozick, “side constraints” Some things can’t be done, no matter how beneficial the consequences –Rawls, Rights, equality and fairness take priority over economic maximizing –Sometimes called “deontological theories” –Immanuel Kant is probably the most famous deontological philosopher

5 Questions. P. 288f 2. Professor Kull believes that engagement ring disputes should be decided in accordance with “individual choices, intentions, understandings and expectations.” What are people’s understandings with respect to engagement rings? Consider three possible understandings: (a) that the ring is an unconditional gift, so the fiancée gets to keep the ring no matter what happens; (b) that the ring is a conditional gift and the fiancée needs to give it back, unless the groom-to-be was at fault in calling off the engagement; and (c) that the ring is a conditional gift, and the fiancée needs to give it back if the marriage doesn’t take place, no matter who was at fault in calling off the engagement. Is there widespread social agreement as to which of these three understandings is correct? Or do all three competing understandings have their adherents? If so, should a judge or jury inquire into the parties’ own understanding? The understanding of their peers or cultural group? 3. When the Pennsylvania Supreme Court expresses its decided lack of enthusiasm for inquiring into the details of engagements gone awry, and its concomitant preference for a simple rule which settles such disputes while avoiding detailed inquiry into their facts, is it suggesting that traumatic events in people’s personal lives are too unimportant for courts to spend time considering them? If not, why is it that administrative convenience is more important than doing justice?

6 Questions. P. 289f 9. If the court was merely interested in simplifying the law why didn’t it just announce a rule that engagement rings are unconditional gifts so that the groom-to-be is never entitled to the return of the ring? That would eliminate suits for the return of engagement rings and the “romantic bailment” problem. Does treating the ring as an unconditional gift create any new problems? Suppose a would-be groom gives a woman he wants to marry an engagement ring and the wedding is never consummated. The woman intends to sell the ring and keep the profit. The would-be groom concludes that she never intended to marry him at all but was happy to have a valuable ring to sell. He demands the ring back. Do we have to decide if there are conditions on this unconditional gift? 13. Professor Kull appears to be appalled by the Harvard Law Review Note which suggests that the legal rule regarding the return of engagement rings might have an effect on the conduct of persons contemplating marriage Is he correct to dismiss this possibility as something that is simply not worth entertaining? The following Note on “‘Corrective Justice’ and ‘Private Law’” considers some reasons why Professor Kull might think this.

7 Questions, p Is Lindh a case where consideration of incentive effects and fairness suggest different outcomes? Can you think of incentive and fairness arguments in favor of returning the ring to Lindh? In favor of letting Surman keep the ring? 5. Should it matter that figuring out who was at fault in Lindh and similar cases could be very costly, both to the parties and to the public which pays judges’ salaries and funds other court costs? Kull thinks legal rules should establish liability even when they only provide compensation for harm, but do not "change the world for the better … by reducing the incidence of losses." That is, he believes that a legal system should incur costs (the costs of litigation and adjudication) even when, in economic terms, all litigation will do is transfer money from one party to another, with no beneficial ex ante effects. That is, he believes that legal systems should make decisions which would fail cost-benefit analysis. Why does Kull think it worthwhile for the legal system to decide such disputes? Do you agree?