LAW – Spring 2019

Midterm

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1 – Main tasks of courts

Courts mostly deal with two main pillars:

 Facts – what actually took place, at what time, who was involved.
 Law – choosing of the appropriate legal framework (the Law) that rules the facts.

2 - How do we distinguish a Trial Court from an Appellate Court and still

from a Supreme Court?

The higher we climb in the Pyramid of Courts, the less attention is paid to facts.

Trial Courts - Courts of First Instance: To make a ruling on the issues of FACT and law. Some trial
courts operate with a judge and a jury: juries are responsible for making findings of fact under the
direction of the judge, who decides the law. This combination constitutes the judgment of the court. In
other trial courts, both fact and law are decided by the judge. (Facts) – Frequently present in main
Cities of States. European Law can be ignored even if asked for it.

 The first court an individual who is being accused of a crime will attend. In this type of court
there might be a judge and a jury, or just a judge, and at the end of the trial the court will make a
ruling based on facts and law.

Appellate Courts - ("Tribunais da Relação/Centrais"): To reconsider the application of legal rules to

a case that has already been heard by a lower court (did the trial court, for example, apply and
interpret the law correctly?); sometimes it also deals with questions of fact: new evidence have
emerged, an appeal court may evaluate it in order to determine whether the case should be remitted to
a court of first instance to be retried. (Law & (maybe) Facts) – Sub-national, territorial divisions that
include several cities.
 If the individual being accused is not satisfied with the outcome of the trial, he can appeal to the
appellate court to reconsider the application of legal rules to the case that has already been heard
by a lower court. In this court the main question will be regarding the law (if it was applied
properly), however it might also discuss facts if new evidence arises and it might choose to have
the case retried in a court of first instance.

Supreme Court: Only reconsider the application of legal rules. (Law) – Usually 1 or 2 in a state.
 A supreme court will represent the last chance to appeal however it will only consider the law and
will not take into account any facts.

3 - How many Supreme Courts exist within the Portuguese National

System?

STJ ("Supremo Tribunal de Justiça") - Civil + Criminal – rarely have a Jury.

STA ("Supremo Tribunal Administrativo") – Administrative and Tax courts. We do not have a
Jury. If necessary, people should refer to the European Court of Justice (ECJ) in Luxembourg, where
the EU law is involved and in top of that people also can appeal to the European Court of Human
Rights (ECHR) in Strasbourg.

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4 – The role of the Jury:

Countries with No Jury:

 Facts and law are often decided by a single judge.
 Here albeit the bounds of evident facts and pre-existing Law (Statute Law).
 The individual view is preponderant.

Countries with Jury:

 An extremely diverse group of people is called upon to establish facts.
 The judge then applies the existing law.
 Juries are responsible for making findings of fact under the direction of the judge, who
decides the law.

In Criminal cases there are 12 judges, but in Civil there might be more.

5 – Constitutional Court:

They have a very specific function: to make sure that the Law we apply (Statute Law – written law
coming from the Parliament) doesn’t breach the principles of the National Constitution (list of rights
that must be protected by National Courts).
 These courts are set aside from the other courts.
 It doesn’t held trials.
 In case of conflict, Constitutional Law is STRONGER than ordinary Statute Law.
 In Portugal it is composed of 13 Judges.

6 - Which are the two main International Courts that operate

Supranational (above the national legal systems) but whose rulings
(decisions) have effects within the national systems of the EU?

The ECJ: European Court of Justice - Luxemburg

 The most important Article is Article 267 TFEU. It allows the national judge (in Civil, Criminal
and Administrative Cases) to ask the ECJ for Help and advice on how to solve a case.
 The Court of Justice of the European Union shall have jurisdiction to give preliminary rulings
concerning:
o The interpretation of the Treaties.
o The validity and interpretation of acts of the institutions, bodies, offices or agencies of the
Union.
 Can be used during trial.

The ECHR: European Court of Human Rights – Strasburg (France)

1- Life
2- Prohibition of Torture
3- Prohibition of Slavery
4- Liberty and Security
5- Right to a fair trial – so-called DUE PROCESS

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6- No punishment without Law
7- Private and family life
8- Freedom of thought, conscience religion
9- Freedom of Expression
10- Freedom of Association
11- Right to marry
12- Right to effective remedy
13- Prohibition of discrimination
34- The Court may receive applications from any person, if not anonymous and if its content isn’t
similar to what has already been dealt with.
35- Might only be used once all domestic resources have been exhausted

7 - Explain the MAIN difference between the procedure to Access to the

ECJ and the procedure to Access the ECHR

The ECJ: European Court of Justice

National courts MAY ask the EJC for advice during cases where there might be a difficulty
interpreting laws and treaties, and they SHALL present to the EJC any cases that do not have a
remedy under national law. This resource can only be accessed by the courts and can be used
throughout the whole judicial process.

The ECHR: European Court of Human Rights

It can only be accessed after all the national judicial resources have been exhausted and until 6 months
after the final decision, however, it can be contacted by anyone. Nevertheless, it will not accept cases
that are reported under anonymity and whose content is similar to what has already been dealt with.

8 – What is Law?

Law (legal system) lies at the heart of any society, where there is a society, there is a rule.
 Juxtaposition of contingent elements (positive) and requirements of inherent fairness (natural).
 System of rules laid down by a “institutional source” or a system of rules grounded on
fundamental principles of morality. It must be distinguished from social or market rules.

It is a SUM (in the Western legal Tradition, WLT):

 Of the Statutes that come from Parliament.
 And the Rulings (decisions) of the Courts.

According to Natural Lawyers: Universal moral principles in accordance with nature.

 This is a view that dates back to ancient Greece.
 Example: No abortion / adultery.

According to Legal Positivists (Wacks): Law is nothing more than a collection of valid rules,
commands or norms that may lack any moral content. When there is no applicable rule, or there is a
degree of ambiguity or uncertainty, the judge has a discretion to fill in the gaps of the law.
 Not the same everywhere. It can’t be divorced from the social content.

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9– Please provide the definition of a Code.

Code: A coherent collection of Laws / rules that make sense when read together. Named as Corpus
Juris meaning body of law.
 Give access to law firsthand.

10 - Please provide an explanation for the fact that the earliest codes were
written on Stone or engraved in Metal. Does this make sense, in your
opinion?

The earliest codes were written on stone or engraved in metal, so that they could be displayed in
public areas to ensure that everyone knew what the codes were and that everyone was clearly aware of
what their rights and duties they had, so that no man would be accused of breaking a law he did not
know existed. This brings us to the Principle of Publicity, which tells us that the law has to be
published in a publicly accessible place, so that everyone can know of it and comply with it. It cannot
change places and the law cannot be changed without being (re)published.
 A law that is not publicly accessible beforehand shall not be held against a person
 This principle was established to fight the previous means of letting the law be known (word of
mouth), which could be dangerous when it comes to the interpretation and possible distortion of
the rules.

This makes sense to me because it ensures that everyone knows what laws are in place and exactly
what they are expected to do, what they can expect and what would happen if they were to break the
law. A law that is not publicly accessible beforehand shall not be held against a person. Therefore,
this guarantees a fairer society where everyone is acquainted with the law and, above that, it
substitutes the previous mean of communicating laws (word-of-mouth) which was very unstable and
dangerous when it came to law interpretation.

11 - What is Custom?

Custom: Set of norms, unspoken rules and behaviors that people learnt by watching, listening to
stories and imitation of those who knew, limiting the knowledge to certain intimate circles. (all who
know yet ONLY those who know)

Under this system, people had to rely on their elders to communicate them what their rights and duties
were and, the overall absence of written law limited the capacity of these rules having a lasting or
extensive impact. Furthermore, the fact that these customs were transmitted through word-of-mouth
meant that it was very unreliable and could lead to dangerous interpretations of the law.

12 - Explain what the principle of Publicity is.

The principle of Publicity tells us that the law has to be published in a publicly accessible place, so
that everyone can know of it and comply with it. It cannot change places and the law cannot be
changed without being (re)published.
 A law that is not publicly accessible beforehand shall not be held against a person, meaning that
no man shall be prosecuted with a law he was not aware of.

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 This principle was established to fight the previous means of letting the law be known (word of
mouth), which could be dangerous when it comes to the interpretation and possible distortion of
the rules.

13 – Make a distinguish between the Hammurabi Code, The Roman Law

and the Napoleonic Code.

Code of Hammurabi:
 Systematic corpus of law, so that everyone is able to know their rights and duties.
 First appearance of the principle of publicity.
 On the stone slab there are 44 columns and 28 paragraphs that contained over 282 laws.
 Almost devoid of defenses or excuses – early example of strict liability (no excuse of your
behavior).

Roman Law:
 To resolve disputes between patricians and plebians.
 Tablet form a compilation of laws known as the 12 Tables – produced by a commission of 10
men.
 10 Bronze tablets + 2 later ones: To draft a code of law binding on all.
 They did a systematic comprehensive codification: CORPUS JURUS CIVILIS (digest / codes /
institutes) that had about 1.000.000 words.

Napoleonic Code:
 More concise.
 Western + Southern Europe
 Latin America

14 - Which Code is larger physically, the Corpus Juris Civilis or the Code
Napoléon?

The Napoléon code is smaller since it is a more concise version meant to be accessible to everyone. It
relies on a more practical and condensed approach to law, and it is based on previous examples of
legislature. It can be brief but comprehensive in its provisions, while having clear objectives for every
situation.
 It was influenced by the prior system, building up on it and adapting its provisions throughout
time in order to encompass the changing times and modern ideas and mindsets

The Corpus Juris Civilis was more extensive, given that it was composed by different parts, each
being very long (3 books - 1 million words); It is very hard to comprehend and it was mostly
understood by lawyers, judges and scholars. Nevertheless, it served as a basis for a lot of legislature
that followed.

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15 - What is Habeas Corpus and in which situation do you think someone
might wish to make use of it?

Habeas corpus is the concept that once a man is arrested, he has to be tried and has to be proven
guilty, meaning that the state must bring the individual before a judge. If they are unable to prove that
said individual is guilty then the judge can release him from custody.
 If someone feels like they have been wrongly detained, they might want to make use of this is in
order to be released. In fact, this was created as a measure to limit the power of the state and
ensure that there was no innocent man in prison.
 Habeas corpus is available to counter misuse of power in the form of illegal arrest, imprisonment
or detention. Application for it must be made to the competent court.
 Application for a habeas corpus order may be made by the person so arrested, imprisoned or
detained, or by any citizen in possession of his political rights.
 Within a time-limit of eight days of an application for habeas corpus, the judge shall rule thereon
in a hearing that shall be subject to the adversarial principle

16 – What are the distinctive features of the Western Legal Tradition?

1. Demarcation between institutions – separation of powers.

2. Nature of legal doctrine – as source of law and a basis for teaching and practice.
3. Law as a coherent body of rules with its own internal logic.
4. Specialized training of lawyers and other legal personnel.

17 - What is the ideal of the RULE OF LAW (Estado de Direito)?

The ideal rule of law is a system where the access to power and its exercise is subject to
accountability and must be able to be constantly checked by parliament, and specially by the courts, in
order for no abuse of power to happen. That is, you must answer for what you have done. In this ideal
system, any party has to be proven guilty beyond reasonable doubt.
 List of basic requirements that the government must respect.

In rule of law:
 There shall be supremacy of regular law as opposite to arbitrary power.
 There shall be equality before the law for all citizens, despite any differences that might exist.
 The law of the constitution is a consequence of the rights of individuals as defined and enforced
by the courts.

18 – Identify the different legal systems included in the WLT.

Civil Law:
 Code Law.
 System of codified Law.
 Building blocks are texts.
 Where there is a right, there is a remedy.
 Judge is more involved, lawyers present facts instead of stories, theories and ironies.

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 More of an inquisitorial system.
 The judge interprets de law and applies the codes.

Common Law – Anglo-Saxon:

 Story Law.
 Essentially unwritten.
 Casuistic: building blocks are cases, not texts.
 Doctrine of the precedent, supreme position in the Legal System.
 Where there is a remedy, there is a right: system of prior WRITS (pre-requisites to any action –
acknowledgement that the legal system should provide a Remedy.)
 Judge has a more neutral part: they are interpreters of the law and custodians of distinct body of
law.
 Trial by Jury (civil + criminal): jury decides on the facts, judge decides on the Law and
punishment.
 Lawyers fight for facts.
 Court decision is more important. Rules have evolved from court cases to which you have to look
at before making a decision – living tradition.
 Access to courts is more restricted.
Point 3 and 4 are the basis of the Law of European Union.

Religious Law:
 It’s important to investigate religious roots of legal systems.
 Co-existence of State Law with ecclesiastical law of the Catholic Church.
 Rise of secularism: the separation between Church and State.

19 – Explain the functions of the Law

The law has two great objectives: to preserve order and to do justice. The two do not always coincide,
so the best solution lies in keeping the proper balance between the two.

Order – without law, order would be unattainable. Today it’s called security and it seeks to address
solidary, poor, nasty, brutish and short.

Justice – treating equals equally and “unequals” unequally. To achieve it, it is required laws,
independent judicial system, legal profession and fair trial (procedural justice).

Less important functions:

 Facilitate social and economic arrangement
 Protection of Property
 Protect the well-being of the community
 Protection of individual rights.

20 – Make a distinction between lawyers and judges

Judges – officers appointed or elected to implement the law.

Lawyers – owe a strong duty to their clients. Their duty is to utilize the law, not to dispense justice.

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21 – Identify the sources of law.

 Legislation (The stereotypical source of law in modern legal systems).

o Statute enacted by a legislative body that seeks to introduce new rules, or to amend old ones.
o Civil code.
o Enacted by a legislative body.
 Common Law:
o Previous decisions of courts are a fundamental - Doctrine of the precedent.
o Statutes
 Other Sources:
o Writings of legal academics.
o Common sense and moral values.

Sources of law in Portugal:

 Parliament / Government:
o Originator of the Statute Law.
o Able to give law-making powers to other bodies by way of a law of legislative authorization.
 The Courts:
o Produce Case-Law

22 – Classify the different types of rights

 First generation – negative civil rights, to not be interfered with.

o Example: speaking freely / physical integrity.
 Second generation – positive rights
o Example: claim to education, health, justice.
 Third generation – rights of solidarity, participation in development and enjoyment of natural
resources, a healthy environment and disaster relief.

23 - Explain the Concept of JURISTIC PERSON and contrast it with the

Concept of NATURAL PERSON

Legal person – A natural person (human being) or a juristic person.

Juristic person - is a body recognized as having a legal personality (since Human beings to collective
entities). At the same time, a juristic person is an entity that has the ability to hold rights and duties.
Juristic persons are artificial persons or entities such as corporations, recognized as having legal
personality. This happens due to the need of corporations to enjoy and be subject to certain rights and
duties, legally

Natural Person - human beings individually considered. A person having legal status as an
individual, as distinguished from a corporate body, representative, etc.

 A natural person is a human being individually considered. Whereas a juristic person is an entity
or an artificial person (E.g.: Corporations) that has legal personality and that has rights and duties.

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24 - What is the FUNCTION (purpose) of Article 14 of the European
Convention of Human Rights?

Article 14 of the European convention of human rights sates that all citizens of the countries that
signed the treaty shall enjoy all the rights included in it and shall not be discriminated based on a
physical trait or based on opinions or beliefs. The function of this article is to ensure that all
individuals are treated fairly and that everyone is equal in the eyes of the law.
 “The enjoyment of the rights and freedoms set forth in this Convention shall be secured without
discrimination on any ground such as sex, race, colour, language, religion, political or other
opinion, national or social origin, association with a national minority, property, birth or other
status.”

