Cases for Law & Economics

ROSS, Circuit Judge. The libel [See note at end of case] in this case was based upon a contract alleged to have been entered into between the libelants and the appellant corporation on the 22d day of May, 1900, at Pyramid Harbor, Alaska, by which it is claimed the appellant promised to pay each of the libelants, among other things, the sum of $100 for services rendered and to be rendered. In its answer the respondent denied the execution, on its part, of the contract sued upon, averred that it was without consideration, and for a third defense alleged that the work performed by the libelants for it was performed under other and different contracts than that sued on, and that, prior to the filing of the libel, each of the libelants was paid by the respondent the full amount due him thereunder, in consideration of which each of them executed a full release of all his claims and demands against the respondent.

The evidence shows without conflict that on March 26, 1900, at the city and county of San Francisco, the libelants entered into a written contract with the appellant, whereby they agreed to go from San Francisco to Pyramid Harbor, Alaska, and return, on board such vessel as might be designated by the appellant, and to work for the appellant during the fishing season of 1900, at Pyramid Harbor, as sailors and fishermen, agreeing to do “regular ship's duty, both up and down, discharging and loading; and to do any other work whatsoever when requested to do so by the captain or agent of the Alaska Packers’ Association.” By the terms of this agreement, the appellant was to pay each of the libelants $50 for the season, and two cents for each red salmon in the catching of which he took part.

On the 5th day of April, 1900, 21 of the libelants signed shipping articles by which they shipped as seamen on the Two Brothers, a vessel chartered by the appellant for the voyage between San Francisco and Pyramid Harbor, and also bound themselves to perform the same work for the appellant provided for by the previous contract of March 26th; the appellant agreeing to pay them therefor the sum of $60 for the season, and two cents each for each red salmon in the catching of which they should respectively take part. Under these contracts, the libelants sailed on board the Two Brothers for Pyramid Harbor, where the appellant had about $150,000 invested in a salmon cannery. The libelants arrived there early in April of the year mentioned, and began to unload the vessel and fit up the cannery. A few days thereafter, to wit, May 19th, they stopped work in a body, and demanded of the company's superintendent there in charge $100 for services in operating the vessel to and from Pyramid Harbor, instead of the sums stipulated for in and by the contracts; stating that unless they were paid this additional wage they would stop work entirely, and return to San Francisco. The evidence showed, and the court below found, that it was impossible for the appellant to get other men to take the places of the libelants, the place being remote, the season short and just opening; so that, after endeavoring for several days without success to induce the libelants to proceed with their work in accordance with their contracts, the company's superintendent, on the 22d day of May, so far yielded to their demands as to instruct his clerk to copy the contracts executed in San Francisco, including the words “Alaska Packers’ Association” at the end, substituting, for the $50 and $60 payments, respectively, of those contracts, the sum of $100, which document, so prepared, was signed by the libelants before a shipping commissioner whom they had requested to be brought from Northeast Point; the superintendent, however, testifying that he at the time told the libelants that he was without authority to enter into any such contract, or to in any way alter the contracts made between them and the company in San Francisco. Upon the return of the libelants to San Francisco at the close of the fishing season, they demanded pay in accordance with the terms of the alleged contract of May 22d, when the company denied its validity, and refused to pay other than as provided for by the contracts of March 26th and April 5th, respectively. Some of the libelants, at least, consulted counsel, and, after receiving his advice, those of them who had signed the shipping articles before the shipping commissioner at San Francisco went before that officer, and received the amount due them thereunder, executing in consideration thereof a release in full, and the others being paid at the office of the company, also receipting in full for their demands.

On the trial in the court below, the libelants undertook to show that the fishing nets provided by the respondent were defective, and that it was on that account that they demanded increased wages. On that point, the evidence was substantially conflicting, and the finding of the court was against the libelants, the court saying:

The evidence being sharply conflicting in respect to these facts, the conclusions of the court, who heard and saw the witnesses, will not be disturbed. ...

The real questions in the case as brought here are questions of law, and, in the view that we take of the case, it will be necessary to consider but one of those. Assuming that the appellant's superintendent at Pyramid Harbor was authorized to make the alleged contract of May 22d, and that he executed it on behalf of the appellant, was it supported by a sufficient consideration? From the foregoing statement of the case, it will have been seen that the libelants agreed in writing, for certain stated compensation, to render their services to the appellant in remote waters where the season for conducting fishing operations is extremely short, and in which enterprise the appellant had a large amount of money invested; and, after having entered upon the discharge of their contract, and at a time when it was impossible for the appellant to secure other men in their places, the libelants, without any valid cause, absolutely refused to continue the services they were under contract to perform unless the appellant would consent to pay them more money. Consent to such a demand, under such circumstances, if given, was, in our opinion, without consideration, for the reason that it was based solely upon the libelants' agreement to render the exact services, and none other, that they were already under contract to render. The case shows that they willfully and arbitrarily broke that obligation. ...

