Law and Economics – Unit- III

Coase Theorum
What is Coase Theorem?

 Coase Theorem is a legal and economic theory developed by 

economist Ronald Coase that affirms that where there are
complete competitive markets with no transactions costs, an
efficient set of inputs and outputs to and from production-optimal
distribution will be selected.
 Further, the Coase Theorem asserts that if conflict arises over
property rights under these assumptions, then parties will tend to
settle on the efficient set of inputs and output.
What is Coase Theorem ?

 Coase theorem is the idea that under certain conditions, the issuing of
property rights can solve negative externalities. For example, a Forrester
will manage their forest to ensure its longevity and protect it from fires.
It is their incentive to do so in order for them to be able to sell logs in
future years.
 The Coase theorem was originally coined by economist, Ronald Coase, in
his 1960 paper, ‘The Problem with Social Cost’. He explains that property
rights can become conflicting, thereby resulting in inefficient economic
results. When property rights are not clearly defined, disputes can arise.
Example:-

 For example, a business may pollute a river. In turn, those that benefit
from walking past the river and enjoying the views face a negative
externality.
 There may be bottles and other items in the river which make it
unpleasant. Neither the business nor the individual owns the right to
the river. What results is a negative cost on to the individual walking
past the river.
 We may then see lawsuits that can drag on for years and cost
thousands of dollars.
 The Coase theorem states that in such situations, it is more efficient
for property rights to be clearly defined and for both parties to
bargain instead. Although this is based on the assumption that there
are no transaction costs.
 So in the previous example, the business may own the right to pollute
the river. In turn, the individual would pay the business to use and
walk around the river. It would, therefore, benefit the business to
reduce its pollution in order to obtain income from the individual.
Coase Theorem Explained-

 The Coase Theorem is based on assigned property rights which help

to align true economic value. Where property rights are not assigned,
we see an inefficient allocation of resources. This may be noise
pollution, air pollution, or some other negative externality.
 When such negative externalities occur, the Coase theorem states
that they can be prevented by assigning property rights and then
allowing both parties to bargain. In other words, the Coase theorem
suggests that negative externalities can be resolved with property
rights. This is best explained with an example.
Example of the Coase Theorem

 There is a farmer who uses fertilizer on his crops to help them grow.
However, those fertilizers flow down into the nearby river, which
negatively affects those who are fishing downstream. Other
members downstream may also become affected.
 In this example, the farmer is causing a negative externality onto the
fishers. The cost of which is unknown and without property rights,
there is no way of accounting for such costs. This is where the Coase
theorem kicks in.
 Without clearly defined property rights, the farmer and the fisher may
become entwined in a long court battle to determine who is in the right.
 This will cost thousands of dollars, time, and effort. The solution is to
assign property rights and allow both parties to negotiate.
 If the farmer has defined, divisible, and defendable property rights, he
would own the right to use pesticides to help grow his crops. The
negative externality will cause a cost onto the fisher. In turn, both parties
would have to negotiate what it is worth to reduce or diminish that
negative externality.
 The fisher would pay the farmer however much it is worth to allow
them to fish. That may be $50, $100 or $1,000. The main point is that
the price is determined by the value the farmer has to forgo by
reducing the amount of fertilizer they use.
 So reducing the amount of fertilizer may reduce their crop yield, but
they would consequently be compensated by the fishers
downstream. In the same fashion, if the fisher owns the river, then
the farmer would have to compensate the fisher depending on how
much fertilizer gets washed into the river.
Understanding Coase Theorem

 The Coase Theorem states “that when there are conflicting

property right, bargaining between the parties involved will lead to
an efficient outcome regardless of which party is ultimately
awarded the property rights, as long as the transaction costs
associated with bargaining are negligible.”
Example-

Fish Shop Coffee Shop

Dispute
 The cost for a lawsuit would be the same for the two parties in a
suit, i.e., the fine that the defendant would pay is the same as the
cost to take a different action. This cost means that the two parties
are better off negotiating with each other to reach a compromise
than file a lawsuit.
The Coase Theorem Example