25 - For Human Beings, what is the difference between Legal Personality

and Legal Capacity of Exercise?

Legal Personality: Given to all individuals from the moment they are born alive until they die. It is a
recognition in the eyes of the law of said individual as a legal subject who holds a set of rights, duties
and/or liabilities. It is a qualitative concept that precedes legal capacity to exercise, which is a
quantitative concept.
 To have legal personality means to be capable of having legal rights and duties within a certain
legal system.
 In Portugal, human beings acquire Legal Personality upon complete birth and lose it upon death.
 Certain entities, such as limited companies or public corporations, are granted a personality
distinct from the individuals who create them. They can enter in legal transactions in their own
name and on their own account.

Legal capacity of enjoyment – capacity as an abstract connection between beneficiaries and specific
positions – ability to be the holder of rights. Flows from the concept of inherent dignity of any person.
Potentially almost all legal persons can benefit from the enjoyment of active situations.

Legal capacity of exercise: Quantitative concept that measures the capacity of each individual to
rationally understand his rights and duties and to measure his ability to comply with them
autonomously.
 Ability to act, to exercise rights and to comply with duties, without assistance. Ability to be the
handler of rights.

Legal personality is a qualitative concept that can be described as natural persons as legal subject, that
is, all human beings are individualized and described as an entity to which law acknowledges ability
to held rights and duties and/or liabilities. Capacity of exercise is a quantitative concept that assumes
the capability of a person to rationally exercise their rights and comply with obligations without
assistance.

This is the difference between the holders of rights and the ability to administer them. While you may
hold rights, it is to be measured, quantitatively, your capacity of executing your will, your rights and
of complying with your legal obligations.

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So, even though legal personality concedes you certain rights and duties, legal capacity of enjoyment
leads you to enjoy those rights, while legal capacity of exercise means that you are able to make your
own decisions rationally and that you can comply with the law and be aware of your rights.
26 – Minors or disabled people.

Minors – benefit from representation of Parental Authority or Legal Guardianship. Until they come of
age, they are represented by their parents or guardians (tutors).

In some cases, the system steps in to help individuals who are unable to govern themselves or their
personal assets:
 People with mental disorder
 Severe hearing loss or muteness
 Blindness

Who helps them?

1. In the case of someone with legal personality, capacity of enjoyment but with no ability to
exercise willingly and freely (with conscience) the rights that they are holders of, in their name
and interest, a Tutor will be appointed.
Interdiction: the absence of capacity of exercise is corrected by the tutor.
2. Sometimes the inability is less extreme, and a Curator will be chosen instead.
Inabilitation: the will of the person is constrained by the necessary authorization of a curator.

27 - Who “stands beside” a Minor: A Tutor or a Curator? Why?

Minors can be attached with a Tutor. The legal age to be considered an adult with comprehensive
legal capacity is 18 years old (in Portugal), and minors have legal personality, being the holders of
rights; however, they cannot exercise their rights/duties at full capacity, as the responsibility for their
actions falls upon their parents or legal tutors.
Where curators will ask you for your opinion on all matters and approve your decision if it is clear
that you've understood all consequences, the tutors can decide for you, without taking your desire into
account. This substitution mechanism helps in these cases where a person cannot exercise his rights
with full conscience.

Answer: Minors do not have legal capacity to exercise a significant amount of their rights, which
means that in a lot of decisions their opinion will not be required nor recommended, therefore, a tutor
will be assigned to the minor who will make most of the decisions in their behalf. Contrarily, a curator
is assigned to situations where the individual’s opinion is still valid, however it is necessary that
someone ensures that his best interests are kept in mind, so in a way the decisions are taken together.

28 - Does someone Blind have Legal Personality?

Yes, in the Portuguese legal system, every human who is born alive is awarded legal personality until
their death. Therefore, blindness doesn’t compromise a person’s legal personality, it might however
limit its legal capacity of exercise, by impeding the individual’s ability to rationally exercise their
rights and comply with obligations without assistance. Here depending on each individual’s situation
either a tutor or a curator might be assigned.

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29 - Define SPECIAL CAPACITY of Collective entities

Collective Entities - Composed by a prevalent or preponderant substrate – reality subject to certain

kind of organization: either a group of individuals or by assets that individuals manage. In order to
protect certain interests, the Legal System has acknowledged Legal Personality in favor of entities that
comprise several individuals and/or assets.
Collective Entities shall enjoy a limited set of rights and are subject to obligations compatible with
their nature, which includes all rights & obligations necessary or convenient to the pursuit of its
purposes” “except those prohibited by law or inseparable from natural persons”: examples - family
relationships: marriage, adoption (Art 160 Civil Code) – collective entities may not “re-invent”
themselves.
 To this set of rights that collective entities enjoy and the duties they are subject to, we call
special capacity.

Regarding capacity: the capacity to hold rights and to comply with duties will be shaped on the scope
of the entity: the purpose that the entity aims to achieve.

Principle of Special Capacity: This capacity is limited to the convenient and necessary powers to
attain their objectives. They can only enjoy rights that are compatible with their nature.

Collective Persons act through their Governing bodies.

Therefore, collective entities mix several elements:

Intrinsic Elements:
1. Substrate: a social organism subject to a certain kind of organization.
1.1 Personal Substrate – corporations and associations.
1.2 Patrimonial Substrate – foundations, altruistic purpose, allocation of a mass of assets to a certain
social purpose.
2. Formal organization
3. Legal personality

Extrinsic Elements:
4. Scope – purpose that it aims to achieve (profit, charity, education, …)
5. Corporate purposes – activity of its organs

Requirements of Legal Personality:

1. Organized substrate – existence of people / assets to achieve certain goals worthy of legal
protection.
2. Recognition – Acknowledgment of legal personality to the organized substrate.
3. Registration – Ex: Portuguese registry of corporate entities.

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30 - Single out 1 Power (option, choice) that the Law does not acknowledge
to collective entities (undertakings) and explain why.

Collective entity’s capacity is LIMITED to the convenient and necessary powers to attain their
objectives. Therefore, there are certain rights that do not fall under said description which are
inseparable from natural persons. For example, adoption. Corporations can not adopt a child because
it does not contribute to the pursuit of their purpose and being a father/mother is inseparable from
Natural persons (companies would not be able to ensure certain things for the child, for example
love).

In contradiction, can a collective entity with profit-making purpose practice legal acts contrary to the
achievement of profit by the Company? NO! Their purpose is to distribute profits to shareholders. By,
for example, giving to charity, they might be defrauding shareholders. Under threat of nullity due to
the lack of legal capacity, it is not allowed for a company to make donations or free loan credits
except if: donations are performed non-altruistically and publicity or if it is a liberal act considered a
usual practice depending on prevailing circumstances and the state of the company itself at the time
(donations made at Christmas).

31 – Mitigation of the principle of special capacity

Collective entities may also practice acts convenient to the pursuit of its purposes which may
occasionally move away from its corporate purpose. Ex: a collective entity with non-economic
purpose can practice occasional acts of commerce in order to raise funds to practice its charitable
purposes.

The Brain of collective entities: Even if they have no psychological will, through its corporate bodies,
the collective entities know, think and want. Through the corporate bodies of collective entities, the
various individual wills (voluntas) of the entity’s component members are formally organized. “The
articles of the association” of a collective entity settles:
1. The procedure of governance
2. The establishment of individual component members
3. The terms of the decision-making process.

Each corporate body is allocated a set of functional powers for the purposes of the legal entity.
The entity wants “X”:
3. Active bodies: issue a preference resulting from deciding-making procedure
o Internal bodies: form the decision (ex: general assembly)
o External bodies: express the decision (ex: board of directors).
4. Advisory bodies: prepare scientific / technical elements on the basis of which active bodies issue
decision.

Agenda – specifically describes what issues are to be discusses during the meeting. If a point is not in
the agenda, discussing it in the meeting has no legal value. Helps you deciding if you want or not to
be present in the meeting while assuring that no other matters are going to be decided.

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Minutes – a written description of every meeting of the corporate body is recorded and filed in an
appropriate standard. If a point is not in the minute, it doesn’t count as point already discussed.
Protects members involved.

Quorums: # of persons present as a % of the entire body.

 Functioning quorum – state for example that for the meeting to take place at least 60% of the
members should be present.
 Deliberation quorum – states that a valid decision must be taken by for example at least 60% of
favorable + validly cast votes of members present. If there are 5 out of 7 members present and 3
votes in favor, the decision may be taken even though it’s represented by less than 50% of the
component members.

Staggered board: assuming the board is composed of 7 members and member’s renewal takes place
every 3 years, to ensure the continuity of decisions and to protect shareholders from abrupt changes in
policy:
 Yr 3 – 4 members max are renewed
 Yr 6 – 3 members max are renewed
 Yr 9 – 4 members max are renewed

32 – Define Legal Relationship

Legal Relationship – normative / legal answer to a conflict of interests in real life. Ultimately is also
about adjudication within a conflict (one actor (person) is vindicated and the other actor (person) is
sacrificed).
In order to get as close to reality as we can when using the law, and especially in contractual
relationships that are extremely important for companies, we use a formula that has 5 parts. The sum
of the partis is what we call legal true.

1. Subject: who is involved. Usually holders of competing advantages (rights) and disadvantages
(duties). Human being or a non-human legal person.
Erga omnes – everyone is involved. Every person has to respect the ownership relationship of
someone with their possessions.
 Active / Passive subject

2. Content: the kind of legal positions that compete with each other within a relationship. All of the
prevalent (advantageous / active) positions VS all of the subordinate (disadvantageous / passive)
positions.

3. Object: what thing / behavior is appropriate and adequate to satisfy a need or to enforce an
interest that the law wishes to protect / sacrifice.
 Immediate object: behavior / performance
 Mediate objects: the projection of the behavior into something

4. Fact: Finding the trigger of legal situations / relationships. To dominate issues, we have to know
where it starts and where it ends. Events to which the law attaches some consequences.

5. Warranty: how is the law going to be enforced?

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33 - What is the CONTENT of a Legal Relationship? First define this and
then APPLY it to a contract of EMPLOYMENT.

The content of a legal relationship describes all the positions of the legal subjects in a certain legal
relationship, which might be advantages (active situations or rights) or disadvantages (passive
situations or duties).

Advantages:
 Subjective Rights: rights that fall directly upon things, conferring on the holder of the right:
o Power over things.
o The right to demand an attitude of respect.
o Very often they are absolute rights: they may be upheld by their holder VS anyone (erga
omnes).

 Credit Rights: advantageous position in situation regarding debt. The right to demand a certain
type of behavior from someone else.

 Potestative Rights: linked to the concept of powers. The holder of these rights may exercise them
out of free will, triggering legal change in the legal sphere of others independently of the will of
the latter. The passive subject is not required to cooperate and may do nothing to impede the
exercise of these rights. It’s a right that doesn’t imply a duty from another party.
o Constitutive: Start something new (ex: setting up an easement)
o Modificative: Change something (ex: change to a contract due to a change of circumstances)
o Extinctive: Put an end to somethings (ex: right to divorce)

Disadvantages:
 Duties – the downside of a Credit and Subjective right. The imposition to adopt a certain type of
behavior:
o Obligation: arises between two or more specified subjects
o General duty: respect for private property (erga omnes)
 State of Subjection – the downside of a Potestative right. Situation of being subject to or
constrained by someone else’s options. Doesn’t presuppose any adoption of any behavior by the
subject, yet the subject cannot impede / influence the outcome.
 Burden – The non-adoption of a certain behavior - if you don’t comply with the burden, you lose
an advantage that is within your reach.

In a contract of employment (assuming the subjects are the employer and the employee) the content
would be:
 The employee has a duty to work/perform the task assigned, but he also has the credit right to
receive wages.
 The employer has a credit right to receive the performance of the employee in the tasks demanded
of him, but he also has the duty of paying him his wages.

15
34 - What is the OBJECT of a Legal Relationship?

What thing / behavior is appropriate and adequate to satisfy a need or to enforce an interest that the
law wishes to protect / sacrifice.

Immediate Object: Concerns Rights and Duties; The behavior the players are expected to undertake.
The activity to which some are entitled and that others must perform or undertake.
 De Facere: Activity – situation that you have to do or make something.
o Build a house, draw a contract, write a report.
 Non Facere: Omissive activity – situation that you must not do something.
o Respect a prohibition to build.
o Refrain from something.
 De Pati: To suffer the activity of others – situation that you have to accept action of others.
o Accept that a neighbor builds on his own land even if you would prefer a garden.
 De Dare: Conveyance / Delivery – situation that you have to give something.
o Shopping bought.

Mediate Object: Projection of the behavior into something. The real-world object that all of the listed
above seems to converge on.
 Unreal Property or moveable property – property that is not stick in the ground.
o Book, bike, animals…
 Real Property or immoveable property – property that is stick in the ground.
o Land, house, tree…
 Tangible: something that is embodied.
o Jewel, pencil…
 Intangible: usually called intellectual property.
o Actions, author’s rights or a brand…

Things and behavior may or not be substitutable:

 Substitutable: When they may be replaced by other things/behaviors and the beneficiary will not
feel damaged.
o Antonio (repairman) is so ill, so he sends Bernardo to paint the wall instead of him.
 Non-substitutable: When such replacement will cause damage to the beneficiary.
o Alice is supposed to apologize to Beatriz therefore she may not send Carla to do so in her
place.

35 - Now suppose that the Contract of Employment is about Cleaning

Services (in a restaurant) Provided by B to A. What is the Object of this
contract?

In this scenario the content of the contract would be:

16
 B as a duty to clean A’s restaurant but also has a credit right to receive wages for it.
 A has a credit right to having his restaurant cleaned by B but has a duty to pay him his wages.

The object of a contract refers to what the legal relationship is, what is being transacted. In this case
the object is the cleaning services that B is providing to A.

36 - What is the Fact of the Legal Relationship?

Facts are events to which the law attaches certain consequences. It is a simple event, and its legal
consequences arise from a (contingent) legal qualification.

The legal dimension is not static: legal situations/relationships arise, are transmitted from one person
to another and may remain in the same person’s sphere yet be subject to change over time and
eventually may be extinguished.

Efficacy is a concept that is discussed together with the fact. It is the legal result of an existing and
valid legal rule. That is, valid and existing legal rules are capable of producing results that we call
effects.
 Constitutive: Gives rise to a previously inexistant legal situation. Creates a new legal
relationship.
o Act of foundation/incorporation/birth.
 Transmissive: Transfers an already existing legal situation from person A’s legal sphere to
person B.
o Act of inheritance.
 Capable of Change: Changes the content of a given legal situation that remains in the sphere of
person A. An older situation with one more agent.
o Change-inducing act of merger/division/parenthood.
 Extinctive: Causes disappearance from the legal dimension of a previously existent legal
situation. Annulment of a situation.
o Death, payment, conveyance.

Facts are the source of efficacy.

37 - Consider the situation in which C turns up to work (clean) A’s

restaurant with the explanation that “today B sent me”: which concept
would you resort to run the analysis on this fact?

I would resort to the concept of substitutability. Which happens when an object (mediate or
immediate) can be substituted by another and the beneficiary will not feel damaged by the
substitution.

If C’s cleaning abilities are equal or greater then B’s, and if A is ok with it, then this switch should not
be a problem. If, however, C does not clean well or A doesn’t want C to clean his restaurant, there
will be a problem and the legal relationship might end because B did not fulfill his duties.