Certainly, it cannot be justly held, upon the record in this case, that there was any voluntary waiver on the part of the appellant of the breach of the original contract. The company itself knew nothing of such breach until the expedition returned to San Francisco, and the testimony is uncontradicted that its superintendent at Pyramid Harbor, who, it is claimed, made on its behalf the contract sued on, distinctly informed the libelants that he had no power to alter the original or to make a new contract; and it would, of course, follow that, if he had no power to change the original, he would have no authority to waive any rights thereunder. ...

It results from the views above expressed that the judgment must be reversed, and the cause remanded, with directions to the court below to enter judgment for the respondent, with costs. It is so ordered.

Note: A civil action today begins with the plaintiffs filing a complaint. In admiralty law actions were begun by the filing of a “libel;” and the person or persons seeking relief were called “libelants.” Since 1966 the Federal Rules of Civil Procedure and Supp. Admiralty Rules have governed admiralty actions so that they are now, like civil actions, commenced by complaint.

CARDOZO, C.J. The plaintiff, Allegheny College, is an institution of liberal learning at Meadville, Pa. In June, 1921, a "drive" was in progress to secure for it an additional endowment of $1,250,000. An appeal to contribute to this fund was made to Mary Yates Johnston, of Jamestown, New York. In response thereto, she signed and delivered on June 15, 1921, the following writing:

In consideration of my interest in Christian education, and in consideration of others subscribing, I hereby subscribe and will pay to the order of the treasurer of Allegheny College, Meadville, Pennsylvania, the sum of five thousand dollars: $5,000.

This obligation shall become due thirty days after my death, and I hereby instruct my executor, or administrator, to pay the same out of my estate. This pledge shall bear interest at the rate of ____ per cent per annum, payable annually, from ____ till paid. The proceeds of this obligation shall be added to the Endowment of said Institution, or expended in accordance with instructions on reverse side of this pledge."

In loving memory this gift shall be known as the Mary Yates Johnston memorial fund, the proceeds from which shall be used to educate students preparing for the ministry, either in the United States or in the Foreign Field.

This pledge shall be valid only on the condition that the provisions of my will, now extant, shall be first met.

The subscription was not payable by its terms until 30 days after the death of the promisor. The sum of $1,000 was paid, however, upon account in December, 1923, while the promisor was alive. The college set the money aside to be held as a scholarship fund for the benefit of students preparing for the ministry. Later, in July, 1924, the promisor gave notice to the college that she repudiated the promise. Upon the expiration of 30 days following her death, this action was brought against the executor of her will to recover the unpaid balance.

The law of charitable subscriptions has been a prolific source of controversy in this state and elsewhere. We have held that a promise of that order is unenforceable like any other if made without consideration. . . If A promises B to make him a gift, consideration may be lacking, though B has renounced other opportunities for betterment in the faith that the promise will be kept.

The half truths of one generation tend at times to perpetuate themselves in the law as the whole truth of another, when constant repetition brings it about that qualifications, taken once for granted, are disregarded or forgotten. The doctrine of consideration has not escaped the common lot. As far back as 1881, Judge Holmes in his lectures on the Common Law (page 292), separated the detriment, which is merely a consequence of the promise from the detriment, which is in truth the motive or inducement, and yet added that the courts "have gone far in obliterating this distinction." The tendency toward effacement has not lessened with the years. On the contrary, there has grown up of recent days a doctrine that a substitute for consideration or an exception to its ordinary requirements can be found in what is styled "a promissory estoppel" . . . Certain, at least, it is that we have adopted the doctrine of promissory estoppel as the equivalent of consideration in connection with out law of charitable subscriptions. So long as those decisions stand, the question is not merely whether the enforcement of a charitable subscription can be squared with the doctrine of consideration in all its ancient rigor. The question may also be whether it can be squared with the doctrine of consideration as qualified by the doctrine of promissory estoppel . . .

The promisor wished to have a memorial to perpetuate her name. She imposed a condition that the "gift" should "be known as the Mary Yates Johnston Memorial Fund." The moment that the college accepted $1,000 as a payment on account, there was an assumption of a duty to do whatever acts were customary or reasonably necessary to maintain the memorial fairly and justly in the spirit of its creation. The college could not accept the money and hold itself free thereafter from a personal responsibility to give effect to the condition . . . By implication it undertook, when it accepted a portion of the "gift," that in its circulars of information and in other customary ways when making announcement of this scholarship, it would couple with the announcement the name of the donor. The donor was not at liberty to gain the benefit of such an undertaking upon the payment of a part and disappoint the expectation that there would be payment of the residue. If the college had stated after receiving $1,000 upon account of the subscription, that it would apply the money tot he prescribed use, but that in its circulars of information and when responding to prospective applicants it would deal with the fund as an anonymous donation, there is little doubt that the subscriber would have been at liberty to treat this statement as the repudiation of a duty impliedly assumed, a repudiation justifying a refusal to make payments in the future. Obligation in such circumstances is correlative and mutual . . .

We think the duty assumed by the plaintiff to perpetuate the name of the founder of the memorial is sufficient in itself to give validity to the subscription within the rules that define consideration for a promise of that order. When the promisee subjected itself to such a duty at the implied request of the promisor, the result was the creation of a bilateral agreement. . . The subscriber does not say: I hand you $1,000, and you may make up your mind later, after my death, whether you will undertake to commemorate my name. What she says in effect is this: I hand you $1,000, and if your are unwilling to commemorate me, the time to speak is now. . .