 There is a fish market next to a coffee shop and the smell from the fish
market is hurting the coffee shop’s business. We will assume that this
is costing the coffee shop $5 per pound of fish sold. When taken to
court the judge has to decide whether the fish market is liable or
whether the coffee shop is liable, i.e., who has the right to complain.
Possible Outcomes

Fish Market is Liable Coffee Shop is Liable

1) Pay Coffee Shop $5/pound 1) Suffer from smell $5/pound

2) Install Air Cleaner$8/pound 2) Pay Fish Market for Scrubber

$8/pound

3) Fish Market Moves $10/pound 3) Pay Fish Market to Move $10/pound

4) Pay Coffee Shop to Move $20/pound 4) Coffee Shop Moves $20/pound

 Coffee Shop Moves $20/pound.

 However, if the cost to the coffee shop were higher, then the coffee
shop would choose the air cleaner since it is the cheapest option.
Legal Concept of Property-

 Property, an object of legal rights, which embraces possessions or

wealth collectively, frequently with strong connotations of
individual ownership.
 In law the term refers to the complex of jural relationships
between and among persons with respect to things. The things
may be tangible, such as land or goods, or intangible, such as stocks
and bonds, a patent, or a copyright.
  It is the exclusive right of a person or persons over a thing.  Property
has various economic, social and legal implications arising from it. It
consists of all animate and inanimate which a person possesses.  It
also includes all the legal rights resulting from the property of a
person.
 Hence the term property is a vast concept which is governed by
different laws. An owner of a property has the right to transfer the
property, that is he can sell, mortgage, lease or transfer his property
in any other way as he desires. The property has been derived from
the Latin word ‘properietate’ which means a thing that is owned.
Immovable property

 The term ‘immovable property’ has not been defined under

the Transfer of Property Act 1882.  However, section 3 of this Act
merely lays down the meaning of immovable property. Immovable
property means a property which does not include standing timber,
growing crops (that is in form of vegetable produce which have
separate existence except for their produce) or grass. Hence the
meaning is an exclusive definition. In Babu Lal v. Bhawani Das and
Ors, the court held that section 3(25) of the General Clauses Act which
defines immovable property can be applied to Transfer of Property Act
1882.
Under the General Clauses Act

 Under the General Clauses Act immovable property is defined as one

which includes land, benefits arising out of the land (eg. Right to catch
fish), things attached to the landor things that are permanently
fastened to anything that is attached to the earth (like windows,
doors, walls etc.). Additionally, the court held that the right of way,
right to collect rent, a Hindu widow’s life interest of the income of the
husband’s property, a factory, furniture, fixtures, windows, doors,
office of a hereditary priest of the temple etc. are all immovable
property.
What is immovable-
 In Sukry Kurdepa v. Goondakull, the court explained the meaning of the

term immovability. It held that “when a thing cannot change its place

without injury to the quality of which it is, what it is, it is said to be

immovable.” Therefore trees will be immovable as long as they are

attached to the earth. When these trees as severed from the earth they

become movable property. Standing timber are trees like teak, neem,

bamboo etc. which are used for building houses, ships etc When such

trees are severed from the earth they can be sold and used for multiple

purposes. Hence standing timbers are not immovable property.