17
38 - Using Examples, Explain the Difference between FACT, ACT and
CONTRACT

Acts (stricto sensu) or simple acts are a scenario where there is no bargaining power nor any control
of the conditions of a certain choice, the only answer available is yes or no. Therefore, you are not
able to choose the underlying conditions of your action, such as accepting the terms and conditions on
a webpage or a simple purchase of some good. You either agree with the price and buy the good or
you don't.

Contracts are those in which you can choose the conditions/effects of the contract, in addition to
whether or not to enter into the contract. This often requires that two adults (natural legal persons)
with (comprehensive) legal capacity of exercise determine conditions for a certain
situation/relationship.
 Unilateral: any deal is necessarily bilateral yet observe that sometimes it only generates
disadvantageous situations for one of the parties involved. Theoretically it is a situation that
appears to be unable to bind two parties, as both parties will not sat down and sign the same
document at the same time, meaning that no proper contract exists.
o Carlill Case, Wacks: The Court held that the advertisement constituted an offer of a
unilateral contract between the Company and anyone who, having seen the advertisement,
acted on it.
o Donation
 Bi-lateral Plurilateral – You only have to comply when the other parties comply. A person who is
being sued for non-performance of contractual obligations can defend themselves by proving that
the plaintiff did not perform their side of the bargain.

Facts are events to which the law attaches certain consequences. It describes what happens and they
can be classified has:
 Facts I – Natural events like actions of nature.
o Earthquake, flood.
o The passage of time, death.
 Facts II/Involuntary acts- Facts originated by humans, however in this case they are originated
without consciousness that something is happening.
 Facts III / Voluntary Acts: Acts or Contracts

39 - In Chapter 6 The future of the Law, Wacks talks about Defamation

and Slander (when someone publicly insults someone else or insinuates that
certain unsavory facts are true regarding someone else) he then explains
that technology has changed the law’s ability to deal with this issue. Please
explain How.

There are laws that prevent and punish defamation and slender, however these were thought at a time
were these types of crimes were more public (people would publicly insult someone on TV or on the

18
streets) which meant that it was easier to identify and prosecute the offender. However, as technology
evolves it has gotten harder, especially since a lot of national borders disappear online, different laws
get into play which makes the whole process slower and less efficient, on top of that, it is harder to
identify however is slandering someone under a generic username.

38 - In Chapter 6 The future of the Law, Wacks mentions two Acronyms

P.I.T.S and P.E.T.S. Explain what they mean and provide (to the best of
your ability) an example of each.

Wacks mentions the two acronyms P.I.T.S and P.E.T.S in accordance with Roger Clarke’s studies.

PITs are Privacy-Invasive Technologies

 This term describes the many technologies that intrude into privacy.
 Example from Wacks: Bots – your computer can be turned into a “bot” which means that it is
being remotely controlled by someone else. Bots can be used to harvest email addresses, send
spam and conduct attacks on corporate websites.

PETs are Privacy-Enhancing Technologies

 These are tools, standards and protocols that set out to reverse the trend, by directly assisting in
the protection of the privacy interest.
 Example from Wacks: Copyright protection to software – that contra-attacks the creation of
pirated software which has caused huge losses to companies such as Microsoft.

39 - The Warranty of Legal Relationships, Enforcement

The warranty determines how a legal rule is going to be enforced.

The procedure in court:

 Do we have interim relief? Interim relief can be an order by the court before a full trial to preserve
the current situation until the trial.
o The court grants some short-term help until a decision is made – it can take some time.
o When a court orders a person to hold off on publishing a book until after a trial to
determine if he is legally allowed to share the information in the book.
o It is about the timely exercise of rights.
 The intensity of the judge’s powers – Are injunctions available?
o An injunction is a legal and equitable remedy in the form of a special court order that
compels a party to do or refrain from specific acts.

Types of Sanctions: In presence of a breach the legal system may resort to force to:
 Premial sanctions – Rewards.
o In favor: Acknowledgement that illegal behavior is frequent, and awards are powerful
incentives for compliance.
o Against: Compliance with the rules should be mandatory, such cooperation is expected of
persons, it does not merit applause.
 Negative sanctions – Punishment: impose a negative sanction on the perpetrator

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 Types of Negative Sanctions (Context)
Disciplinary Civil Administrative Criminal

Breach of
employer’s
Rules protect Breach of rules
internal rules. Breach of rules:
secondary interests: that protect
Jeopardizes the Citizen V Citizen
Description Citizen V PA essential
company. (acting in private
Or imposed for general interests of the
Liability or capacity).
interest of society. community.
damages may
occur.

Hitting someone
Example Arriving late Parking ticket Murder
with your car

Damages, does not

Monetary sanction,
Reprimand or imply loss of Fine, Prison,
Consequence impediment to perform
Firing physical freedom Death
a certain action
(no prison)

Public Administration
Enforcer Employer Court Court
(PA)

Objective of sanctions (Purpose)

Compulsory Reconstitutive Compensatory Preventive Punitive
Designed to
Punishment
force the culprit Do not reinstate
ensues breach,
to adopt, albeit Reinstate situation prior situation Retribution/
Description but its objective
late, the prior to breach but compensate Punish culprits
is to prevent
requested the victim
further breach
behavior
Interest (civil), Specific
Parole
Tax increase performance,
Arise within (Conditional
(admin), Right conveyance, Criminal,
contracts, Liberty),
to hold real- Destruction, Administrative /
Example monetary Impediment to
estate that has Replacement of Disciplinary,
compensation serve (again) in
been improved Contractor, Jail
(Damages) certain (public)
on until owner Promise enforced
capacity.
pays (civil) by court

20
Forms of Self-Enforcement of the law
Imperious
Self defense Direct Action Right of resistance
necessity

Limits to a citizen
allegiance to the
Often triggered by a Timely exercise of a
Description - State, refusing to
natural fact. right
obey an “unlawful
command”

Stealing a car in the

Stealing back A soldier refusing to
Someone threats middle of the storm
Example something someone kill a civilian he was
you and you kill him to escape the
stole from you instructed to
disaster

40 - Reputational Enforcement

Reputational enforcement occurs when both parties are incentivized to comply with the contract to
avoid the possibility of having his reputation damaged. In other words, if a party is cheated word will
get out and people will stop doing business with him, and therefore he will avoid such situation. Even
with large stakes, reputation sometimes provides an adequate mechanism for enforcing agreements.
This type of enforcement is more effective and therefore common in close-knit communities where
reputation is easily checked, or in industries where there is available feedback, such as Airbnb. For
example, if the player uses the Airbnb platform as a scam network and rents a fake house to someone,
they would be willing to risk long term businesses on a single deal, as they would be punished or
eventually had to leave the business. In contrast, if a player establishes a contract based on reputation,
but then moves to operate somewhere else, the element of reputation does not play a role anymore and
becomes insignificant. Therefore, for these cases it is important to establish a formal contract.

Ex: I rent an Airbnb and when I arrive the amenities are not the same as described on the website.
After my visit, I write a negative comment and the number of reservations decrease. Since the owner
of the apartment wants to keep his reputation and the number of reservations, he won’t lie about the
space and try his best for me to enjoy my stay and give a positive review. This is a solution for parties
to stick with what they say - Reputational Enforcement.
However, in the case of a player that works in London and then decides to work in Southampton, it is
plausible to think that the Reputational Constraint will cease to exist, since there is no information
about his previous operations. However, if he keeps operating there in the same way he was doing
before, it is right to assure that a new reputational constraint will show up, which is similar to the one
he attained in London.

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41 - The Nudge Theory:

The Nudge Theory arises as an alternative exploration of enforcement’s ultimate objective: getting
people to behave in a socially desirable way. Nudge’s best achievements can easily be understood by
the widespread usage and dependence on GPS, by the calorie counting labels on “junk food”, and by
rules that determine by default (if nothing more specific is established on a case-by-case basis) that in
case of an accident healthy organs will be donated for transplants.

A nudge is any aspect of the choice architecture that alters people’s behavior in a predictable way
without forbidding any options or significantly changing their economic incentives. To count as a
mere nudge, the intervention must be easy and cheap to avoid and, therefore, nudges are not
mandates.

Parallel theory:
 Conformity: When the actions and statements of other people provide information about what is
true and right, leading you to act like them to fall in their good graces. Therefore, there must be an
approach to Nudge without forgetting that there is the risk that it might lead people, without a
robust sense of independence, to Conformity.

Define Navigability and give an example:

In countless situations, human beings face a serious problem of “navigability”: They do not know
how to get to their preferred destination, whether the issue involves health, education, employment, or
well-being in general. This problem is especially challenging for people who live under conditions of
severe deprivation, but it can be significant for all of us.
 Navigability is a surprisingly fresh vision of what happens to persons and weighs them down
when attempting to achieve social betterment. For example, those who are facing hardship
(poverty, mental illness, chronic pain) are often unable to solve the problem of navigability and
consequently deserve some help. Nudges are the desired help to surpass navigability problems.

Nudge for Orientation:

 GPS respects freedom of choice as it is helpful, but you can ignore its advice if you like.
 Calorie counting apps.
 Text messages informing that a bill is due or that a doctor’s appointment is scheduled for the
next day.
 Automatic enrollment in pension plans.
 Default settings on computers and cell phones.
 Systems for automatic payment of credit card bills and mortgages.

In Government:
 Graphic warnings for cigarettes.
 Mandatory labels for energy efficiency or fuel economy.
 Nutrition facts panels on food.
 The “Food Plate”: simple guide for healthy eating.
 Default rules for public assistance programs.
 Data websites making a large number of data sets available to the public.

22
Non-Nudge: Include mandates or bans, and economic incentives, for example prohibitions or
subsidies.

Explain how Self Control is improved (and complemented) through nudges:

Self-control problems raise conceptual, empirical, and normative challenges. Self-control problems
might deviate the planner from their preferred behavior, and, in important cases, the individual is
aware that they suffer from such problems. In those cases, a nudge helps to strengthen the hand of the
planner in avoiding self-control problems. Therefore, appropriate interventions lead individuals where
they want to go, at least on reflection. For example, someone with a self-control problem, who is
addicted to smoking, who knows it and would like to be a non-smoker can be helped on surpassing
such problem with the introduction of graphic images on cigarettes’ packages.

A School is extremely concerned that children overindulge in candy bars and soft drinks at the
canteen and therefore bans the sale of the same. Is this a Nudge?
No, as it is a mandate or ban, forbidding their option of consuming candy bars and soft drinks at the
canteen. To overcome that with a nudge, the school could make an educational campaign to reduce its
consumption, in which it noted that a high number of children only consume those goods twice a
month or less. As a consequence of a “new social norm”, children would reduce their consumption of
candy bars and soft drinks in order to act like their “neighbors” and be accepted.

Diesel is seen as much more hazardous to the environment than Gasoline, therefore the
government imposes a significant environment tax on Diesel. Is this a Nudge?
No, as it significantly changes economic incentives, in this case to decrease Diesel consumption. The
introduction of an app providing information about each person fuel-efficiency, that compares the
recommended levels of CO2 emissions with the ones that each person is having, while providing an
approximate measure of how much they would issue if they opted for Gasoline, could be a good way
of incentivizing people to switch from Diesel consumption to Gasoline.

The principle of publicity that you are familiar with has had as a result that all Criminal Codes
sport an important rule: Murder is forbidden, and significant penalties will be imposed. There
is no doubt that the objective of the rule is to make people behave in such a way as to maximize
social welfare. Is this a Nudge?
No, as it is a mandate that does not allow people to act in the way they want. With regard to criminal
actions, such as murder, it is important that this type of mandates and law exists, as these behaviors
can compromise individual rights. Given that a nudge must always protect these rights, a nudge for
this situation would not be applicable, as it would not forbid people to commit crimes and they would
be able to do so if they wanted.

5 Step Analysis (Cass Sunstein):

1. Clarification of Nudge: past and present.

People suffer from:
 Limited Attention / Inertia: they can’t control all the features of what they buy, all the catches in
a credit card contract (the probability that you will attend to high late fees is low). There are
shrouded attributes and hidden features.
 Present Bias: When people’s future self is a stranger: can lead to addiction, smoking, obesity, …
(prefer 5€ today than 50 next week).

23
 Unrealistic Optimism

Countries are worried about obesity, poverty, environment, cigarettes, accidents, violence. It is not
possible to forbid those. To control obesity calorie counters can be introduced, to reduce poverty an
opt-in rule for credit card overdraft can be introduced, for cigarettes photographs can be introduced
etc.

Results: EAST: Easy Attractive Social Timely.

 Default rules.
 Simplification.
 Information.
 Reminders.
 Social Norms: tell people about existing ones and emerging ones.

2. Exploiting the idea of Choice Architecture.

What the world likes:
 Calorie labels, graphic warnings for cigarettes, traffic lights, automatic enrollment in savings
plans or green energy.
What the world does not like:
 Automatic enrollment in charitable contribution or carbon-emissions contribution (even if you can
opt-out).
 When people are in favor of nudge that are against a ban.

3. Navigability as an objective (unto itself).

4. Defining Sludge (noise).

Sludge is a friction that causes harm:
 Scholarships, research projects, access to help for mental health issues of students, global entry.

5. A Bill of Rights for Nudging:

 Must be for legitimate ends.
 Must not violate individual rights.
 Must be consistent with people’s values and interests.
 Transparent.
 Ought not to take things from people without their consent.
 Should not manipulate people.
 The benefits must justify the costs.

Nudging the Nudgers

 Analyze effects, including cost and benefits, before proceeding and on a continuing basis.
 Literacy Boosts are an alternative: boosts in statistical literacy, finance and nutrition.

Countless interventions increase navigability, writ large, in the sense that they enable people to get
where they want to go, and therefore enable them to satisfy their antecedent preferences. Many other
interventions, helping to overcome self-control problems, are warmly welcomed by choosers, and so
are consistent with the “as judged by themselves” standard. Numerous people acknowledge that they
suffer from such problems. When people lack antecedent preferences or when those preferences are

24
not firm, and when an intervention constructs or alters their preferences, the “as judged by
themselves” standard is more difficult to operationalize, and it may not lead to a unique solution.
42 - Law VS Morality

Morality: Internal moral constraints on national law (coming from the citizens own sense of decency).

Constraints on a State:
 Internal:
o Morality
 External:
o EU Law
o UN Framework ECHR
o ICC (non-UN)

Positive Morality: In Society there is a positive relationship between the Law and Moral Practices.
The intersection of Law and Morality is composed for example by murder or any other
correspondence between the law and moral values. The greater it is the intersection, the more likely
the law is to be accepted and respected by members of society.

Conflict between Law and Moral code of some individuals:

 A pacifist required to serve in the military, may be compelled to become a conscientious objector
and face imprisonment as a consequence of his own violation of the law.
 Journalist that claims a right not to disclose sources. This does not assist them when they are
required to give information in court, as witnesses.

Law conflicts with majority’s moral values:

 Apartheid in South Africa law used to pursue immoral aims, as the creation of a white minority.
All law disenfranchised and discriminated a non-white majority.

Case Example: Nazi’s Wife: In 1944, during Nazi rule, a woman to dispose of her husband denounced
him to Gestapo. The husband was tried and sentenced to death, though his sentence was converted to
service as a soldier on the Russian front. After the WWII, the woman was prosecuted for procuring
her husband loss of liberty and the court convicted her to prison.
 Prof. H. L. A. Hart: Wrong decision – the Nazi rule was a valid law in that time.
 Prof. Fuller: Right decision – the Nazi law isn’t a valid rule because don’t have internal morality.