KELLOGG, J. (dissenting). The Chief Judge finds in the expression, "In loving memory this gift shall be known as the Mary Yates Johnston Memorial Fund," an offer on the part of May Yates Johnston to contract with Allegheny College. The expression makes no such appeal to me. Allegheny College was not requested to perform any act through which the sum offered might bear the title by which the offeror states that it shall be known. The sum offered was termed a "gift" by the offeror. Consequently, I can see no reason why we should strain ourselves to make it, not a gift, but a trade. Moreover, since the donor specified that the gift was made, "In consideration of my interest in Christian education, and in consideration of others subscribing," considerations not adequate in law, I can see no excuse for asserting that it was otherwise made in consideration of an act or promise on the part of the donee, constituting a sufficient quid pro quo to convert the gift into a contract obligation. To me the words used merely expressed an expectation or wish on the part of the donor and failed to exact the return of an adequate consideration. But if an offer indeed was present, then clearly it was an offer to enter into a unilateral contract. The offeror was to be bound provided the offeree performed such acts as might be necessary to make the gift offered become known under the proposed name. This is evidently the thought of the Chief Judge, for he says: "She imposed a condition that the 'gift' should be known as the Mary Yates Johnston Memorial Fund." In other words, she proposed to exchange her offer of a donation in return for acts to be performed. Even so, there was never any acceptance of the offer, and therefore no contract, for the acts requested have never been performed at a time to convert the offer into a promise. This is so for the reason that the donation was not to take effect until after the death of the donor, and by her death her offer was withdrawn . . .

It seems clear to me that there was here no offer, no acceptance of an offer, and no contract. . . Therefore I can see no ground for the suggestion that the ancient rule which makes consideration necessary to the formation of every contract is in danger of effacement through any decisions of this court. To me that is a cause for gratulation rather than regret. However, the discussion may be beside the mark, for I do not understand that the holding about to be make in this case is other than a holding that consideration was given to convert the offer into a promise. With that result I cannot agree and, accordingly, must dissent."

[We used the following case in the first and second editions of Law and Economics to illustrate he classical or bargain theory -- specifically, to introduce the classical elements of a bargain: offer, acceptance, and consideration. In this case, the order in which the facts are presented is confusing, so here is a summary to help you get started. Demotsis, finding herself in difficult circumstances in Nazi-occupied Greece, borrowed money from Batsakis. The Greek currency she borrowed was worth about $25 on the international market at the time, but she signed a promissory note to repay the loan in United States currency, specifically, to pay $2,000 plus interest. After the war the two parties met in America, and Batsakis sought repayment of the full amount of the note, whereas Demotsis offered to pay $25 plus interest. At the trial the jury awarded Batsakis $750 plus interest, [How the jury computed this odd award is not explained in the opinion.] and the case was appealed by Batsakis.]

McGILL, JUSTICE. This is an appeal from a judgment of the 57th judicial District Court of Bexar County. Appellant was plaintiff and appellee was defendant in the trial court. The parties will be so designated.

Plaintiff sued defendant to recover $2,000 with interest at the rate of 8% per annum from April 2, 1942, alleged to be due on the following instrument, being a translation from the original, which is written in the Greek language:

I state by my present (letter) that I received today from you the amount of two thousand dollars ($2,000.00) of United States of America money, which I borrowed from you for the support of my family during these difficult days and because it is impossible for me to transfer dollars of my own from America.

The above amount I accept with the expressed promise that I will return to you again in American dollars either at the end of the present war or even before in the event you might be able to find a way to collect them (dollars) from my representative in America whom I will write and give him an order relative to this. You understand until the final execution (payment) to the above amount an eight per cent interest will be added and paid together with the principal.

Trial to the court without the intervention of a jury resulted in a judgment in favor of plaintiff for $750.00 principal, and interest at the rate of 8% per annum from April 2, 1942 to the date of judgment, totaling $1163.83, with interest thereon at the rate of 8% per annum until paid. Plaintiff has [brought this appeal.]

[The principal contention on appeal regards the allegations of the following paragraph from the defendant's answer to the plaintiff's complaint:]

Plaintiff avers that on or about April 2, 1942 she owned money and property and had credit in the United States of America, but was then and there in the Kingdom of Greece in straitened financial circumstances due to the conditions produced by World War II and could not make use of her money and property and credit existing in the United States of America. That in the circumstances the plaintiff agreed to and did lend to defendant the sum of 500,000 drachmae, which at that time, on or about April 2, 1942, had the value of $25.00 in money of the United States of America. That said plaintiff knowing defendant's financial distress and desire to return to the United States of America, exacted of her the written instrument plaintiff sues upon, which was a promise by her to pay to him the sum of $2,000.00 of United States of America money.

Defendant testified that she did receive 500,000 drachmas from plaintiff. It is not clear whether she received all of 500,000 drachmas or only a portion of them before she signed the instrument in question. Her testimony clearly shows that the understanding of the parties was that plaintiff would give her the 500,000 drachmas if she would sign the instrument. She testified:

A. That was how he asked me from the beginning. He said he will give me five hundred thousand drachmas provided I signed that I would pay him $2,000.00 American money.