 Trees such as orange trees, mango trees cannot be called as
movable as they are grown for enjoying the fruits and not utilizing
them as timber. Only those trees which can be utilized as timber
are termed as immovable. Growing crops such as wheat, rice,
sugarcane etc. are also movable as they are grown to enjoy their
final produce.
Movable property

 The term movable property has not been defined in the Transfer of
Property Act 1882. However, in general sense, movable property is
a property which can be shifted or moved from one place to
another without harm to its surroundings.
 The term movable property has been defined in other statutes.
The General Clauses Act defines movable property as property of
every description except immovable property.
 Further, the Registration Act defines movable property as property
of every kind except immovable property but including standing
timber, growing crops and grass. Hence movable property is a
property which is neither land nor permanently fastened or
attached to the land or building, either directly or indirectlyby
attaching it to real property.
 For example royalty, Government promissory notes, computers,
jewellery, paintings, hereditary allowances etc. are movable
properties.
 In the case of Mohamed Ibrahim v. Northern Circars Fibre Trading
Company, the Court held that if a machinery is installed on a
cement platform and attached to iron pillars fixed in the ground,
they were held as immovable property. To find out if a property of
a given description is movable or immovable it is essential to find
out its mode of annexation of the thing and purpose of such
annexation.
Kinds of properties

 Property is basically of two categories : Corporeal Property and

Incorporeal Property. Corporeal Property is visible and tangible,
whereas incorporeal Property is not. Moreover, corporeal Property is
the right of ownership in material things, whereas incorporeal
Property is an incorporeal right in rem. Corporeal Property is further
categorized into Movable and Immovable Property. Incorporeal
Property is classified into two categories : right in re propria and rights
in re aliena or encumbrances.
Corporeal and Incorporeal Property 

 These are the two categories of properties that exist.

 (i) Corporeal Property has a tangible existence in the world and is
related to material things such as land, house, ornaments, silver,
etc.
 (ii) Incorporeal Property is intangible because it’s existence is
neither visible nor tangible. Right of easement and copyrights are
incorporeal Property.
Public Property and Private Property 

 With reference to the concept of ownership, Property may be classified

into public and private property. The two kinds are discussed below: 
 (i) Public Property is owned by the public as such in some governmental
capacity. In other words, it is owned by the government and used for the
beneficial use of the public in general. A park or a government hospital is
a public property.
 (ii) Private Property is that Property which is owned by a particular
individual or some other private person. A residential house of a citizen
may be his private property. 
Real and Personal Property

 This distinction between real and personal Property basically

originated from Roman law, and it still exists in England. The two
categories of Property are discussed below:
 (i) Real Property means all rights over land recognized by law.
 (ii) Personal Property means all other proprietary rights, whether they
are right in rem or in personam.
 Right in rem- right available against entire world
 Right in personam- right available against person
Right in re aliena and Right in re propria 

 Right in re aliena are also sometimes referred to as encumbrances.

These are the rights of a specific user. These prevent the owner from
exercising some definite right in reference to his Property. Lease,
security and trust may be included under this category.
 Right in re propria are immaterial forms of Property. These are a
product of human skill and labour. Patents, copyrights and commercial
goodwill may be included under this category. 
Intellectual Property

Meaning 
 Intellectual Property is, in simpler terms, creation of intellect or
wisdom or of the human mind. It is related to intellectual
innovation and innovation in the literary, scientific and artistic
fields. Nations around the world are making efforts toward
protecting intellectual property. One major reason is to recognize
by way of statute, the economic rights of creators of these
intellectual properties.
 Another reason is the urge to promote creativity amongst the
masses which will, in the long run, contribute towards an
environment comprising of only fair trade practices. The law related
to intellectual Property aims at protecting the people who create
and own the intellectual goods and services by granting them
certain time-limited rights to control the use made of those
productions. Those rights do not apply to the physical object in
which the creation may be embodied but instead to the intellectual
creation as such.
Kinds of Intellectual Property 

Intellectual Property may be classified into various categories.

However, a few of the most widely utilized and owned intellectual properties have
been discussed below:
Patent
A patent is a kind of Property that has intellectual worth attached to it. It is an
exclusive right granted for an invention which is a product which is a result of a
person’s ability to of doing something or offers a new technological solution to a
problem. In order to obtain a patent, it is necessary that the technological
information must be disclosed to the public in a patent application. A patent so
obtained remains in force for twenty years.
Trademark

 Another widely popular form of intellectual Property is a trademark.