Fuller defends that Real Law has an Internal Morality, and 8 essential principles must be present. If
we detect a failure of Government and Parliament to comply with them, the context suggest that Law
does not exist in that society.

1. Generality 6. Possibility of compliance

2. Promulgation 7. Constancy
3. Non retroactivity 8. Congruence between declared rule and
4. Clarity official action
5. Non-contradiction

The Sad Tale of King Rex:

25
Fuller presents these problems in his book The Morality of Law with an entertaining story about an
imaginary king named Rex who attempts to rule but finds he is unable to do so in any meaningful way
when any of these conditions are not met. Fuller contends that the purpose of law is to "subject human
conduct to the governance of rules". Each of the 8 features which lead to failure form a corresponding
principle to avoid such deficiencies which should be respected in legislation.

About a King (an authority) that upon taking the throne decides to do away with the legal system of
the previous monarch and build a new system from scratch. However, he does everything poorly,
because he does not pay attention to the Fact that the Law (even if stemming from the King) must
have internal consistency to qualify as Law. The King fails to meet each of the 8 principles:

1. Fails to make rules at all, deciding questions ad hoc on a case-by-case basis, leading to
inconsistent adjudication.
a. Could not make a code due to his defective education, so for each case he decided he
would make a decision. However, his decisions didn’t suggest any pattern.
2. Fails to publicize rules or make known the rules of law.
a. Decided to take lessons in generalization and creates a Code to decide on cases. However,
he decides that the code would remain an official state secret, meaning that the subjects
did not know what rules they had to comply with.
3. Enacts rules for the past: He would make some actions illegal after the fact, that is actions that
were legal when they were performed later became illegal and the people who performed them
earlier were punished.
a. Stunned by the previous rejection, Rex decided that it was easier to decide things with the
aid of hindsight than it was to attempt to foresee and control the future. For him, hindsight
made it easier to decide on cases and give reasons. Therefore, at the beginning of each
calendar year he would decide all the controversies that had arisen among his subjects
during the preceding year. The new subjects did not enjoy the plan, as they needed not
only to know the rules but also to know them in advance so they could act on them.
4. Difficult to understand, unclear and obscure legislation.
a. Rex then published a code declaring the rules to be applied in future disputes. However,
this code was a truly masterpiece of obscurity and it could not be understood by either an
ordinary citizen or a trained lawyer.
5. Contradictory: The laws contradicted themselves, so that it was impossible for anyone to obey all
of them.
a. Rex withdrawn the previous code and put a staff of experts to work on its revision. The
resulting code was a model of clarity, but it was full of contradictions. There was not a
single provision in the code that wasn’t nullified by another provision inconsistent with it.
6. Require conduct beyond the powers of the affected party, that is demands that are beyond the
power of the subjects and the ruled. He enacted laws that were impossible to follow.
a. The code was again withdrawn, but now Rex was already without patience as his subjects
had always negative attitudes towards his code. Therefore, he decided to teach them a
lesson and he added a whole new list of crimes, which implied certain behaviors that were
impossible to comply with: for example, subjects could not cough, sneeze or fall down in
the presence of the king.
7. Unstable legislation: he changed the laws so rapidly that it was impossible for people to adjust
their behavior to them.
a. The new code led to revolutions and the code was withdrawn again and a staff of experts
were charged again with the task of revision. The final result was clear, consistent,

26
 demanded nothing of the subject that did not lie easily within his powers, and was
distributed freely to everyone. However, the code changed so many times that the
substance of the code had been seriously overtaken by events. Since Rex assumed the
throne there had been a suspension of ordinary legal processes, which brought important
economic and institutional changes within the country. Accommodation to these altered
conditions required many changes of substance in the law, and the code was subject to
daily stream of amendments. Again, popular discontent mounted, and people were
claiming that “A law that changes every day is worse than no law at all”.
8. No correspondence between rule announced and their actual administration.
a. Rex concluded that much of the trouble were due to bad advice from the experts.
Therefore, he declared he was reassuring the judicial power in his own person. In this
way he could directly control the application of the new code and insure his country
against another crisis. However, as the bound volumes of Rex’s judgements became
available and were subject to closer study, his subjects were appalled to discover that
there existed no discernible relation between those judgements and the code they
purported to apply.

43 - Lautsi Case

The case stemmed from a request of Mrs. Soile Lautsi, a Finnish-born Italian national, against the
School Council of a school in Abano Terme (province of Padua). When the School Council decided
not to comply, Lautsi applied to the Veneto Administrative Court. The administrative Court
decided, on 17 March 2005, that the presence of crucifixes in State-school classrooms did not
offend the principle of secularism. Lautsi appealed to the Supreme Administrative Court. The
Supreme Administrative Court upheld the Veneto Court's decision reasoning that in Italy the
crucifix symbolized the religious origin of values (tolerance, mutual respect, valorization of the
person, affirmation of one's rights, consideration for one's freedom, the autonomy of one's moral
conscience vis-à-vis authority, human solidarity and the refusal of any form of discrimination) which
characterized Italian civilization and that keeping the Crucifix did not have any religious
connotations.

Facts:
 The applicants, Ms. Lautsi and her two children, objected to the display of a crucifix in the
classrooms of the children’s State school.
 The dispute originated at a school governors’ meeting in 2002, where Ms Lautsi’s husband asked
for the crucifixes to be removed. The governors declined this request. This decision was contested
and subsequently affirmed in the Administrative Court, the Constitutional Court and the Supreme
Administrative Court. Eventually, the applicants brought a case against the Italian Government in
the ECHR.

The facts were as follows: the claimants were a mother, an Italian citizen with Finnish roots, and her
two children. Between 2001 and 2002, the children attended a local state school in Abano Terme in
Italy. On the basis of a directive issued by the Italian Ministry of Education of 2006, which, according
to Italy’s argument, reflected the long historical tradition in Italy of displaying crucifixes as a symbol
of tolerance and the values enshrined in the Christian tradition, the school displayed crucifixes in each
of its classrooms. The mother was of the opinion that the display of crucifixes in classrooms ran
counter to the principle of secularism according to which she wished to bring up her children .

27
She filed complaints against the decision to display the crucifixes, first in the local school council and,
ultimately, before the Italian Constitutional Court. The latter declared the case manifestly ill-
founded and dismissed the application. The legal basis for the display of crucifixes in public school
classrooms were two royal decrees of 1924 and 1928. Accordingly, the Constitutional Court declined
to decide upon the matter, since its own jurisdiction only comprised an assessment of the
constitutionality of statutory provisions.
Much to the consternation of some Member States of the Council of Europe, the second Chamber of
the European Court of Human Rights, comprised of a Belgian, Portuguese, Italian, Lithuanian,
Serbian, Hungarian and Turkish judge, unanimously found in the applicants’ favor. The Chamber
stressed that the case had to be reviewed mainly in the light of art.2 (1) of the First Protocol to the
ECHR, which in turn must be interpreted in the light of art.9 of the ECHR, which includes the
freedom not to believe in any religion (negative freedom). It pointed out that art.2 of the First
Protocol, in particular, aimed at safeguarding pluralism in education which was essential for the
preservation of a democratic society.4 The Chamber took the view that the state should refrain from
imposing beliefs, even indirectly, in places where people were dependent on it or particularly
vulnerable.5 In order to assess this matter, the Chamber went on to assess whether the particular
nature of the crucifix was such that it could overrule the state’s obligation to exercise its educating
functions in a way which was objective, critical and pluralistic. According to this analysis, the
Chamber held that the presence of crucifixes in classrooms went “beyond the use of symbols in
specific historic contexts”.6 It added that “the crucifix may be easily interpreted by pupils of all ages
as a religious sign, and they will feel that they have been brought up in a school environment marked
by a particular religion”.7 Therefore, the state had a “duty to uphold confessional neutrality in public
education, where school attendance is compulsory regardless of religion, and which must seek to
inculcate in pupils the habit of critical thought”.8 Eventually, the Chamber decided that the display of
a symbol, which is essentially a symbol of Catholicism, would not convey the pluralism, which is
“necessary for the preservation of a democratic society” by the state. It was incompatible with the
state’s duty to respect neutrality in the exercise of public authority, particularly in the field of
education.9

European Court of Human Rights

Lautsi then appealed to the European Court of Human Rights on 27 July 2006. On 3 November 2009,
a Chamber of the Second Section of the Court declared that there had been a violation of the
European Convention on Human Rights. This decision caused uproar in Italy. Lautsi declared that she
had received threats and had been a victim of vandalism and complained about statements by
politicians. The Chamber that considered the case decided that Italy was in violation of Article 9 of
the European Convention of Human Rights and Article 2 of the first Protocol to the Convention,
reasoning that among the plurality of meanings the crucifix might have, the religious meaning was
predominant. The Chamber argued that 'the "negative" freedom of religion was not limited to the
absence of religious services or religious education: it extended to practices and symbols expressing,
in particular or in general, a belief, a religion or atheism. It added that this "negative right" deserved
special protection if it was the State, through public schools, which expressed a belief, thus placing
dissenters in a situation from which they could not extract themselves except by making
disproportionate efforts and sacrifices. Conversely, the Court disputed the claim by the Italian state
that the display in state schools of symbols associated with Catholicism served the value of pluralism.

Italian Government reaction

On 28 January 2010, the Italian government lodged an appeal to the Grand Chamber of the Court. Its
position was supported by the governments of Lithuania, Slovakia and Poland: "Lithuania's Ministry

28
of Foreign Affairs holds that the use of crucifixes in public in Catholic countries reflects the European
Christian tradition and should not be regarded as a restriction on the freedom of religion", stated its
spokesperson. By July 2010, twenty countries had officially expressed their support for Italy's appeal
against the ruling.
The decision of the Chamber of the Court was also deplored by the Orthodox Church of Greece.

European Parliament
In the European Parliament, two motions for resolutions were proposed: one by S&D group, calling
for "recognition of [...] the freedom of Member States to exhibit any religious symbol in public",
another by GUE/NGL and Greens/EFA groups, stating belief that "only states based on the principle
of the separation of church and state – as opposed to theocratic states – can find the proper solutions
to safeguard everybody's right to freedom of thought, conscience and religion, the right to education
and the prohibition of discrimination" and "it should not be compulsory to display religious symbols
in premises used by public authorities".

ECHR 2010 ruling

In March 2010, the case was referred to Court's Grand Chamber. Ten countries, 33 MEPs (jointly)
and several NGOs were authorized as third parties to present written observations, several others were
refused. On 30 June 2010, a hearing was held by the Grand Chamber, which on 18 March 2011
announced its decision, reached by 15 votes to 2, to overturn the ruling of the lower Chamber. It
granted that, "by prescribing the presence of crucifixes in State-schools’ classrooms - a sign which,
whether or not it is accorded in addition a secular symbolic value, undoubtedly refers to Christianity -
the regulations confer on the country's majority religion preponderant visibility in the school
environment." But it declared: "That is not in itself sufficient, however, to denote a process of
indoctrination on the respondent State's part and establish a breach of the requirements of Article 2 of
Protocol No. 1". It added that "a crucifix on a wall is an essentially passive symbol and [...] cannot be
deemed to have an influence on pupils comparable to that of didactic speech or participation in
religious activities".

Summary:
Offended by the display of crucifixes in her children’s school in Italy, Soile Lautsi asked that they be
removed. Her request went directly against long-held Italian cultural and religious traditions.
When the school refused Mrs. Lautsi’s request, she appealed to the Regional Administrative Tribunal
and eventually to the European Court of Human Rights (ECHR). In an astonishing decision, the Court
ruled that the crucifixes in Italy’s public schools had to go.
The Italian Government then appealed the case to the Grand Chamber of the ECHR (the highest
section of the Court). In March 2010, ADF International was given permission to provide legal
expertise in the case, submitting arguments on behalf of 33 Members of the European Parliament,
representing 11 different nations. ADF International argued that the lower chamber had overridden
the cultural sovereignty of Italy and placed ‘freedom from offence’ above the freedom to display
Christian symbols.
In a dramatic turnaround, the Grand Chamber reversed the lower Chamber’s ruling by 15 votes to 2 in
March 2011. It declared that Italy was within its rights under the Convention to allow the display of
crosses in classrooms. In his written opinion in support of Italy, ECHR Judge Bonello wrote, “The
Convention has given this Court the remit to enforce freedom of religion and of conscience but has
not empowered it to bully states into secularism.”
“The Grand Chamber did the right thing here in choosing to reverse the lower chamber’s flawed
decision,” said ADF International senior counsel Roger Kiska. “An outside judicial body demanding

29
that a nation must forsake and discontinue how it handles millennia-old traditions is a step towards an
authoritarian system that no country anywhere on the globe should welcome.”

44 - Map the legal proceedings identifying the different Parties, Courts,

Requests and Decisions on the José Manuel Fernandes’ case – Noronha de
Nascimento, Maria Gabriela and Portugal.

Courts

[2006] – JMF writes an article criticizing NN and the way he got elected, named “The Spider Web”

[2007] – N.N. sues JMF and his wife.

- N.N. demanded 150 000€ in non-pecuniary damages from JMF and his wife.

[2009] - The case was initially argued in a 1st instance court (civil court).
- The court decided that the wife should not have been charged and that JMF would have to pay
30 000€.

[2010] - Both parties appealed, and it was argued in the Appeal Court.
- N.N. demanded more money and JMF argued that his wife should not be included, this lawsuit was
breaching his right of expression and that the sum was disproportionally high.
- The court ruled that JMF and his wife would have to pay 60 000€. Even though some of his
comments did not breach freedom of expression, most were considered an attack on the judge’s honor
and had exceeded his right of criticize and inform. The defendant was not able to prove some of the
allegations made. It also considered the 2nd applicant to be a legitimate party to the proceedings
basing its decision on the applicants being married under the community property system.

[2010] - The applicants and Judge N.N., respectively, lodged an appeal and a cross-appeal against that
judgment with the Supreme Court of Justice.
[2011] - The Supreme Court ordered the case to be remitted to the Lisbon Court of Appeal for it to
correct its statement of facts, which would enable the Supreme Court of Justice to analyze the points
of law that had been raised.
- The facts were not clear.

[2012] - The Lisbon Court of Appeal delivered a new judgment in which it upheld its previous
judgment of 9 November 2010.
- The ruling was the same, the facts were highlighted.

[2012] - Judge N.N. lodged appeal with SCJ and applicants lodged with the SCJ a cross-appeal
against the judgment of the Lisbon Court of Appeal.

[2013] - Appeals before the SCJ were discontinued on the grounds of Judge N.N. not submitting any
grounds of appeal.
- JMF claims once again that the ruling is an infringement on his freedom of speech, however since
NN does not present ground for his appeal and JMF’s was a cross-appeal, the case gets dropped and
JMF is not able to reach the supreme court.

30
[2015] - ECHR declares that Government must pay 9 400€ for expenses JMF incurred in domestic
court.
- The defendant’s lawyer contacted the ECHR because he felt that the decision infringed his right of
expression and the amount was excessive
- The sum was small because the newspaper Publico had paid for most of the expenses, therefore JMF
could only sue for what he had spent.
- In theory the ECHR can only be contacted once all the domestic resources have been used and, in
this case, the supreme court had not been reached, nevertheless the lawyer claimed that the defendants
had tried to do so, and they did not reach it because N.N. had dropped the lawsuit.