The transaction amounted to a sale by plaintiff of the 500,000 drachmas in consideration of the execution of the instrument sued on, by defendant. It is not contended that the drachmas had no value. Indeed, the judgment indicates that the trial court placed a value of $750.00 on them or on the other consideration which plaintiff gave defendant for the instrument if he believed plaintiff's testimony. Therefore the plea of want of consideration was unavailing. A plea of want of consideration amounts to a contention that the instrument never became a valid obligation in the first place ...

Nor was the plea of failure of consideration availing. Defendant got exactly what she contracted for according to her own testimony. The court should have rendered judgment in favor of plaintiff against defendant for the principal sum of $2,000.00 evidenced by the instrument sued on, with interest as therein provided. We construe the provision relating to interest at the rate of 6% per annum from April 2, 1942. The judgment is reformed so as to award appellant a recovery against appellee of $2,000.00 with interest thereon at the rate of 8% per annum from April 2, 1942. Such judgment will bear interest at the rate of 8% per annum until paid on $2,000.00 thereof and on the balance interest at the rate of 6% per annum.

a. The court states that "[m]ere inadequacy of consideration will not void a contract" and that is said to be the controlling rule in this famous case. What function did this rule serve in common law?

b. The sum of 500,000 drachmae supposedly had the wartime exchange value of $25 U.S. And yet the borrower agreed to pay the lender $2,000 in exchange for something objectively worth only $25. Can you think of reasons why the borrower might have knowingly been willing to make this extraordinary exchange? That is, suppose that she knew that the value of the loan was incredibly one-sided in favor of the lender. Under the circumstances given in the opinion, might she have agreed anyway?

c. Would your answer change if the borrower did not know the 1942 exchange rate between dollars and drachmae? Suppose she could have known, if only she had taken the time to ask someone. What then?

d. What might you do if the testimony had revealed that Batsakis was the only person in 1942 Athens who had money to lend? Is that likely to have been the case?

e. Did the borrower expect to be held to the loan? Should she have expected to be held to the loan's terms? Does she appear to be capable of repaying it? Why should we care about her expectations, or those of the lender, and her capability to repay?

f. Suppose that the Court of Civil Appeals of Texas had upheld the trial court's finding that the loan was worth only $750. What effect might that holding have had on future contractual exchanges in Texas?

g. What effect might there be on future contractual exchanges of the court's holding that it will not inquire into the adequacy of consideration?

GOODRICH, Circuit Judge. … The transactions which raise the issues may be briefly summarized. On June 21, 1947, Campbell Soup Company (Campbell), a New Jersey corporation, entered into a written contract with George B. Wentz and Harry T. Wentz, who are Pennsylvania farmers, for delivery by the Wentzes to Campbell of all the Chantenay red cored carrots to be grown on fifteen acres of the Wentz farm during the 1947 season. Where the contract was entered into does not appear. The contract provides, however, for delivery of the carrots at the Campbell plant in Camden, New Jersey. The prices specified in the contract ranged from $23 to $30 per ton according to the time of delivery. The contract price for January, 1948 was $30 a ton.

The Wentzes harvested approximately 100 tons of carrots from the fifteen acres covered by the contract. Early in January, 1948, they told a Campbell representative that they would not deliver their carrots at the contract price. The market price at that time was at least $90 per ton, and Chantenay red cored carrots were virtually unobtainable. The Wentzes then sold approximately 62 tons of their carrots to the defendant Lojeski, a neighboring farmer. Lojeski resold about 58 tons on the open market, approximately half to Campbell and the balance to other purchasers.

On January 9, 1948, Campbell, suspecting that Lojeski was selling it contract carrots, refused to purchase any more, and instituted these suits against the Wentz brothers and Lojeski to enjoin further sale of the contract carrots to others, and to compel specific performance of the contract. The trial court denied equitable relief. We agree with the result reached, but on a different ground from that relied upon by the District Court. …

We think that on the question of adequacy of the legal remedy the case is one appropriate for specific performance. It was expressly found that at the time of the trial it was “virtually impossible to obtain Chantenay carrots in the open market.” This Chantenay carrot is one which the plaintiff uses in large quantities, furnishing the seed to the growers with whom it makes contracts. It was not claimed that in nutritive value it is any better than other types of carrots. Its blunt shape makes it easier to handle in processing. And its color and texture differ from other varieties. The color is brighter than other carrots. The trial court found that the plaintiff failed to establish what proportion of its carrots is used for the production of soup stock and what proportion is used as identifiable physical ingredients in its soups. We do not think lack of proof on that point is material. It did appear that the plaintiff uses carrots in fifteen of its twenty-one soups. It also appeared that it uses these Chantenay carrots diced in some of them and that the appearance is uniform. The preservation of uniformity in appearance in a food Article marketed throughout the country and sold under the manufacturer's name is a matter of considerable commercial significance and one which is properly considered in determining whether a substitute ingredient is just as good as the original.