Trademark is a sign capable of distinguishing goods and services of
one enterprise from another. These are basically a means to protect
the unique identity of renowned brands. It enables a customer to
recognize the brand or the product instantly without being misled. An
example of a trademark would be the logos or slogans used by brands
to make their products uniquely identifiable.
Copyright

 Copyright is available to the creators of literary, dramatic, musical,

artistic, producer of cinematograph acts or sound recording. It
determines whether and in what conditions the original work may be
used by persons other than the owner of the unique intellectual
property.
 Almost every product has copyright. These include the visible symbols on
the product packaging and label etc. Copyrights protect original creative
work has been written down on a piece of paper, saved on electronic
storage hard drive device or preserved in some other tangible format. 
Geographical Indicators (gi)

 It is an indicator used on products having a specific geographical

origin and possess qualities that exist due to their basic origin. The
sign must identify a product as originating in a given place, and the
quality, characteristics or reputation should be due to the place of
origin. Recently, Rasgulla from Orissa and Kadaknath chicken from
Madhya Pradesh has been granted the geographical indication tag
in India.
Industrial Design

 Industrial design is related to the products which are a part of

the industrial set up. It refers to the shape, configuration, colour
or pattern which may be an ornamental or aesthetic aspect of a
product. The owners of a registered industrial design have a right
to prevent third parties from making, selling, importing articles
bearing a design which is a copy. Thereby any person using
someone else’s industrial design may be liable to pay damages to
the owner of the industrial design.
Trade Secret

 Trade secret in simpler terms implies the strategy adopted by the owner
of the business. It may be any confidential business information which
provides an organization with a complete edge in the world market of the
respective product it deals with. A trade secret is an initial step for an
investor. It is essential that the idea or formula behind the unique trade
opportunity remains secretive. Any person or organization indulging in
unauthorized use of trade secrets is regarded to be guilty of unfair trade
practice. For example, the recipe of any popular noodles brand may be
considered as a trade secret of that brand.
Commercial Goodwill

 Commercial goodwill is a prominent form of incorporeal right. The

goodwill of a commercial business is a valuable right acquired by
the owner by his labour and skill. The owner has the exclusive right
of use and profit from the business and anyone who seeks to make
use of it by falsely representing to the public that he is himself
carrying on the business in question shall be violating this right.
Economy of Property Right

 Property rights are theoretical socially-enforced constructs in 

economics for determining how a resource or economic good is
used and owned. 
 Resources can be owned by individuals, associations, collectives, or
governments. Property rights can be viewed as an attribute of an
economic good. This attribute has four broad components and is
often referred to as a bundle of rights.
 (Economic Good- a commodity or service that can be utilized to
satisfy human wants and that has exchange value.)
Four Components-

 the right to use the good

 the right to earn income from the good
 the right to transfer the good to others, alter it, abandon it, or destroy it
(the right to ownership cessation)
 the right to enforce property rights
In economics, property is usually considered to be ownership (
rights to the proceeds generated by the property) and control over a
resource or good. Many economists effectively argue that property rights
need to be fixed and need to portray the relationships among other parties
in order to be more effective.
Types of Property Rights -

 Nobodies property- (res nullius) is not 'owned' by anyone. It is non-

excludable (no one can exclude anyone else from using it), non-
transferable, but may be rival (one person's use of it reduces the
quantity available to other users). Open-access property is not
managed by anyone, and access to it is not controlled. There is no
constraint on anyone using open-access property (excluding people
is either impossible or prohibitively costly). Examples of currently
open-access property is outer space or ocean fisheries (outside of
territorial borders).
 Public property (also known as state property) is property that is
publicly owned, but its access and use are managed and controlled by
a government agency or organization granted such authority. An
example is a national park or a state-owned enterprise.
 Common property or collective property is property that is owned by
a group of individuals. Access, use, and exclusion are controlled by the
joint owners. True commons can break down, but, unlike open-access
property, common property owners have greater ability to manage
conflicts through shared benefits and enforcement.
 Private property is both excludable and rival. Private property
access, use, exclusion and management are controlled by the
private owner or a group of legal owners.
Bargain Theory-