Parties

During the presidential elections of the Supreme Court on September 2006, JMF wrote an article
saying that NN won the elections through corruption because he created a “spider web”. This led the
judge to sue the journalist and his wife for defamation in December.

Plaintiff: Judge Noronha de Nascimento

Defendant: José Manuel Fernandes, Maria Gabriela Neves
From the European Court: Portuguese Government and JMF and wife

The case of JMF was a case that involved 3 parties: José Manuel Tavares de Almeida Fernandes /
Maria Gabriela Neves Rebelo Cabeta Simão de Almeida Fernandes (wife of the defendant) and
Noronha de Nascimento (plaintiff).

Encontra um Summary na internet.

45 - Gillberg v. Sweden: A case on Privilege taken to the Limit

Facts
Between 1977 and 1992 a research project was carried out at the University of Gothenburg in the field
of neuropsychiatry, focusing on cases of Attention-Deficit Hyperactivity Disorder (ADHD) or
Deficits in Attention, Motor Control and Perception (DAMP) in children.
140 pre-school children, privacy-sensitive data, assurance of confidentiality: Parents to a group of
one hundred and forty-one pre-school children volunteered to participate in the study, which was
followed up every third year. Certain assurances were made to the children’s parents and later to the
young people themselves concerning confidentiality. The research file, called the Gothenburg study,
was voluminous and consisted of a large number of records, test results, interview replies,
questionnaires and video and audio tapes. It contained a very large amount of privacy-sensitive data
about the children and their relatives. Several doctoral theses have been based on the Gothenburg
study. The material was stored by the Department of Child and Adolescent Psychiatry, of which the
applicant was director. The project was originally set up and started by other researchers, but the
applicant subsequently took over responsibility for completing the study.
Applicant had therefore promised absolute confidentiality to the patients and their parents: “All
data will be dealt with in confidentiality and classified as secret. No data processing that enables the
identification of your child will take place. No information that has been provided previously or will

31
be provided to teachers about your child except that when starting school, she/he took part in a study
undertaken by Östra Hospital, “Participation is of course completely voluntary and as on previous
occasions you will never be registered in public data records of any kind and the data will be
processed in such a way that nobody apart from those of us who met you and have direct contact with
you will be able to find out anything at all about you.”.
One day, a request for public access comes forth: In February 2002 a sociologist, K, requested
access to the background material. She was a researcher at Lund University and maintained that it was
of great importance to have access to the research material and that it could, without risk of damage,
be released to her with conditions under Chapter 14, section 9, of the Secrecy Act (Sekretesslagen;
SFS 1980:100). University refuses TWICE and TWICE K challenges the decision before the
Administrative Court of Appeal.
One day a second request for public access comes forth: In the meantime, in July 2002, a
pediatrician, E, also requested access to the material, which the University refuses. The Decision is
challenged before the Administrative Court of Appeal.

In § 18 to 23: We can see the legal battle in the courts: The Medical researcher being ousted and the
Courts turning in favor of access.

In §24-28: The University also decides that access will be granted and orders documents to be moved
by the Applicant. Applicant refuses and is then threatened to be subject to disciplinary proceedings.
But the University changes course, declines access, and the Supreme Court is involved against this
position.
Criminal Proceedings against the applicant commence: The assurances of confidentiality given to
the participants in the study go, at least in some respects, further than the Secrecy Acts permits. The
Court of Appeal notes that there is no possibility in law to provide greater secrecy than follows from
the Secrecy Act and that it is not possible to make decisions on issues concerning confidentiality until
the release of a document is requested. It follows therefore that the assurances of confidentiality cited
above did not take precedence over the law as it stands. The applicant’s objections therefore have no
relevance in assessing his criminal liability.
A suspended sentence may be imposed by the courts for an offence for which a fine is
considered an inadequate penalty: such sentence is, as a general rule, combined with day-fines. A
maximum total of 200 day-fines may be imposed. When determining the amount, account is taken of
the economic circumstances of the accused, but a day-fine may not exceed 1,000 Swedish kronor
(SEK) (Chapter 25, Section 2, Chapter 27, Sections1and 2, and Chapter 30, Section 8 of the Penal
Code). In Sweden a suspended sentence does not refer to any specific number of days of
imprisonment.
Under Chapter 27 of the Penal Code a suspended sentence is always subject to a probationary period
of two years. A suspended sentence may be linked to specific conditions. If the person convicted
commits a new crime during the probationary period the courts may, having due regard to the nature
of the new crime, revoke the suspended sentence and impose a joint sanction for the crimes.

Case Summary and Output:

The European Court of Human Rights’ Grand Chamber held that a public employee is not protected
under Article 10 of the Convention when he refuses to make research material available in cases
where (i) such material belongs to a university, (ii) a university is ready to disclose it, and (iii) the
employee does not owe any statutory duty of secrecy towards research participants. The Applicant, a
university professor leading a project on specific disorders in children, had been convicted for

32
misusing his office after refusing to hand over documents to outside researchers on the grounds that
he had promised absolute confidentiality to the patients and their parents. While the Court did not rule
out that a negative right to freedom of expression (a right not to impart information) might be
protected under Article 10 of the Convention under certain circumstances, in the present case, the
Court ruled that the research material was owned the University and that finding for the Applicant
would run counter to the university’s property rights and also impinge upon the outside researchers’
rights to access the public documents. The Court also rejected the Applicant’s argument that his
situation was similar to a journalist protecting sources or to a lawyer-client privilege, finding instead
that since the Applicant had not been mandated by the research participants as their doctor, he had no
duty of professional secrecy towards them.

Facts:
The Applicant, a university professor, was responsible for a research project on hyperactivity and
attention-deficit disorders in children that was carried out between 1977 and 1992. According to the
Applicant, the university’s ethics committee had made it a precondition for the project that sensitive
information about the participants would be accessible only to him and his staff, and he had therefore
promised absolute confidentiality to the patients and their parents. In 2002, a researcher from another
university and a pediatrician requested access to the research material. After their requests were
refused by the university, they appealed to the Administrative Court of Appeal, which found that they
had demonstrated a legitimate interest and should be granted access to the material, conditional upon
certain restrictions on its use and a ban on removing copies from the university premises. The
Applicant refused to hand over the material, however, and his colleagues eventually destroyed it. The
Applicant was subsequently prosecuted and convicted of misusing his office. He relied on a
“negative” right to freedom of expression, the right not to give information under Article 10 and
Article 8 (respect for private and family life), to oppose the criminal conviction.
In a judgment of 2 November 2010 (see Information Note no. 135) a Chamber of the ECHR held by
five votes to two that there had been no violation of Article 8 of the Convention and no violation of
Article 10. The applicant requested a referral of the case to the Grand Chamber.

Decision Overview:
The Court found that the disputed material belonged to the university and consisted of public
documents subject to the principle of public access under the Freedom of the Press Act and the
Secrecy Act. Under Swedish legislation, it was impossible for a public authority to enter into an
agreement with a third party in advance exempting official documents from the right to public access.
For this reason, the assurances of confidentiality the Applicant had given to the participants in the
study went further than was permitted by law. In any event, the Administrative Court settled the
question of whether and on what conditions the documents were to be released to the two researchers.
The Applicant was not prevented from complying with the judgments by any statutory duty of secrecy
or any order from his public employer.
The Court did not rule out that a negative right to freedom of expression (a right not to impart
information) might be protected under Article 10 of the Convention. However, it pointed out that the
crucial question was whether the Applicant, as a public employee, had an independent negative right
not to make the research material available in circumstances where (i) it belonged to the university
and (ii) the university had intended to comply with the Administrative Court’s orders. In the Court’s
view, finding for the Applicant would run counter to the university’s property rights and also impinge
on the two researchers’ rights to receive information in the form of access to the public documents
concerned (protected under Article 10) and to have a final court judgment implemented (protected
under Article 6).

33
The Court also noted that the applicant’s situation could not be compared to that of journalists
protecting their sources as the information obtained by a journalist based on his or her source
generally belonged to the journalist or the relevant media outlet, whereas in the Applicant’s case the
research material was owned by the university and was in the public domain. Further, the Applicant
was not the doctor of the research participants and therefore did not owe them any duty of
professional secrecy.

Case Significance:
The decision establishes a binding or persuasive precedent within its jurisdiction. This was the first
case in which the Grand Chamber of the European Court of Human Rights recognized a self-standing
right of access to information held by public authorities. The ruling represents a significant reversal of
the Court’s earlier approach on the right to know. Together with two earlier cases, Társaság A
Szabadságjogokért (Hungarian Civil Liberties Union) v. Hungary and Kenedi v. Hungary where the
Court held that a civil rights group and an individual historian, acting in the public interest, were
entitled to access government records, the Court appears to have created a presumption under Article
10 of the Convention that state-held information of clear public interest must, in principle, be
disclosed.

46 - Economics of Litigation (Shavell)

Justice is about enforcement of the “right thing”, the law or certainty. It’s a state service involving
costs.

The Costs of Justice:

 Rules on Fees:
o Flat fee, hourly fee, contingent fee (% flat fee + success fee), pure success fee.
 Rules on awarding of costs:
o Plaintiff’s costs.
o Defendant’s costs.
o Court Costs: Loser pays all, winner pays nothing; Loser pays his own costs + 100% court
costs (PT); Loser pays his own costs + ½ court costs (PT).

Litigation is an Economic Decision: You have a Plaintiff (person who initiates litigation, the
complainant) and a Defendant (person who has to defend himself from the accusation). Litigation (for
the plaintiff) is an economic decision and should be done when:
Expected Gross Return > Cost

Stakes of case X:
 Probability that P will win: M (0-1)
 Expected gross return: (M*X) for each + then you must equate costs.
 Costs of Litigation: Cp & Cd
 Case has to be privately profitable:
o M*X > Costs => P will litigate.
o M*X < Costs => P should not litigate.

Settlement: bargaining range.

34
American Rule: Each pays his own costs.
English Rule: The loser pays his own costs and the winner’s litigation costs.

When the stakes of a case are 300, it means that the plaintiff considers to have suffered a damage of
300 and it is fault of someone who caused him the damage (a defendant). The probability of winning
is 50% because the plaintiff can’t be sure that the judge will be able to correctly value the damage as
300.
 X (stakes of case) = 300
 M (probability to win/lose) = 50%
 Cp = Cd = 30

Calculating Expectations:
 First draw a horizontal line with a central point valued as MX (50%*300) =150. This is what you
expect to happen. If this is verified, you still have to pay your own costs: Cp = 30.
 To the left-hand side of MX plot a point that = MX minus 30. That is where you will be left (net)
after the case with 120.
 The defendant who pays you 150 must also pay lawyers: Cd = 30.
 To the right-hand side of MX plot a point that = MX plus 30. That is where the defendant will be
left (net) after the case: Pay 180.
 In practice, if the court is involved, the Plaintiff receives 120 but the Defendant pay 180.

MX- Cp MX MX +
C
Plaintiff Net Expected Judgement Defendant Net
150-30=120 150 150+30 = 180
Settlement range is in joint interest of Plaintiff & Defendant

Minimum amount P would accept Max. D is willing to pay in settlement

This means that the least the Plaintiff will accept in order not to sue is 120 and the most the Defendant
will pay in order to avoid being sued is 180. What they will settle depends on bargaining power.

There is overlap when P & D are mutually optimistic.

Risk aversion makes range bigger: The plaintiff is willing to take less and the defendant to pay more.

When P & D are mutually optimistic, but plaintiff is more optimistic and thinks that:
 M is higher => Mp is not equal to Md
 MpX-Cp > MdX + Cd
 There is no overlap when people have different expectations.

Different Beliefs: asymmetric information:

 D knows better if he was negligent.
 P knows better about level of damages.
 Knows better = Better information.

Contingent Fees for Attorney:

35
 Lawyer only paid 1/3 if he wins => The Positive Case.
o Solves P’s liquidity constraint.
o Motivation Effort of lawyer (solver moral hazard problem).
o Risk aversion is VIP because P shares risk with lawyer.
 The Not Positive Side:
o Asymmetric information seems to be a good thing (lawyers’ monopoly): Lawyer knows
best if:
 Case is good or not.
 How good the case is.
o But lawyer, who also has asymmetric information on judicial uncertainty, has incentive to
settle too quickly.

Divergence: Private vs Socially desirable level of suit.

 “If the hourly rate of a lawyer is 250€ and suit would require only 20 hrs of a lawyer’s time, the
cost would be 5000€, excluding the consideration of the Plaintiff’s time, which could well be
significant. Thus, even if individuals are certain to prevail in trial (Mp=1), they will NOT bring
suit unless their losses surpass a fairly significant threshold.”
 Private Incentive to Sue is misaligned with the socially optimal incentive to do so:
o Oversuit: when a plaintiff contemplates bringing suit, he considers only his own costs
and doesn’t take in consideration the Defendant’s costs or the State’s costs that the suit
will engender. The P may be led to bring suit when the total costs associated with the suit
would make that undesirable. (Strict liability in car accidents).
o Undersuit: The P would usually not be expected to treat as a benefit to himself the social
benefits flowing from suit, notably its deterrent effect on the behavior of injurers (or
statistical records): what he does consider as a benefit is the gain he personally would
obtain from prevailing. (Cases where serious harm occurs but rules on evidence are very
restrictive: tapings and recordings are not allowed unless defendant knew he was being
taped).

The Risk of a Saga: Affirmance & Reversion

 Locus Standii – The right or capacity to bring an action or to appear in a court.
 Direct Appeal – if I win my case, does my opponent can appeal to a higher court.
 Discretionary Review: Screening – is the authority appellate courts have to decide which appeals
they will consider from among the cases submitted to them – delusion of right of people to have
full hearing.
 Unexpected appeal from defendant – costs and new bargaining range.
 Affirmance: when a higher court confirms or affirms what the lower court already concluded
some time before. There isn’t much social utility (to be derived from the appeals) when a case is
affirmed. There have been private and social costs incurred in to achieve the same result.
 Reversion: when a higher court quashes, changes or doesn’t agree with what the lower court
already concluded. Here there is more social utility since there has been a further clarification of
the issue at stake.
o Only reversal has a positive social value, not affirmance.

36
 1st instance Court
Social Decision

Affirmance/reversion
Case Ends Appeal to (2nd instance
of 1st instance decision

Appeal to Supreme Affirmance /Reversion

Case Ends
Court of appeal decision

(if allowed: Appeal to Affirmance/reversion

an international Court, of Supreme Court
say ECHR) decision
Welfare = Expected value of reversal – Total cost of appeal.
Cab-Rank Rule (not applicable in the US): No counsel is entitled to refuse to act in a sphere in which
he practices, and on being tendered a proper fee, for any person however unpopular or offensive he
and his opinions may be.

47 - Property, Bare Property and Usufruct

Property is a very broad topic: we can assess it from a point of view of the underlying principles
(abstract types of rules) or from the point of view of concrete specific choices, that is whether the
epicenter of a specific legal system is concretely based on:
 Private property
 Commons (a system in which property is public)

Wacks:

Ownership: Epicenter of our social organization.

 The manner in which the law defines and protects this exclusive right is an important market of
the nature of society.
 The Law always has something to say on this subject – it will either:
o Confer absolute rights of property.
o Recognize collective rights.
o Adopt a position in between.

Steps in the law of property:

1. Determines what counts as property: Lands, buildings and goods. Property is what the law
declares it to be.
 In Common Law:
o Real Property – land as distinct from moveable of personal possessions.
o Personal Property
 In Civil Law:
o Immovable Property
o Moveable Property
2. When (on what conditions) a person acquires a right to a thing?
 Donation, acquisition, oral or written form.
 When an owner is an owner.