The trial court concluded that the plaintiff had failed to establish that the carrots, “judged by objective standards,” are unique goods. [According to prevailing understanding, specific performance is the appropriate remedy, as compared to an award of compensatory money damages, only for unique goods.] This we think is not a pure fact conclusion like a finding that Chantenay carrots are of uniform color. It is either a conclusion of law or of mixed fact and law and we are bound to exercise our independent judgment upon it. That the test for specific performance is not necessarily “objective” is shown by the many cases in which equity has given it to enforce contracts for articles -- family heirlooms and the like -- the value of which was personal to the plaintiff.

Judged by the general standards applicable to determining the adequacy of the legal remedy we think that on this point the case is a proper one for equitable relief. There is considerable authority, old and new, showing liberality in the granting of an equitable remedy. We see no reason why a court should be reluctant to grant specific relief when it can be given without supervision of the court or other time-consuming processes against one who has deliberately broken his agreement. Here the goods of the special type contracted for were unavailable on the open market, the plaintiff had contracted for them long ahead in anticipation of its needs, and had built up a general reputation for its products as part of which reputation uniform appearance was important. We think if this were all that was involved in the case specific performance should have been granted. …

The reason that we shall affirm instead of reversing with an order for specific performance is found in the contract itself. We think it is too hard a bargain and too one‑sided an agreement to entitle the plaintiff to relief in a court of conscience [i.e., a court that may award equitable relief]. For each individual grower the agreement is made by filling in names and quantity and price on a printed form furnished by the buyer. This form has quite obviously been drawn by skilful draftsmen with the buyer's interests in mind.

Paragraph 2 provides for the manner of delivery. Carrots are to have their stalks cut off and be in clean sanitary bags or other containers approved by Campbell. This paragraph concludes with a statement that Campbell’s determination of conformance with specifications shall be conclusive.

The defendants attack this provision as unconscionable. We do not think that it is, standing by itself. We think that the provision is comparable to the promise to perform to the satisfaction of another and that Campbell would be held liable if it refused carrots which did in fact conform to the specifications.

The next paragraph allows Campbell to refuse carrots in excess of twelve tons to the acre. The next contains a covenant by the grower that he will not sell carrots to anyone else except the carrots rejected by Campbell nor will he permit anyone else to grow carrots on his land. Paragraph 10 provides liquidated damages to the extent of $50 per acre for any breach by the grower. There is no provision for liquidated or any other damages for breach of contract by Campbell.

The provision of the contract which we think is the hardest is paragraph 9, set out in the margin. It will be noted that Campbell is excused from accepting carrots under certain circumstances. But even under such circumstances the grower, while he cannot say Campbell is liable for failure to take the carrots, is not permitted to sell them elsewhere unless Campbell agrees. This is the kind of provision which the late Francis H. Bohlen would call “carrying a good joke too far.” What the grower may do with his product under the circumstances set out is not clear. He has covenanted not to store it anywhere except on his own farm and also not to sell to anybody else. …

We are not suggesting that the contract is illegal. Nor are we suggesting any excuse for the grower in this case who has deliberately broken an agreement entered into with Campbell. We do think, however, that a party who has offered and succeeded in getting an agreement as tough as this one is, should not come to a chancellor and ask court help in the enforcement of its terms. That equity does not enforce unconscionable bargains is too well established to require elaborate citation.

What do you think the more appropriate remedy was in this case -- compensatory money damages or specific performance?

“The murder case that came before the Supreme Court of Newgarth in the fall of the year 4300 presented problems that had not arisen within anyone’s memory and for which not even the dustier volumes of the law reports offered any precedent. The four defendants had been tried and convicted in the Court of General Instances of the County of Stowfield for the murder of their traveling companion Roger Whetmore. In accordance with Newgarth’s very succinct murder statute—”Whoever shall willfully take the life of another shall be punished by death” (N.C.S.A. [N.S.] Sec. 12-A)—they had been sentenced to death by hanging. They had appealed to the Supreme Court, and it was now up to the five justices to affirm or reverse the trial court.

The four defendants and Roger Whetmore were all members of the Speluncean Society, a group of amateur cave explorers and archaeologists. In May, 4299, the five set out to explore the interior of a limestone cavern located in the Central Plateau. While the five men were probing the remote inner reaches of the cave, a powerful landslide shook the area. A barrage of massive boulders rained down in front of the cave and blocked its only exit. Although physically unscathed, the five explorers found themselves hopelessly immured in the rubble, with little more than a meager supply of water, wine, and dates to last them through the indefinite future.

The absence of the five men was soon noticed. Their families grew alarmed and called on the secretary of the society to undertake a search. It turned out that the explorers had left at the society’s headquarters fairly exact indications of their whereabouts, and a rescue party was immediately sent out for them. But freeing them proved far from easy. The society’s rescue party was no match for the primordial boulders. Heavy machinery had to be moved in from far away. A whole army of workmen, engineers, geologists, and other experts had to be assembled. Fresh landslides repeatedly intervened to make working conditions hazardous and progress slow. Ten workmen ultimately died in the rescue effort.