  In law and economics, the Coase theorem describes the 

economic efficiency of an economic allocation or outcome in the
presence of externalities. The theorem states that if trade in an
externality is possible, bargaining will lead to a Pareto
efficient outcome regardless of the initial allocation of property. This
'theorem' is commonly attributed to 
Nobel Memorial Prize in Economic Sciences winner Ronald Coase
 during his tenure at the London School of Economics, 
SUNY at Buffalo, University of Virginia, and University of Chicago.
 Coase proposes that well-defined property rights can overcome the

problems of externalities, because many environmental problems arise

from poorly defined, or a lack of, property rights. Assuming that property

rights are held by the polluter and that transaction costs are zero, the

Coase theorem states that a polluter and a victim can reach a mutually

beneficial bargain if the damage from pollution is higher than the

polluter’s net return from the sale of the good generating the pollution. In

this case, a payment from the affected party to the polluter would reduce

the pollution.
 Thus, the Coase theorem states that the most efficient solution to
resolving interdependent uses of the environment, including pollution
cases, is a bargaining process among relevant property holders. If
property rights are given to polluters, victims can pay them not to
pollute, creating a market-like solution akin to a scheme for payments
for ecosystem services. Alternatively, if property rights are given to the
victims, the polluters may compensate the victim or buy the right to
pollute. Thus, the cost of the negotiated outcome is shared between
the parties without any external intervention.
 As an example, consider a chemicals factory producing useful products
but also polluting smoke. If the initial legal framework gives people the
right to breathe clean air, they could make the factory produce less or
nothing at all. However, assume that the factory is willing to pay up to
USD 5 per unit for the right to pollute enough to produce its output. If
this amount is considered of greater value than that of clean air,
people will take the money and put up with (the economically optimal
level of) pollution. On the other hand, if the right to pollute lies with
the firm, people can bribe the firm to pollute less.
 The Coasian bargaining approach is an attractive one to some: an
economy may be able to achieve Pareto-efficient resource allocation
without pervasive government regulation. Moreover, Coasian
bargaining solutions can be particularly interesting for international
externalities, since there is no supranational environmental
protection agency with the necessary authority to impose abatement
directives or pollution taxes.
Ownership & Possession of
Property-
Ownership-

 The concept of ownership is one of the fundamental juristic concepts

common to all systems of law. This concept has been discussed by
most of the writers before that of possession.
 However, it is pointed out that it is not the right method.
 Historically, speaking the idea of possession came first in the minds of
people and it was later on that the idea of ownership came into
existence.
 The idea of ownership followed the idea of possession.
DEVELOPMENT OF THE IDEA OF OWNERSHIP

 The idea of ownership  developed by slow degrees with the growth

of civilization. So long as the people were wandering from place to
place and had no settled place of residence, they had no sense of
ownership.
 The idea began to grow when they started planting trees,
cultivating lands and building their homes.
 The transition from a pastoral to an agricultural economy helped
the development of the idea of ownership.
 People began to think in terms of mine and thine. To begin with, no
distinction was made between ownership and possession.
 However with the advancement of civilization, the distinction
became clearer and clearer. This distinction was made very clearly
in Roman law. Two distinct terms were used to point out the
distinction and these were Dominium and possession.
 Dominium denoted the absolute right to a thing. Possession
implied only physical control over a thing. The English notion of
ownership is similar to the conception of dominium in Roman law.
According to Holdsworth, the English law reached the concept of
ownership as an absolute right through developments in the law of
possession.
OWNERSHIP UNDER ANCIENT INDIAN LAW