37
 o Discovering who has the strongest long-term right to control the thing in question.
o Important for transactions: normally the right of ownership includes the right to transfer
ownership to another.
o In the case of land, I may not know whether the seller is the legal owner.
o Reason for public land registration: enable prospective buyers to establish who the
genuine owner is.
3. The manner in which the Law protects this right.
 The law may be called upon to settle a contest between the owner and the possessor of a thing.
 While we know that the owner is the person with the strongest long-term claim to the possession
of a thing, sometimes these two positions are severed.

Ownership: The exclusive right to use, possess and dispose of property. It is subject only to the rights
of persons having a superior interest, and to any restriction of the owner’s rights imposed:
 By agreement with third parties.
 By operation of law.

Possession: Actual control of property combined with the intention to use it, rightly or wrongly, as
one’s own.

Ex: Suppose I rent my villa to you for a year. You currently possess the property, and while I have an
ultimate right to possess it, some legal systems favor the right of the tenant over the owner, others
prefer the owner.

Friedman:

Property or Liability Rules: Different types of rules are chosen in accordance with different types of
interests or assets that need both protection and legal framework to be known ex-ante by the citizens.

Liability Rules: The right to performance of a contract or the right not to have your property
accidentally damaged is a liability right, protected by Civil (Contract and Tort) Law. A Liability Right
to something means that if it is taken, the taker is punished in a fashion intended to make it in his
interest not to have taken it.
 About Money.
 Damages equal to damages done.

Property Rules: The right to possession of something is a property right, protected by criminal law.
 Not just about money.
 Damages high enough always to deter.

In a world with only liability rules, if someone wants your car, he doesn’t have to offer you a price, he
simply takes it and lets you sue him for its value. This would make stealing an efficient transaction,
and people would have no incentive to spend time and money guarding their cars against thieves,
since if it were stolen, they would be fully compensated. Moreover, theft would be rare in a world
where the thief would have to fully compensate the victim. However, courts can’t measure the value
of a car to its owner very accurately, and the cost of finding out who the thief is and proving that he
did, and establishing an estimate of its value is substantial, so protecting property with a liability rule
is an expensive approach that would lead to inefficient transfers. Therefore, the best approach is a

38
property rule. Under a property rule system, if a car is worth more to you than to me, you will be
willing to make me an offer that I will be willing to accept. In this case, value is demonstrated not by
the court’s best guess, but by what offers you are willing to make and I am willing to accept.

In conclusion:
 Property Rules are attractive when the cost of allocating rights by market transactions is low
(equals asking for permission).
 Liability rules are attractive when allocating rights by litigation is low (since it is too difficult to
ask permission, only if damage is done, we seize the Court).

Trespass:
 By people (low transaction costs): If I deliberately trespass on your land, I am liable without
regard for how much damage I did or how reasonable my action was. Your right to keep out
people is enforced by a Property Rule (that favors market transactions). If crossing your land is
worth more to me than to you, I can ask permission to cross once, or buy it permanently under the
form of an easement.
 By cattle: If my cattle stray onto your land, I pay only the damage that they actually did. Your
right to keep out cattle is enforced by a liability rule (used when transaction costs are high). If I
want to keep my cattle on my land, I can’t readily buy the permission of every landowner onto
whose property they might stray.

Property as a bundle of rights:

If you can sell easements over your property, then it is easier to understand Property as a Bundle of
Rights, and the concept of many potestative options available under the big right of property, instead
of Property as one indivisible right.

What rights should always go together?

 Use of land must be considered when considering farming (Crops or trees with entry of 3 rd parties
onto land).
 Value to me of forbidding airplanes from flying over crops is so low that it should be left out of
the bundle.
 Might be different with typically adjacent pieces of land.

Specific problems with Vertical Adjacency:

 Rights to land are made up of 3 separable Estates:
o Mineral Estate
o Support Estate – valuable both to the owner of the surface who wants something under
his house to hold it up, and to the miner who wants to get out all the coal.
o Surface Estate
 Law permits transactions between owner of surface and owner of mining and gives rights to
whoever values it most.
Why Property (that needs re-bundling) vs (the previous system of) Commons?
 The dog as the “bionic burglar alarm”:
o Farming land in common is a pain: you spend as much time watching each other +
arguing who is or isn’t doing his share as you do in digging the ground + pulling out
weeds.

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 o Problem would disappear if you convert common land to private property (each lives +
dies according to amount of work he is willing to put in).
o But harvest by day + watch (lazy or greedy) neighbor by night.
o Domestication of dogs allows you to put private property into practice.

 Real Property as the optimal basis for re-bundling

Only real property is re-bundable to some extent:
o Elaborate recording system: title deeds and land registries.
 The buyer can know about all the contracts that involve that piece of land.
 The ability to re-bundle is limited by the ability of third parties to find out about
the recording system of what they are getting.
o Introducing diligence over boundaries.
o Limits on re-bundling “touch and concern doctrine”.

Reasonableness is determined by weighing the utility of the restraint vs the injurious

consequences of enforcing the restrain:
o The utility of the restraint: I am a believer in “no work on Saturday” so I gain utility by
selling my car to someone who promises not to drive it on Saturday.
o The injurious consequences of enforcing the restraint: But then someone has to monitor
the buyer’s activity on Saturday – and what if, in turn he decides to sell to someone else?

Real property can be divided into usufruct and bare property:

 Usufruct is the right of use and enjoyment of the property, that is the right to use it and earn the
income from it. In the case of house or flat, that means the right to live in it or to rent it out. The
usufruct holder has no power to sell the property. He or she must look after it, keep it maintained
and pay the tax on it.
 Bare Property gives you long-term control over the property. Bare ownership is a right of virtual
ownership. For example, the bare owner of a property has no right to occupy it or rent it out. On
the other hand, when the usufruct holder dies, full ownership of the property is carried over to the
bare owner without any liability for inheritance tax. He can then dispose of it (by sale, gift,
bequest, etc.) as he wishes.

When purchasing a property, splitting the ownership between a bare owner and a usufruct holder can
facilitate the future transfer of the property. When the usufruct holder dies, his or her right to use the
property and earn the income from it is automatically carried over to the bare owner, who thus takes
over the full ownership with no inheritance tax to pay.

In conclusion, according to Wakcs, the law of property determines, first, what counts as property;
second, when a person acquires an exclusive right to a thing; and third, the manner in which it
protects this right. Property includes land, buildings and goods. The common law distinguishes
between real property and personal property while civil law systems distinguish between moveable
and immoveable property. Considering the owner, this is determined by discovering who has the
strongest long-term right to control (which normally includes the right to transfer the ownership to
another person) the thing in question.

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 Moveable - any objects and goods that can be owned, excluding land and any immoveable
property
 Real - land, or anything built on land.

Out of these, according to Friedman, only real property has an elaborate recording system, diligence
over boundaries (so that future buyers get all the relevant information) and limits on re-bundling. The
former means it can be too hard for me to pass certain conditions on the use of a car I’m selling (i.e., a
car which is only used for work). Lastly, only real property is re-bundable, though courts determine its
limits. It makes the most sense to keep a recording system of real property since it is immovable, and
we can easily determine its physical boundaries. Having a registration system provides easy access to
information about the land itself (size, what it includes) and the owner so that it is easier for potential
buyers/renters to know/observe what they are buying and from whom with due diligence. Ownership
of land is controlled by an elaborate recording system which includes title deeds, land registries,
easements and this is what allows for the re-bundling of rights of real property.

Ownership vs Possession
One specific situation where ownership is questionable is in the case of bare property and usufruct.
According to this approach, bare property includes the property itself but not the right to use it or take
profit from it while the usufruct is the right to explore it without actually owning it. The usufruct is
responsible for paying taxes, maintaining and exploring as he wishes until the pre-defined period end
or the usufruct dies. Considering that the age of the usufruct is an important factor, since after he dies
the total ownership of the property goes immediately to the bare property owner, the appropriate
discount rate is calculated according to the usufruct’s age in the moment of the contract. The bare
property owner pays a smaller price, calculated accordingly with the usufruct’s age, and remains the
owner of the property while the remaining value (the market price minus the price payed by the bare
property owner) is the value of the property that will be explored by the usufruct until his death.
As an example, we can think of a building. The bare property owner owns the structure and the land
where the building is situated. He also owns the right to sell that building. The usufruct is the person
who explores the building, whether it is to build a hotel or rent the apartments to families. He is
entitled to all the revenues from that building but also all the costs, meaning he is responsible for
paying the taxes regarding the building and all required licenses to explore it.

48 - The (un)necessary connection between mineral estate, support estate,

surface estate

Problems with vertical adjacency:

Rights to land are made up of 3 separable Estates: Mineral Estate, Support Estate and Surface Estate.
The mineral and surface estates are two legal interests that may be separated, i.e., may belong to
different persons. This means that one person may own the surface estate, and another own the
mineral estate underlying the land. The surface estate is what we typically understand to be property
ownership, that is the corners of your property and everything within them. The subsurface rights
occur beneath the surface estate, and they’re often called mineral rights. Not many people own both
the surface and subsurface rights to their property, but if you do, you have considerable legal authority
to determine if and how, for instance, oil and gas will be developed on your land. However, if you
only own the surface estate, anyone holding the mineral estate has a legal right to access the mineral
reserves under your property. Such access can include tree and ground clearing, road building, worker

41
housing, pad construction and drill rig placement, among other things. The Support Estate is valuable
both to the owner of the surface who wants something under his house to hold it up as it is to the
miner who wants to get out all the coal (or gas/oil).

Lateral and subjacent support, in the law of property, describes the right a landowner has to have that
land physically supported in its natural state by both adjoining land and underground structures. It’s
important to notice that the support estate is valuable for both the owner of the surface, who wants
something under his house to hold it up, and, for example, to a miner, who wants to be able to get out
the coal. So, it makes sense for the law to permit transactions between the owner of the surface and
the owner of the mining rights to move the support right to whoever values it most.

Note: All the coal is not greed, it is an efficiency of scale. Law permits transactions between owner of
surface + owner of mining rights to whoever values it the most.

If you own the mineral and surface estates: You have the legal right to decide if development will
occur on your land. If you chose to develop oil and gas on your property, you can negotiate with an
oil and gas company for financial compensation, including but not limited to royalty shares,
production revenues, etc. Subsurface estate (or “mineral right”) owners are also in a better position to
negotiate for added protections on the surface estate such as the timing and placement of drilling
equipment, through surface use agreements. And of course, you have a legal property right not to
lease your mineral rights, and to prevent oil and gas development on your property.

If you own only the surface estate: If you do not own the subsurface estate (“mineral rights”) under
your property, your right to shape oil and gas development on your property is much more limited. In
a 1999 challenge brought by a private property owner in the Mat-Su Valley over coal bed methane
drilling, Unocal argued it need not receive the surface estate owner’s consent prior to accessing the
hydrocarbon resources below the landowner’s property, and that it should not have to pay damages
for tree cutting and other “non-negligent” activities needed to access the minerals rights. Nonetheless,
the Alaska Division of Oil & Gas requires oil and gas corporations to post a bond to cover potential
harm to surface owners’ property and interested property owners should contact ADOG for more
information.

49 - The significance of a Doorbell as related to the distinction, trespass by

cattle/trespass by humans and the choice of Property/Liability rules

A property law is similar to the right to possession of your car, which is protected by Criminal Law.
Property rules are attractive when the cost of allocating rights by market transactions is low. Hence,
an individual trespassing a terrain is considered as breaking a property law, because you have the right
to not have your terrain trespassed, but above that, if he valued going through your terrain more than
you mind it, he could have asked and/or paid you to do it.

A liability law is the right of performance of a contract or the right not to have your property
accidentally damaged and it is protected by civil law. Liability rules are attractive when of allocating
rights by litigation is low. Therefore, when cattle trespasses there was no prior intention and the
owner will pay for the damages that the cattle might have caused, furthermore it would be virtually
impossible for the owner to talk to all the proprietors of the neighboring terrains and pay them upfront
for the possibility of some of his cattle accidently entering his terrain.

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Consider the distinction between trespass by people and trespass by cattle. If I deliberately trespass on
your land, I am liable without regard for how much damage I did or how reasonable my action was. If
my cattle stray onto your land, I am liable only for the damage they actually do. Thus, your right not
to have people walk on your land without your permission is enforced by a property rule; your right
not to have cattle stray onto your land is enforced by a liability rule. The obvious explanation is that if
crossing your land is worth more to me than it costs you, I can buy permission permanently, in the
form of an easement, if that is what I require. But if I want to keep cattle on my land and not others, I
cannot readily buy the permission of every landowner onto whose property they might stray (high
transaction costs). Since my cattle can’t ring a Doorbell, it can’t ask for permission to enter the house.
Regarding these two distinctions, in this scenario the doorbell has significance because it can be seen
as a way for whoever is attempting to enter a terrain to ask for permission to do so, respecting the
house owner’s Property Rule. If I arrive at someone’s house and the gate is slightly open, by ringing
the doorbell I’m asking for permission (waiting to be invited) and respecting the house owner’s
Property Rule, since he/her has the right to keep out people of his/her house enforced by that rule
(when transaction costs are low).

Not having your house invaded without permission is a right governed by a property rule. This is
because the transaction costs of asking for permission to enter are very low (ringing the bell and
waiting for acceptance). If trespassing was governed by a liability rule people could enter and leave
houses without permission, only paying for damages when they occur, which is not reasonable at all.
If someone values entering my house more than I do they will make an offer for the house, hence the
use of a property rule.

50 - Difference between Contracts and Social Agreements

A contract is an agreement with specific terms between two or more persons or entities in which there
is a promise to do something in return for a valuable benefit known as consideration.
The main purpose of Contracts is to enforce the agreement of the parties. For there to be a contract,
substantial agreement must exist, and the parties must have freely intended to be legally bound.
People sign contracts because they want to be sure that even if the other party changes his/her mind
and doesn’t want to comply with it, the law will compel him/her to do so. Furthermore, a contract is
only valid if both parties have something to gain from it – principle of consideration. The breach or
non-performance entitles the injured party to protection under a liability rule.

The existence of a contract requires finding the following factual elements:

 Offer
 Acceptance of that offer which results in a meeting of the minds.
Then, according to different legal systems, we might include elements that might not be obvious in
the offer / acceptance:
 Promise to perform.
 Valuable consideration: promise or payment in some form.
 Time or event when performance must be made (meet commitments).
 Terms and conditions for performance, including fulfilling promises.
 Performance.

Although different legal systems call for multiple requirements, in order to acknowledge that a
contract exists the minimum requirements are an offer-to be bound in contract and an acceptance-

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to be bound in contract. “To be bound in contract” is distinguished from other social arrangements,
that albeit agreements, fall short of a contract.

Social arrangements, while their breach may cause considerable inconvenience, distress and even
expense, they fall short of a contract as understood by most legal systems. When agreements are
entered into a social context, it is presumed that the parties did not wish for there to be legal
implications. In order to constitute a binding contract, the law normally requires that the parties
actually intend to create legal relations, which is not the case.

51 – Contracts (Friedman)

A classical Liability Rule view on a Contract

 Contracts are meant to be performed.
o It is a question of word, honor, trust.
 Breach or non-performance entitles the injured party to protection under a liability rule: damages
suffered equal to damages done.

The Need for Contract Law (A chapter in the Civil Code with rules about contracts)
Contract and contract law have specific things: while contract law lays down very general things for
all contracts, a contract has specific things. The courts don’t enforce what is written in each contract
but enforce what is written in the civil code about every contract.