As the days wore on, the rescuers grew increasingly anxious that starvation might kill the explorers long before a passageway could be cut through the detritus. Though considered hardy souls, the explorers were known to have taken only scant provisions along, and limestone caverns rarely, if ever, contain any nourishing vegetable or animal matter. On the twentieth day, however, the rescuers learned by accident that the explorers had with them a portable wireless machine capable of sending and receiving messages. A similar machine was installed in the rescue camp and communication established with the imprisoned men. The prisoners turned out to be unexpectedly alert and remarkably rational and detached about their predicament. Roger Whetmore, the most experienced among them, did most of the talking. He asked how long it would take to liberate them. The engineers estimated it would take at least ten more days, provided no new landslides occurred. Whetmore then asked whether any physicians were present and was immediately put in touch with a committee of medical experts. He described to them with precision what was left of the sparse rations they had taken with them into the cave. Taking turns, each of the prisoners then described his physical condition. Finally, Whetmore asked for a medical opinion whether they were likely to survive the next ten days. Despite some initial reluctance to answer, the committee chairman admitted that there was little likelihood of that. The wireless machine then remained silent for eight hours. Finally, Whetmore’s voice reappeared; he asked to speak once more to the physicians. His voice unnaturally loud and quavering ever so slightly, he inquired of the chairman whether they would be able to survive if they ate the flesh of one of their number. The chairman refused to answer. When Whetmore continued to press him, he finally agreed that they probably would. Whetmore then asked whether it would be advisable for them to cast lots to determine who among them should be sacrificed. The chairman again refused to answer; this time he remained adamant. None of the other physicians [was] willing to respond either. Whetmore asked if there were among the party a judge or other government official who could answer his question. No one responded, not even the secretary of the society who was, in fact, a justice of the peace. Whetmore asked if there were a minister or priest who would answer his question but no one stepped forward, although a priest had only recently performed the last rites on a dying workman. The wireless machine then went dead, and it was assumed—erroneously, as it turned out—that the batteries had been exhausted.

Conscious that time was running out, the rescuers speeded up their efforts. They took risks they would ordinarily have avoided; as a result, six more workmen were killed by another unexpected landslide. Eight days after the exchange with Whetmore, they finally laid bare the cave’s exit. Four of the men were still alive, although close to expiration. The fifth, Roger Whetmore, was dead. His skeletal remains told most of the story, but the survivors made no secret of what had happened. On the twenty-third day of their captivity the defendants had killed and eaten their companion.

Ironically, Roger Whetmore had been the first to propose such a sacrifice. Not only would this ensure that at least some of them survived, he said, but even the victim had reason to be grateful for being spared the agony of a slow death by starvation. He for one, should the lot fall on him, would prefer it that way. Although at first repelled by the idea, his colleagues acquiesced in Whetmore’s proposal when they heard the dire predictions of the medical experts. Whetmore happened to have a pair of dice with him; hence that was the method adopted for choosing the victim. But just before the dice were cast, Roger Whetmore had a change of heart and suggested that they wait another week before resorting tot so awesome a remedy. The others disagreed. They charged him with a breach of faith and proceeded to roll the dice. When Whetmore’s turn came, he refused to participate. Someone else rolled the dice in his behalf. They asked Whetmore if he had any objections to the fairness of the throw; he said he did not. The roll went against him.

The defendants were treated at length for malnutrition and shock and finally were put on trial. The trial was one of the least contentious in Newgarth’s history, since there was little disagreement on the facts. Still, the jury deliberated for a long time. At one point, the foreman—as it happened, a lawyer—asked the court whether the jury might be allowed simply to issue a special verdict finding all the facts and leaving it to the trial judge to determine whether under those facts the defendants were guilty. Both sides agreed to this proposal; and the court acquiesced. Then, having examined the jury’s rather unsurprising findings, he held the defendants guilty of murder and, as required, sentenced them to death. This done, he added his name to a petition drawn up by the defendants’ supporters and carrying the signature of hundreds of citizens, including the twelve jurors, requesting the chief executive to pardon and release the defendants. The chief executive, however, let it be known that he would not consider the petition before the Newgarth Supreme Court had passed on the defendants’ appeal.”

From Leo Katz, Bad Acts and Guilty Minds 8 - 10 (1987). See also David L. Shapiro, "Foreword: A Cave Drawing for the Ages," 112 Harv. L. Rev. 1834 (1999) (in "The Case of the Speluncean Explorers: A Fiftieth Anniversary Symposium") and the Opinions by Judge Alex Kozinski, Professor Robin West, Professor Alan M. Dershowitz, Judge Frank Easterbrook, and Professor Paul Butler.

Assume that you are the Chief Justice of the Supreme Court of Newgarth. Write a one-page opinion resolving this case. (See "The Queen v. Dudley and Stephens" below.)

POSNER, Chief Judge. This appeal in a suit over a collective bargaining agreement presents a fundamental issue of contract law, that of drawing the line between an ambiguous contract, requiring interpretation, and a contract that, because it cannot be said to represent the agreement of the parties at all, cannot be interpreted, can only be rescinded and the parties left to go their own ways. Colfax, the plaintiff, is a manufacturer of envelopes. It does some printing of its envelopes, and the seventeen employees who do the printing are represented by the defendant union. Colfax has two printing presses. One prints 78-inch-wide sheets in four colors. The other prints 78-inch-wide sheets in five colors, but most of the time Colfax prints only four-color sheets on it.