 The right to ownership was also recognized under the ancient Indian law. The
great commentators, notably, narada, Yajnavalkya ,vyas etc. emphasized the
right of ownership of property was to be used for noble cause and good
motives. The ancient hindu law ordained men to behave in a particular
manner in relation to person or property of another.
 They were warned that misuse of the right of ownership would entail them
moral and public indignation and they would be liable for punishment. The
ancient laws of prescription, bailment, sale, etc. were based on the
distinction between ownership and possession.
Mode of Acquisition of Ownership-

 The ancient hindu jurists mentioned seven modes of acquisition of

ownership of property, namely-
 1. Inheritance
 2. Gain
 3. Purchase
 4. Conquest
 5. Investment of wealth
 6. Employment
 7. Acceptance of gifts
Property Right as per Manu-

 According to Manu, only property of the king or state could be

acquired by conquest but the king had no right to interfere or acquire
the private property of the subjects of the conquered territory.
 As regards the property of no-one’s land (i.e. res nullius) Manu says
that it belonged to him who first reclaimed it under cultivation. Where
a thing had no previous owner such as a bird or a fish, the rule of res
nullius was to apply and the one who took it first was its owner.
 In case of some treasure was discovered, the person who found it
took the whole of it if it was found on his land, and if it was found on
some other’s land, he could acquire only half of it.
DEFINITION OF OWNERSHIP-

 Ownership, in its most comprehensive signification, denotes the

relationship between a person and any right that is vested in him. That
which a man owns is in all cases a right. When, as is often the case, we
speak of the ownership of a material object, this is merely a
convenient figure of speech. To own a piece of land means in truth to
own a particular kind of right in the land.
 Ownership, in this generic sense, extends to all classes of rights, whether
proprietary or personal, in rem or in personam, in re propria or in re
aliena.
 I may own debt, or a mortgage, or a share in a company, or money in the
public fund’s, or a copyright, or a lease, or a right of way, or the fee simple
of land. Every right is owned, and nothing can be owned except a right.
 Every man is the owner of the rights which are his.
 According to Austin, ownership is a relation which subsists between a
person and a thing which is the object of ownership.
 Possession- Meaning

"Possession" literary means physical control over a thing or an object. It

expresses the closest relation of fact that can exist between a thing and

the person, who possess it.

In law, possession means it includes not only physical control over a thing

but also an intention to exercise that physical control.

Example: A has an article in his hand. In other words, he is in possession

of that article. The person who is in possession is called a 'Possessor'.

 In human life, consumption of material things is very essential and
it would be Impossible without the position of the material things.
Therefore the concept of possession is of utmost practical
importance in human life.
Definition:

 The concept of possession is though basic and essential in human

life, it is a difficult to define. There is no fixed or precise definition of
possession because it is legal as well as factual concept. Supreme
Court in Superintendent Remembrancer Legal Affairs vs Anil
Kumar, AIR 1980 SC 52, held that it is impossible to work out a
completely logical and precise definition of Possession uniformly
applicable to all situation in the context of all the statutes.
 It is very difficult to define the term Possession. Some Jurists have
given different definitions.
 John Salmond:
Salmond defines Possession as, "possession is the continuing
exercise of a claim to the Exclusive use of an object."
Elements of Possession


  From the above definition we could see in that possession has two essentials -  

1) Actual power over the object possessed. i.e. corpus possessionis and

2) Intention of the possessor to exclude any interference from others. i.e. animus

possidendi.

  According to John Salmond, both corpus and animus must be present to

constitute Possession. Ownership is a legal concept whereas Possession is factual

as well as legal concept.

  The term CORPUS and the term ANIMUS, both the terms borrowed from the

Roman Law.
Categories of Possession:

   Possession is divided into two categories.

a) Possession in fact and 

b) Possession in law.

Possession in fact is actual or physical possession. It is physical relation to a thing.

Possession in law means possession in the eye of law. It means a possession which

is recognized and protected by law. There is sometimes a discrepancy between

possession in fact and position in law, although usually possession exists both in fact

and in law in the same person. A person who is in de facto possession of a thing also

comes to have de jure possession.