There seems to be empirical evidence that, although persons sign unilateral, bilateral or multilateral
agreements, it is rather difficult that in practice they keep their word.

For example:
 Paying Upfront: A hires B to build a house on a property A owns. They agree on a certain price
and A pays B immediately. If there were no enforceable contracts, B could just run off with the
money and A would never see him again.
 Paying at the End: B finishes the house and asks to be paid. A suggests to re-negotiate the terms
and offer a lower price. Until B is paid the house belongs to him but it is on A’s land. If B do not
accept A’s new and lower price, he is free to tear it down.
 Paying as we go along: When the house is almost built, B suggests a re-negotiation and increase
the price. A could pay someone else to finish it but, without the original contractor’s detailed
knowledge of the project that may be a costly proposition.
 Reputation: Trusted private arbitrators provide an alternative to a court system, not by enforcing
contracts directly, but by generating the public information necessary to allow reputational
mechanisms to enforce them. However, if the contractor is from “out of town”, there is no
reputational constraint. In this case the victim is not in position to prove the fact to future
interested parties and thus impose reputational costs.
o Only works in small and strict circles.

If it is the courts who ultimately enforce contracts, why not let just the court read what the parties
wrote and enforce it?
 Courts may not enforce contracts as written because they believe that they know better than the
parties regarding what the terms should have been – Paternalism.
 You still have to decide whether a contract exists and what its terms actually mean.

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 Even when contract exists and there is agreement on meaning, contracts never say enough.

We need contract law because judges look at individual contracts and doctrine gives wide support to
the possibility that, when judges find difficult terms making the contract difficult to comply with, it is
ok for the judge to re-write that contract.
The Law is a default, and sometimes imperative, brunch of rules that the judiciary falls back on.

Therefore, there are still 4 main Problems:

 Paternalism – courts believe they know better what terms should have been.
 When is an agreement a contract?
 What do the word in contracts mean – we use theory on interpretation to help us.
 How much detail is necessary in a contract? – Incompleteness of contracts theory; we use
remission to help us

Paternalism – Courts believe they know better what terms should have been.
 Opposite to Freedom of Contract.

The Case in Favor of Freedom of Contract:

We expect rational bargainers to come up with contract terms that maximize the net gain.
 For example, if I am a landlord letting out an apartment whose market rent would be 1500/month.
Yet the apartment is covered by the city’s rent control ordinance which limits the rent to
300/month – constraint on contract. If the city controls only the price, but not the other terms, I
will respond by lowering the quality of the apartment in whatever ways save me most money. I’ll
be losing 1200 every month so I won’t repair the hot water system, I won’t invest in central
heating, I won’t fix the plumbing system, I won’t paint the house. I am imposing a cost on tenants
(that is greater than the savings to me because I get a ruin back). In conclusion, the best would be
to set my own price. The next best is to lower the quality.
 Here we have a provocative argument against minimum wage:
o I would survive and be happy with 400€ but the minimum wage is 485€ and employers
can’t pay that much so I won’t get a job and he won’t get an employee.

The Case Against Freedom of Contract:

So, when is it good to allow a court to re-write a contract?
Contracts that benefit parties signing it but not produce net benefits.
 Abusive or unconscionable clauses:
o A court refuses to enforce a contract on the grounds that one of the parties must have
been incompetent, since otherwise he would not have agreed to those terms.
o Example: I agree to deliver 20 tables to you by May 10. I also agree that if I fail the
deadline, I will pay 100.000€. If I fail to deliver and you sue me, will the court enforce
the clause? Yes, if the court believes that 100.000€ is a reasonable estimate of the cost to
you of my nonperformance. In this case, the liquidated damages term of the contract will
be enforced.
o Court may see the term as a Penalty Clause, which is too harsh and abusive. According to
Friedman, a penalty clause is a private version of a property rule. The idea is not just
compensation, it is to make sure you will comply with. The cost of moving resources to
their highest value used through the market is cheaper than doing it through the court
system.

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  The court can estimate the real cost of the failure: to identify the penalty clause.
 Penalty clauses are never efficient.
 Duress: Duress is the unlawful pressure exerted upon a person to coerce that person to perform an
act that he or she ordinarily would not perform. It also acts as a ground for judicial re-writing of
contracts. Duress can be either physical (contract made at gunpoint) or mental (threat to harm
family/friends) coercion, but the coercion must be to the extent that it deprives the other person of
free will or freedom of choice. This means that the person is left with no reasonable alternative
other than to enter the contract. There are 3 types of duress:
1. Real duress - A mugger asking for money or he will kill you (Life or death decisions –
Third party gets you in trouble).
a. Enforceability is good: otherwise, mugger will refuse the check and kill you, or
take the check and kill you before you stop payment.
b. Enforceability is bad: offering people the choice between their money or their life
becomes a profitable business, increasing the probability of being mugged.
2. Semi-Real duress - A tugboat demanding money to save your ship (No threat to your life
– Gets you out of trouble).
3. Bogus Duress – Having to sign a contract without being able to discuss the terms:
Contracts of adhesion, offered on a take it or leave it basis.
a. All terms are drawn up by one party, which maximizes it’s profit by the
acceptance of the other party.
b. Motivations for this type of contract are reducing costs of drawing up a contract
and reducing the risk that employees will cheat.
c. Very detailed contract to prevent court interpretations.
o Should a contract made under duress be enforceable (by the courts)? Under these
circumstances, contracts are considered to be void (not valid or legally binding).
Example: I have to pay €100 so that I don’t get killed. This contract is made under duress
and may possess benefits for both parties (not get killed, receive 100€). However, this
would make life for money profitable – it is not enforceable to avoid these situations (also
the case with peace treaties).

When does a Contract exist? When is an Agreement a Contract?

 Solution of Formality: Oral contracts can be hard to be upheld in court, therefore one solution is
formality. To ensure that an agreement counts as a contract in court it should be signed in red ink,
or sealed with purple sealing wax, or notarized, or deposited with the proper official, or all of the
above. Such actions translate into “we intend this agreement to be enforceable.”
 Doctrine of Consideration: A variety of other approaches are, in various legal systems, used to
determine what is or is not a binding contract. One of the most important ones in our legal system
is to count as a contract only an agreement from which each party gains something. In other
words, the common law requires evidence of consideration in return for a promise.
o Only if both benefits.
o My rich uncles say a niece like me should go to Harvard and he’ll pay for it. 6 months
later after getting admitted I send him the first bill. His lawyer says that since I am giving
back nothing in return there is no contract to enforce.
 Detrimental Reliance: Occurs when a party is reasonable induced to rely on a promise made by
another party. Such promises are contracts and should be enforced. If they are breached, and the
person can prove that the “average person” would have believed in the promise, he/she can sue

46
 the breacher for all costs that he/she engaged in after detrimentally relying on the promise. In law
it is used the standard of the Bonus Pater Familias. In an attempt to convince the Judge:
o By the party that alleges that a contract exists: because the offeror was not diligent or
careful in phrasing a conversation, he misleads someone – anyone would have believed in
that statement to be an offer. So that party detrimentally relied on something that albeit
not intended to be an offer would have been perceived as an offer by a “reasonable
person”.
o By the party that alleges that there is no offer and therefore no contract: No one
“reasonable” would have taken the statement made to be a “contractual” offer. Here is the
offeree that is not careful or diligent in interpreting the phrase.
o I can sue him for all the costs I engages in after detrimentally relying on his promise: the
promise was a contract and should be enforceable. The alternative: limit is a declaration
that is manifestly not serious, and I should have obtained a piece of paper signed in red
ink. If I can prove that anyone would have believed in his promise, the contract is
enforceable.

Bonus Pater Familias: Abstract standard of social diligence in social relations:

 The average type of an honest, prudent and industrious man whose behavior in relations with
other citizens is given as a pattern of an upright man and may be required by anyone.
 Acting contrary to what a Bonus Pater Familias would do in a given situation may serve as a
basis for measuring culpability and liability in a specific case.
 Model of capable and responsible person, and if it is not possible for an ordinary citizen to
know all of the law, this represents a standard from which to measure liability. Of an ordinary
citizen we do not expect that he knows the entire criminal code on a certain subject, but he
knows he may not strike or harm others, and knows that much less may he kill, in the same
way as he knows that there are speed limits.

Not all contracts have to be in written form. A contract does not generally need to be in writing. Apart
from certain contracts, such as selling a house, no written formality is required to bind parties. An oral
agreement is generally no less binding than a written one. When an actress backed out on her verbal
promise of starring in the film “Boxing Helena”, she had to pay $8 million in damages to the
producers.

Furthermore, due to increasing government paternalism – in the name of consumer protection – there
has been a rise in the number of formalities, including written, or more usually, printed contracts
required by legislation. These contracts have still to comply with certain criteria: they cannot be
considered if: any party is misrepresented; there is a mistake; there is a case of duress; any party has
wrongful intentions.

What do the word in contracts mean.

 It does not cover any contingency.
 Contracts always leave gaps to be filled in by the court.
 Use theory on interpretation to help us.

How much detail is necessary in a contract?

 Use remission to help.

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52 – Contracts (Wacks)

Classical Liability Rule view on Contract:

 Agreements are an indispensable element of social life.
 When you agree to meet me for a drink, borrow a book or give me a lift to work we have entered
into an agreement. But the law will not compel you to keep your word.

The need for Contract Law

 These social arrangements, while their breach may cause considerable inconvenience, distress and
even expense, fall short of a contract as understood by most legal systems.
 Two theories to help distinguish Social arrangements from Law:
o Doctrine of Consideration
o Detrimental Reliance

Freedom of Contract:
One of the hallmarks of a free society is:
 From the standpoint of the free society: The autonomy granted to members of society to negotiate
the bargains of their choice, as long as they do not harm others.
 From the standpoint of utilitarianism: By enforcing contracts in accordance with the values
placed on things by the market, resources (goods and services) may be bought by those who place
the highest value upon them.

In a free market, individuals who sign contracts are considered to be the best judges of their own
welfare. Thus, grounding the argument that judges should enforce contracts as written.

Freedom of Contract is the opposite of judicial paternalism. The doctrine of freedom of contract has
always been respected by the Law, which allows parties to provide for the terms and conditions that
will govern the relationship. The Principles of European Contract Law, however, state that this
freedom is subject to the requirements of good faith, fair dealing and the mandatory rules established
under the Principles.

The case against freedom of contract – Those who champion that individuals are the best judges of
their welfare have failed to acknowledge that contract law has been developed with a high degree of
mystification circa the concept of ‘equality of bargaining power’. Do I really get to bargain the
contract with the electricity company?

Judicial Paternalism is an attempt to redress the balance.

 The law tempers the hardship of so-called ‘unfair’ terms through:
o Judicial rewriting of (unbalanced) contractual clauses (hardship clauses).
o Legislative strategies “by default and/or imperative rules” (laid down in contract law) that
automatically fill in gaps in a contract.
 MW as a Pure Default Rule – filling in gaps in a contract: Two parties write a
full-time contract, but they omit / forget to fill in the amount of the monthly
wages. The MW standard is preempted into the contract under the form of “at
least 650€ per month”.
 MW as an Imperative Rule – Re-writing unbalanced terms: Two parties write a
full-time contract and fill in the amount of monthly wages as being 500€. The

48
 MW standard is preempted into the contract and writes over 650€ instead of
500€. The hardship clause (500€) is considered null and void.
o Substitute hardship clauses with more mellow and balanced contractual conditions. To
achieve that, the judge uses legislation to re-write the contract.
o Consumer legislation
o Other institutional means, such as empowering courts to disallow unconscionable clauses
and permitting them to enforce only reasonable terms.
 What is reasonable: Bonus Pater Familias.
Investors are scared of Judicial Paternalism because they invest on the basis of contractual terms that
may be re-written ex-post against the investor’s will.
 One of the main points of the Merchant of Venice.

When an agreement is a contract?

In order to constitute a binding contract, the law normally requires that the parties to the agreement
actually intend to create legal relations. Breaking a promise is almost always regarded as immoral
(wrong, unethical), yet it results in legal consequences only when certain requirements are satisfied.
 However, a person may be held liable even before his offer is accepted - for failing to negotiate in
good faith (in FR, GER, NL).

A contract is a concept of offer and acceptance. By making an offer, the offeror expresses – by
word, speech, fax, email or even by conduct (form of contract) – his readiness to be bound in contract
when it is accepted by the person to whom the offer is addressed, the offeree.
 Sometimes in complex negotiation is difficult to say who is the offeror and the offeree (offers and
counter offers, etc.).
Let’s examine. The extent to which – if at all – an offeror should be bound by his offer:
 Contract Law: until you accept my offer, I am at liberty to withdraw it.
 Ger/ Swiss/ Gree / Aus / Pt Law: I am bound by my offer; I cannot simply revoke it with
impunity.
o A purported (does not follow legal procedures) withdrawal has no legal effect.
 Fr / It Law: intermediate position - an offer may not be revoked before the expiry of a specified
period. If no period is specified in the offer, it may be withdrawn until acceptance. However, if
the offeree has relied on the offer in good faith, he may claim damages for his loss in preparing to
perform his side of the bargain.

Doctrine of consideration
The Common law requires evidence not only of offer and acceptance but also of:
 Serious intention to be legally bound.
 Consideration: the ‘bargain’ element of the agreement: each party must stand to gain something
from the agreement or else they would not have entered into it. Advantages go both ways.
o A promise to do something
o A promise not to do something
o Goods
o Services
o Money
o If consideration is a good thing and positive in nature, we say that he or she gained
benefit.
o If it is negative, the party suffered a detriment.

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Example: Carlill v Carbolic Smoke Ball company case of 1892: The CBS company advertised a
smoke ball claiming that when used 3 times a day for 2 weeks, according to printed directions, it
would be impossible for users to contract Influenza. As a consequence, in the add, the company
undertook to pay 100£ to anyone who later caught the flu. Mrs. Carlill bought the ball, complied with
the instructions and contracted influenza. Can the contract be enforced?
 Has an offer been accepted?
o The advertisement represents an offer of a unilateral contract (Severance between the
time of the offer and the time accepted) between the company and anyone who having
seen the ad, acted on it.
o Since Mrs. Carlill had satisfied the conditions, she was entitled to enforcement of the
contract.
o Informing the company that she had used the ball formed part of the acceptance.
 Is there consider consideration?
o The deposit of 1000£ as warranty for proposal, represented the company’s intention of
being legally bound.
o Is there any benefit for the company once the ball is sold? The court ruled that Mrs.
Carlill conduct (buying, using according to instructions and informing what went wrong)
constituted consideration for the promise to pay her the 100£ reward. In fact, she gave
time and actions to the company, which was her consideration.

Example 2: If I agree to sell you my car. I stand to gain the purchase price and you the ownership of
the vehicle (consideration – advantages to both parts). If I ignore my agreement (promise) with you
and sell my car to someone else, you may invoke the law to obtain a remedy because you relied on me
keeping my promise. This is known as breach of contract.