Colfax has so few printing employees that it does not bother to participate in the collective bargaining negotiations between the union and the Chicago Lithographers Association, an association for collective bargaining of the other Chicago printing companies whose employees are represented by this union. Instead, whenever the union and the CLA sign a new collective bargaining agreement, the union sends Colfax a summary of the changes that the new agreement has made in the old one. If Colfax is content with the changes, the union sends it a copy of the complete new agreement, which Colfax signs and returns. If Colfax doesn't like the terms negotiated by the CLA, it is free to do its own bargaining with the union.

The collective bargaining agreements specify minimum manning requirements for each type of press used by the printers. The agreement in force between 1987 and 1991 fixed those minima as three men for four-color presses printing sheets 45 to 50 inches wide and four men for four-color presses printing sheets wider than 50 inches. Five‑color presses printing sheets more than 55 inches wide required five men unless only four colors were printed, in which event only four men were required. The upshot was that under these agreements, all of which Colfax had signed, Colfax had to man each of its presses (which were 78-inch presses) with four men except on the rare occasions when it printed five-color sheets on its second press, and then it had to add a man.

In 1991 the union negotiated a new agreement with the CLA and sent a summary of the changes to Colfax. The letter enclosing the summary asked Colfax to indicate whether it agreed to the terms in the summary. (This may have been a departure from past practice, in which Colfax signed the complete agreement rather than the summary, but if so neither party makes anything of it.) In a section on manning requirements, the summary lists "4C 60-inch Press -- 3 Men" and "5C 78-inch Press -- 4 Men." Believing (in part because union members who claimed to be familiar with the new agreement had told Colfax that Colfax would really like the changes in it) that this meant that all presses operated as four-color presses would now require only three men to man them, Colfax's president and majority shareholder, Charles Patten, signed the union's letter, indicating acceptance of the terms in the summary. Later a copy of the actual agreement arrived, but it contained a crucial typo, which supported Patten's understanding of the summary. When a corrected copy of the agreement finally arrived, the manning requirements stated in it were different from what Patten had understood from the summary. Four-color presses between 45 and 60 inches required three men, but all four-color presses over 60 inches required four men. The changes had not benefited Colfax at all, and because it was under competitive pressure, it would have liked to negotiate better terms. Patten refused to sign the agreement but the union took the position that Colfax was bound to it by its acceptance of the summary.

Colfax brought this suit under section 301 of the Taft-Hartley Act, 29 U.S.C. § 185, for a declaration that it has no collective bargaining contract with the union because the parties never agreed on an essential term -- the manning requirements for Colfax's printing presses. The union counterclaimed for an order to arbitrate. The union's position was that Colfax had accepted the new agreement, which requires arbitration of all disputes "arising out of the application or interpretation of this contract." The district judge granted summary judgment for the union, concluding that the reference to the new manning requirement for a four-color 60-inch press in the summary of changes that Colfax had accepted referred unambiguously to 60-inch presses and had no application to any other presses, such as Colfax's 78-inch presses. Colfax has appealed.

One way to describe the issue that divides the parties is that they disagree about the meaning of the term "4C 60-inch Press -- 3 Men." Colfax believes that it means four-color presses printing sheets 60 inches and over, while the union believes that it means four-color presses 60 inches and under (down to 45 inches). Remember that the previous agreement had allowed the use of three-man crews on four-color presses between 45 and 50 inches. The union interprets the change as extending the upper bound of the three-man range to 60 inches. Ordinarily a dispute over the meaning of a contractual term is, if the contract contains an arbitration clause, for the arbitrator to decide. But sometimes the difference between the parties goes so deep that it is impossible to say that they ever agreed -- that they even have a contract that a court or arbitrator might interpret. In the famous though enigmatic and possibly misunderstood case of Raffles v. Wichelhaus, 2 H. & C. 906, 159 Eng.Rep. 375 (Ex. 1864), the parties made a contract for the delivery of a shipment of cotton from Bombay to England on the ship Peerless. Unbeknownst to either party, there were two ships of that name sailing from Bombay on different dates. One party thought the contract referred to one of the ships, and the other to the other. The court held that there was no contract; there had been no "meeting of the minds." See generally A. W. Brian Simpson, "Contracts for Cotton to Arrive: The Case of the Two Ships Peerless," 11 Cardozo L. Rev. 287 (1989).