Theories of Property Law: Labour,
Occupation and Economic
Introduction:

 The term property is sufficiently comprehensive to include every

species of estate, real (all rights) and personal (proprietary rights),
and everything which one person can own and transfer to another.
 It extends to every species of right and interest capable of being
enjoyed as such upon which it is practicable to place a money
value.
 Some define “property” very broadly as a “a legal relationship”
where there are three persons in that relationship.
 The State will suppress the civil liberties of the third person to the extent
they fail within the scope of the property held. This is basic to the concept
of property that is the notion that the person who holds the property
being entitled to exclude another from access to the property which is
sanctioned by the State.
 The question of why the State will protect a person’s property interest and
the means of obtaining a property interest have as a background particular
philosophies which provide the justification for how we distribute and
allocate property in our society. We will discuss 3 theoretical justifications
for property i.e.:
Labor theory of property-

 The labor theory of property is a theory of natural law that holds

that property originally comes about by the exertion of labor upon
natural resources. The theory has been used to justify the 
homestead principle, which holds that one may gain whole
permanent ownership of an unowned natural resource by performing
an act of original appropriation.
 In his Second Treatise on Government, the philosopher John
Locke asked by what right an individual can claim to own one part
of the world, when, according to the Bible, God gave the world to
all humanity in common. He answered that although persons
belong to God they own the fruits of their labor. When a person
works, that labor enters into the object. Thus, the object becomes
the property of that person.
Exclusive ownership and creation-

 Locke argued in support of individual property rights as 

natural rights. Following the argument the fruits of one's labor are
one's own because one worked for it. Furthermore, the laborer
must also hold a natural property right in the resource itself
because exclusive ownership was immediately necessary for
production.
 Jean-Jacques Rousseau later criticized this second step in 
Discourse on Inequality, where he argues that the natural right
argument does not extend to resources that one did not create.
Both philosophers hold that the relation between labor and
ownership pertains only to property that was significantly unused
before such labor took place.
Occupation Theory:

 The most influential French thinker of the Enlightenment, Jean-

Jacques Rousseau, elaborated a theory of property based on first
occupation justified by labour. He held that the first appropriation
is mutually recognised, and that unequal distribution is due to the
different abilities of man. This is largely in line with Locke’s ideas;
however, Rousseau departs from the Englishman, by assuming that
shortage and unequal distribution will result in conflicts.
 One of the earliest justifications for private property is contained in
what has been called the occupation theory. This theory attempts to
answer the relatively simple question of how things become the
subject matter of private ownership. We take it for granted that things
are ours because we have acquired them from another person who
has ownership to pass on to us. Such acquisitions can occur through a
voluntary transfer such as a gift or a bequest in a will or; simply by a
purchase for value. Thus, the law prescribes methods by which
ownership can be acquired from another, for example, a transfer by
deed or mere delivery of the thing in question. The law does not,
however, tell us how that chain of ownership began, in other words,
why was ownership of the thing recognized in the first place?
 This theory suggests that the party who is the original discoverer
and occupant of property was entitled to dispose of those assets.
This approach has the advantage of certainty and security as the
person in possession can retain possession until someone else
shows a better title. This philosophy is reflected in the law of
property. If a person retains possession of land over a long period of
time this may make this possessory title unassailable by the original
owner. This is based upon the concept of adverse possession of
land.
 If you squat on land for many years and the true owner does not
remove you from the property in some circumstances you may be
acknowledged as ‘owning’ the land.
 To put an end to this Hobbesian “free for all”, the people
concluded a social contract, which also regulates appropriation.
Thus, Rousseau does not attach too much importance to who owns
what: he is more interested in the fact that the individual
acknowledges exclusion.
 Exclusion, however, cannot be guaranteed in the state of nature,
and the French philosopher ends up with creating a strong State,
which subordinates individual rights of ownership to the
community, and the State becomes the sole owner. according to
Rousseau, the State represents the general will of its citizens, and
its main objective is to oppose inequality.
Economic Theory:

 The economic theory, the main thinkers of which are John Stuart
Mill, David Ricardo, Adam Smith, Jean- Baptiste Say and Thomas
Robert Malthus, supports the view that private property creates the
environment where maximum productivity is created based upon
the profit motive. The economic theory supports the profit motive
and the incentive it provides for developing and seeking out ideas
and process to support productive activity. This view is based upon
belief in the distributive and controlling influence of the market.
 History suggests that the market is not a perfect vehicle and often
the profit motive will create over-supply, under-supply, monopolies
and other non-productive arrangements. This theory gives little
credence to broader social interests. It may be in the personal
economic interest for a person to maximise profits by exploitation
of people and the environment which may be to the long – term
detriment of those factors for the society as a whole.
Trespass:- Meaning and Interpretation

 Trespass can be said to be an action exceeding the limit carved by

the law. It is an intentionally directed, unreasonable interference
with one’s person and property. The word ‘intention’ here implies
committing the wrong voluntarily. Trespass allegation can be leveled
if the interference is with one’s and person’s body and private
property. It is to be kept in mind that intention forms the essential
component of trespass. Unreasonable behavior is triggered by the
mala Fides and ulterior intention to harass another.
Types of Trespass

 Trespass Against Person- It is the causing of apprehension of

unreasonable interference with one’s person and body as well
as person and includes usage of force causing damage and
impairment in the body. The trespasser, with an ulterior intention,
transgresses the right of another and makes an alteration in it with
the objective to cause wrongful loss or wrongful gain as the case
may be. It is considered as intentional even if the wrongdoer did
not know that the property belonged to another.
Trespass Against Property-

 Trespass against movable property like goods-

It is the taking wrongfully or forcefully interfering with the goods of
another. It differs from trespass to land in one important aspect that
wrongful intention or negligence is not necessary for trespass to
goods. A challenge to ownership of goods amounts to conversion
which is different from trespass to goods, which can be elucidated
by an example of the damage of goods given by the plaintiff in a
cloak room of railways but personnel there instead of giving it,
threw it and damaged it.
Trespass against immovable property
like land-
 Trespass is mainly a wrong against possession and is available at times
against the owner himself. Court in the case opined that “The correct
position in law may, in our opinion, be slated thus in order to establish
that the entry on the property was with the intent to annoy, intimate
or insult, it is necessary for the Court to be satisfied that causing such
annoyance, intimidation or insult was the aim of the entry; that it is
not sufficient for that purpose to show merely that the natural
consequence of the entry was likely to be annoyance, intimidation or
insult, and that this likely consequence was known to the persons
entering: that in deciding whether the aim of the entry was
the causing of such annoyance, intimidation or insult, the Court has to
consider all the relevant circumstances including the presence of
knowledge that its natural consequences would be such annoyance,
intimidation or insult and including also the probability or
something else than the causing of such intimidation, insult or
annoyance, being the dominant intention which prompted the
entry”. No one has the right to dispossess the trespasser if he is in a
settled possession of a property and he can’t be evicted unless due
process of law is followed.
 The possession, which a trespasser is entitled to defend against the
rightful owner must be a settled possession extending over a
sufficiently long period and acquiesced in by the true owner. A
casual act of possession would not have the effect of interrupting
the possession of the rightful owner
 Under the doctrine of prescriptive easements, for example, a
property owner loses the absolute right to exclude (all other persons
from taking possession of his land) when a non-owner has used that
land openly, peaceably, continuously, and under a claim of right ad-
verse to the owner for a period set forth by a particular state (known
as the prescription period). It was held by the High Court of Bombay
in case that a rightful owner who dispossesses another cannot be
treated as a trespasser except as provided by Section 9 of the Specific
Relief Act, 187.
Thank You