Rules on breach of contract – Before we say that a contract has been breached, we have to check
seven conditions:
1. Offer
o Is the offer social or does it have a more legal aspect?
o Social agreements are not binding.
2. Consideration
o Sometimes it is difficult to predict what is going to happen.
o Usually, it is necessary that in return for a promise the promisee must give consideration.
o It is what one party promises to give to, or promises to do for, the other party.
o A promise of a gift or of free services does not usually create a contractual situation
according to the English Law, because the recipient has not provided consideration.
o Reciprocity
o If it is a good thing for a party and positive in nature, the party has gained a benefit.
 Receiving a payment of money.
o If it is negative in nature, the party has suffered a detriment.
 An employee agrees in his employment contract not to start a business for two
years after the contract terminates.
o Example: 2 sailors jumped ship and the captain, who’s unable to replace them, promises
crew more money for extra work. In the end he refused to pay because they were already
bound by (initial) contract to assume extra duties on board. The court ruled that they had
given no consideration in return for the captain’s promise to increase their pay.

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 o Example: I promise to tidy a friend’s garden because she is ill, and I don’t want to be
paid. However, I am busy, and I don’t tidy her garden for her. The agreement isn’t a
contract because one of the parties has not provided consideration.
3. Capacity
o Parties must have the capacity to enter into a contract.
 In particular the minors or those afflicted by mental illnesses or other
impairments of their ration faculties are generally regarded incapable of binding
themselves contractually. Figure of a legal ward and legal guardian (tutor or
curator).
4. Formality
o A contract does not generally need to be in writing.
o Apart from certain contracts no written formality is required to bind parties.
o An oral agreement is generally no less binding than a written one.
 Common law: requires evidence of consideration in return for a promise.
o Increasing government paternalism – in the name of consumer protection – has generated
a rise in the formalities = printed contracts.
o Example: In our system, if we invite someone to work with us and the contract has no end
term, it will last forever, and it is binding.
5. Immoral or Unlawful objectives
o Certain contracts are ‘void’ because they offend ‘public policy’.
o The law will not countenance agreements that seek to use the law to achieve immoral or
unlawful objectives.
o Example: German lawcourts would once routinely negate a lease of premises for use as a
brothel.

6. Duress
o Mistake, misrepresentation or duress may render a contract voidable.
o This is because there is, in effect, no genuine agreement.
o Mistake: I thought I was buying a Ferrari, but you were selling me a ford.
o Misrepresentation: you misrepresented the ford as a Ferrari.
o Duress: you forced me by pointing a gun.
7. Detrimental reliance
o Taking an action bases upon someone else’s promise which, by itself, leaves you in a
worse position than when you started.
o Detrimental reliance is a term commonly used to force another to perform their
obligations under a contract.
o When the following conditions are met: a promise was made; relying on the promise was
reasonable; there was actual reliance on the promise; the reliance was detrimental;
injustice can only be prevented by enforcing the promise. Detrimental means that some
type of harm is suffered.

A court may award damages for breach. Should I fail to perform my obligations under a contract you
may sue me to:
 Recover compensation: Plaintiff sues defendant to recover compensation – damages equal
damages done.

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 Compel me to perform my side of the bargain = specific performance. If I can show that
circumstances have rendered performance impossible or that the purpose of the contract has been
frustrated, I may escape liability.

53 - Unilateral Contracts

Any deal is necessarily Bilateral (between 2 people), however sometimes it only generates passive
situations for one of the parties involved. Some people defend the existence of unilateral contracts.
Which is a contract in which we have a constitutive efficacy to offers and acceptances that do not
happen at the same time or somehow contracts in which the advantages are all in one side.

In other words, a unilateral contract by definition is a contract that involves action taken by one group
or one person alone (making a money donation) and a second party that simply accepts or rejects. In
this type of contract there is a promise to pay or give other consideration in return for actual
performance. On the other hand, a bilateral contract is one in which a promise is exchanged for a
promise.

Therefore, unilateral contracts exist when all advantages seem to be attached to one of the parties and
all disadvantages attached to another. For example, in a will, the donor only spends assets with
nothing in return, while the done, once the offer is accepted, only receives benefits.

According to Wacks, in the carbolic smoke ball case there was a company who claimed that if
someone used their product and still contracted influenza, they would pay you 100$. A woman tried
to collect the prize, but the company claimed in court that they didn’t know that she had accepted the
contract (despite their offer). The court held that the ad constituted an offer of a unilateral contract. A
situation that appears to be unable to bind two parties will actually be able to be enforced (despite not
having a signed contract).

54 – The Merchant of Venice

Scene of Writing the Contract

Bassanio, on Antonio’s behalf, deals with Shylock, a Jewish merchant. Bassanio wants 3,000 ducats,
or gold coins with the stipulation that Antonio will pay them back in three months. Shylock notes that
Antonio is likely good for the money – he has cash withheld in potential ventures— but none of it
actually exists yet (Antonio has a ship bound to Tripoli and another to the Indies, and Shylock's heard
rumors of even more ships backed by Antonio: a third for Mexico, a fourth for England, and several
others). Though all this sailing about seems rather risky, Shylock says he'll lend the money, but would
like to speak to Antonio first. Bassanio invites Shylock to dinner but Shylock turns him down, as it
will likely be a Christian dinner with pork, which isn't kosher. Shylock says he's fine trading, talking,
and walking with Christians, but not eating, drinking, or praying with them.

Shylock tells A & B he can lend the 3,000 ducats, but he's surprised Antonio is willing to deal with
interest rates. Isn't that kind of hypocritical? Antonio says he'll do anything to help Bassanio— even
join the interest game he's so often scorned. Shylock continues to needle Antonio about changing his
tune, and then he tells the story of Jacob and Laban from the Bible. Antonio mocks Shylock's attempts
to use the Bible as justification for charging interest and tells Bassanio that all he's learned from this
experience is that even the "devil" can cite Scripture to his purposes.

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He asks if he's supposed to just forget about Antonio's abuse now that he wants to borrow money.
Antonio doesn't deny these nasty charges, but that's irrelevant. They're not friends—this is a business
transaction, and Shylock should consider it a transaction between enemies. If Antonio can't pay him
back, Shylock gets to enact a penalty. Shylock says: I'll lend you the money, and I won't even charge
you interest. Instead, if you can't pay it back on the date we set, my payment will be a pound of flesh
off your body from wherever I choose.
Though he pretends this is just a friendly loan and adds this provision as if it were just a joke, it shows
how much Shylock actually despises Antonio. Because Antonio frequently lends money out without
interest, undercutting Shylock's business, the moneylender holds a grudge against the young
businessman. Furthermore, Shylock knows that Antonio frequently insults him and talks ill of him in
public. He, therefore, is further motivated to exact some sort of creative revenge against Antonio.
Bassanio urges Antonio not to agree to such terms. However, Antonio, as confident as ever, says that
his ships will soon return with their earnings and that he will have no problem at all in repaying the
loan.
To ensure the money would be paid, Shylock went to the notary with the contract to get the contract
on paper.

Offer and Acceptance: Antonio offers Shylock the possibility of being bound in a contract. Shylock
accepts the offer. Together they both establish the terms of the contract.
Solution of Formality: “Shylock went to the notary with the contract to get the contract on paper”.
Theory of Detrimental Reliance: Antonio says with confidence that he will be able to pay back and
therefore promises that if he doesn’t, he will give the pound of flesh to Shylock. In fact, after this,
Shylock lent him the money. In the case that Antonio couldn’t pay back, Shylock would have suffered
the costs of having detrimentally relied on his promise and could sue him for all costs.

The Scene of the Trial

In Venice, the Court convenes for Antonio’s trial. The duke of Venice greets Antonio and expresses
pity for him, calling Shylock an inhuman monster. Antonio says he knows the duke has done all that
he can to lawfully counter Shylock’s malicious intentions, and that since nothing else can be done,
Antonio will respond to Shylock’s rage “with a quietness of spirit”. The duke summons Shylock into
the courtroom and addresses him, saying that he believes that Shylock means only to frighten Antonio
by extending this drama to the brink of performance. Shylock reiterates his intentions and says that
should the court deny him his right, the city’s very laws and freedoms will be forfeit. Shylock offers
no explanation for his insistence other than to say that certain hatreds, like certain passions, are lodged
deep within a person’s heart. Shylock hates Antonio, and for him that is reason enough.
Bassanio, who has arrived from Belmont, attempts to argue with Shylock, but Antonio tells him that
his efforts are for naught. Hatred and predation, Antonio suggests, come as naturally to some men as
they do to the wolf. Bassanio offers Shylock six thousand ducats, twice the amount of the original
loan, but Shylock turns down the offer, saying he would not forfeit his bond for six times that sum.
When the duke asks Shylock how he expects to receive mercy when he offers none, Shylock replies
that he has no need for mercy, as he has done nothing wrong. Just as the slave-owning Christians of
Venice would refuse to set their human property free, Shylock will not relinquish the pound of flesh
that belongs to him.
The duke says that he has sent messages to the learned lawyer, Doctor Bellario, asking him to come
and decide on the matter. News comes that a messenger has arrived from Bellario, and Salarino runs
off to fetch him. Meanwhile, Bassanio tries, without much success, to cheer up the despairing
Antonio. Nerissa enters, disguised as a lawyer’s clerk, and gives the duke a letter from Bellario.
Shylock whets his knife, anticipating a judgment in his favor, and Gratiano accuses him of having the

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soul of a wolf. Shylock ignores these slurs and states resolutely, “I stand here for law”. The duke
alludes to the fact that Bellario’s letter mentions a learned young lawyer named Balthasar and orders
the disguised Nerissa to admit the young man to the court. The duke then reads the letter in its
entirety. In it, Bellario writes that he is ill and cannot come to court, but that he has sent the learned
young Balthasar to judge in his stead.

Summary:
Bassanio (always broke) can be sure of a loan from his good and wealthy friend Antonio but
Antonio's money is all tied up in his business ventures (ships), and so he turns to Shylock. Shylock
demands an unusual security for a loan: “an equal pound of your fair flesh - to be given if the money
cannot be properly repaid.”
Shylock is:
 A Moneylender (these were despised at the time)
 A Jew (who also were despised and were not protected in their contracts like the other venetians;
they lived in a specific zone of Venice).
 Is he evil? He denies so, and through Shakespeare speaks for all persecuted minorities: “Hath a
Jew not eyes? Hands? Organs, dimensions, senses, affections, passions? Fed with the same food,
hurt with the same weapons, subject to the same diseases, healed by the same means, warmed and
cooled by the same winter and summer as Christian? If you prick us, do we not bleed? And if you
wrong us, shall we not revenge?”
Merchant and usurer engage in passionate argument, Antonio stands firm in his contempt: he refuses
to borrow the money as friend but urges Shylock to "lend it (money) to thy enemy so if he breaches
the pact you may more easily exact the penalty" (let's consider Antonio's intent to be bound).
 Author: we have no doubt that Antonio wants to be bound to Shylock as a legal relationship.
So, Antonio agrees with the “forfeit” (sanction) that Shylock suggests. In the meantime, ships sink
(symbolism: pre-announcement of loss and tragedy). Knowing that Antonio has been jailed (for
failing to be able to pay on time), Portia, Bassanio’s new rich wife, disguised as a lawyer (man)
appears to try to save Antonio from that situation.
First, she offers to pay double or treble the sum. Shylock refuses, he wants his bond (specific
performance of the private property rule). He reminds the court that the pound of flesh is his by law
and if the Duke refuses to grant this bond, Venice will suffer in its reputation as the center of
international trade.
 “Shame on your Law”: you will not have the support of the next business doers.
 It will be the destruction of the policy of attracting business through your attractive legal system.
However, the Duke cannot change a sacred principle: the freedom of contract. So, after asking
Shylock to show "mercy-equity" and having concluded that mercy is not enough to trump freedom of
contract, Portia reveals a flow in the contract: "Provision for a pound of flesh has been made but no
provision has been made for drops of blood".
This way, equitable justice takes over, because it would not be feasible to take out a pound of flesh
without taking out a single drop of blood, and that would be against a greater Law. Shylock ends up
with nothing, actually, less than nothing.

55 - The Merchant of Venice, Scene of writing the contract: can you find an
indication that Shylock would have lent Antonio the Money OUTSIDE a
contractual Framework?

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When deciding the terms of the contract, Shylock, who hated António for the way he treated him,
questioned why should he lend António money if they were not friends (“You called me dog; and for
these courtesies, I'll lend you thus many moneys?”). This can be seen as him asking Antonio for his
friendship in return for the loan - only once Antonio said that he would continue to treat Shylock
poorly, and he refused to borrow the money as a friend, did Shylock reach the “1 pound of Flesh”
proposal. In this way, we have no doubt that Antonio wants to be bound to Shylock as a legal
relationship. So, Antonio agrees with the sanction that Shylock suggests.

In a contract, one of the goals is to ensure that in the eventuality that one of the parties does not
comply with what was agreed, he/she will be legally forced to do so. However, since being a friend is
subjective and therefore not enforceable, if Antonio had accepted his initial proposal, then the
proposal was not in a contractual framework, it was instead a social arrangement, because neither
party would have intended for there to be a legal bond.

This is my interpretation; however, I recognize that a verbal contract is just as valid as a written one,
meaning that one could argue that this example was still in a contractual framework.

In conclusion, Shylock might have lent Antonio the money outside a contractual framework, but on
the other hand, Antonio would have not borrowed the money without a legal bond.

56 - Freedom of Contract vs Judicial and Governmental paternalism –

Merchant of Venice.

In general terms, freedom of contract would be where parties are free to bind themselves legally with
whatever terms they see fit in order to achieve a certain goal. It is based on mutual agreements and no
interference from governmental or feudal bodies. On the other hand, governmental paternalism is
when the government imposes itself into contracts in order to oversee the decisions being taken –
normally by re-starting contracts to favor the losing side. This has the aim of protecting those who
have agreed to the terms although being unconscious or incompetent.

Venice was run by a Duke who promised “bring your contracts to Venice, whatever you write in your
contracts won’t be changed by the Venice courts”.

Hence, in Venice, Freedom of Contract was applied, meaning that any adult had the right to make a
legally binding mutual agreement with one or more people, reassured that there was no governmental
interference as to what type of terms could be defined in the contract. Freedom of contract in Venice
was the responsible for the city’s wealth, since any merchant could define the obligations he wanted
in a contract and knew the Duke of Venice would not change them. Negotiation was easier and
therefore merchants had an incentive to operate in Venice.

When Shylock and Antonio went to court, because Antonio did not pay back Shylock within the time
limit specified in the contract, the Duke faced an ethical dilemma. In the contractual agreement made
by the two parties, it was agreed that Shylock would take a pound of Antonio’s heart’s flesh.
However, for this specific performance to occur, Antonio would die. The Duke of Venice didn’t want
to change the contract, in order to avoid jeopardizing the wealth of his city, nor wanted to sentence
Antonio to death.

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If the Duke changed the contract in order to reach a reasonable and morally acceptable agreement, he
would perform Governmental Paternalism. According to Friedman, Judicial Paternalism enables
courts to limit people’s judicial freedom with the intent of promoting their own good, once courts
believe “they know better what terms should’ve been established”. While Wacks sees it has an
attempt to set the balance correctly, an opportunity for courts to re-write contracts to make reasonable
terms.

Paternalism goes against Freedom of Contract and that’s the reason why the Duke was hesitant in his
decision on whether to follow with the contract even if it was unreasonable and unethical. The Duke
cannot change a sacred principle: the freedom of contract. So, after asking Shylock to show “mercy-
equity” and having concluded that mercy is not enough to trump freedom of contract, Portia reveals a
flow in the contract: “Provision for a pound of flesh has been made but no provision has been made
for drops of blood”. This way, equitable justice takes over, because it would not be feasible to take out
a pound of flesh without taking out a single drop of blood, and that would be against a greater law.
This opposes to paternalism, since the court did not interfere or alter any terms of the established
contract under the claim that it would be better for the subject in question.

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