The premise -- that a "meeting of the minds" is required for a binding contract -- obviously is strained. ... Most contract disputes arise because the parties did not foresee and provide for some contingency that has now materialized -- so there was no meeting of minds on the matter at issue -- yet such disputes are treated as disputes over contractual meaning, not as grounds for rescinding the contract and thus putting the parties back where they were before they signed it. So a literal meeting of the minds is not required for an enforceable contract, which is fortunate, since courts are not renowned as mind readers. Let us set the concept to one side, therefore, and ask how (else) to explain Raffles v. Wichelhaus and cases like it. It seems to us as it has to other courts that a contract ought to be terminable without liability and the parties thus allowed to go their own ways when there is "no sensible basis for choosing between conflicting understandings" of the contractual language, as the court said in an American Raffles-like case, Oswald v. Allen, 417 F.2d 43, 45 (2d Cir.1969), quoting William F. Young, Jr., "Equivocation in the Making of Agreements," 64 Colum. L. Rev. 619, 647 (1964). In Oswald the misunderstanding arose because the parties did not speak the same language (literally). In Balistreri v. Nevada Livestock Production Credit Association, 214 Cal.App.3d 635, 262 Cal.Rptr. 862 (1989), the parents of an aspiring farmer thought they had pledged property they owned in Sebastopol to secure a loan to their son, and indeed the lender's cover letter described the property as "your Sebastopol residence." But the actual deed of trust listed the parents' home in Petaluma as the collateral. The court held that there had been no meeting of the minds.

Raffles and Oswald were cases in which neither party was blamable for the mistake; Balistreri a case in which both were equally blamable, the parents for having failed to read the deed of trust, the lender for having drafted a misleading cover letter. It is all the same. ... If neither party can be assigned the greater blame for the misunderstanding, there is no nonarbitrary basis for deciding which party's understanding to enforce, so the parties are allowed to abandon the contract without liability. ...

The clearest cases for rescission on the ground that there was "no meeting of the minds" (or, better, that there was a "latent ambiguity" in the sense that neither party knew that the contract was ambiguous) are ones in which an offer is garbled in transmission. The cases we have cited are all of that character, if "transmission" is broadly construed. Vickery v. Ritchie, 202 Mass. 247, 88 N.E. 835 (1909), provides a further illustration. A landowner and a contractor signed what they believed to be duplicate copies of a contract for the construction of a Turkish bath house. Because of a fraud by the architect for which neither the contractor nor the landowner could be blamed, the copy signed by the landowner stated the price as $23,000 and the copy signed by the contractor stated it as $34,000. Through no fault of their own, the parties had signed different contracts. Or consider Konic International Corp. v. Spokane Computer Services, Inc., supra. The seller quoted a price of "fifty-six twenty," which the buyer thought meant $56.20. In fact the seller had meant $5,620. In both cases rescission was permitted, the first being a case in which neither party was at fault, the second one in which both were equally at fault, being careless in their utterance and interpretation, respectively, of an ambiguous oral formula.

Our case is superficially similar. The actual terms of the 1991 agreement were muddied in the summary that the union gave Colfax and that Colfax signed, making it possible that the parties had different understandings. The difference between this case and the others is that Colfax, unlike the hapless promisors in the cases we have cited, should have realized that the contract was unclear. The buyer in Konic thought -- really thought -- that he was being quoted a price of $56.20, and no doubt fell off his stool when he discovered that the price was a hundred times greater than he thought. But the expression "4C 60-inch Press" does not on its face speak to the minimum manning requirement for a 4C 78-inch Press. The union's interpretation, that the phrase merely extended the upper bound of the old range for three-man four-color presses from 50 to 60 inches, may or may not be correct. The fact that the union restated and clarified the interpretation in the corrected agreement that it sent Colfax is not decisive on the question, because it is the summary rather than the corrected full agreement that is the contract between these parties. But Colfax, if reasonable, could not have doubted from reading the summary that interpretations of the kind that the union and the district judge later placed upon it would be entirely plausible. Colfax had a right to hope that its interpretation would prevail but it had no right to accept the offer constituted by the summary on the premise that either its interpretation was correct or it could walk away from the contract. "Heads I win, tails you lose," is not the spirit that animates the principle that latent ambiguity is a ground for rescission of a contract.

It is common for contracting parties to agree -- that is, to signify agreement -- to a term to which each party attaches a different meaning. It is just a gamble on a favorable interpretation by the authorized tribunal should a dispute arise. Parties often prefer to gamble in this way rather than to take the time to try to iron out all their possible disagreements, most of which may never have any consequence. Colfax gambled on persuading an arbitrator that the reference in the summary to the four-color 60-inch press meant what Colfax believes it means. The union gambled on the arbitrator's adopting the meaning that the union later made clear in the full agreement -- but, to repeat, if there is a contract it is (the parties agree) the summary, read in light of the collective bargaining agreement that was being modified, that is the contract between these parties.

When parties agree to a patently ambiguous term, they submit to have any dispute over it resolved by interpretation. That is what courts and arbitrators are for in contract cases -- to resolve interpretive questions founded on ambiguity. It is when parties agree to terms that reasonably appear to each of them to be unequivocal but are not, cases like that of the ship Peerless where the ambiguity is buried, that the possibility of rescission on grounds of mutual misunderstanding, or, the term we prefer, latent ambiguity, arises. A reasonable person in Colfax's position would have realized that its interpretation of the term "4C 60-inch Press -- 3 Men" might not coincide with that of the other party or of the tribunal to which a dispute over the meaning of the term would be submitted. It threw the dice, and lost, and that is the end of the case. It cannot gamble on a favorable interpretation and, if that fails, repudiate the contract with no liability. ...

We would have a different case if the ambiguity were over whether the parties had agreed to arbitrate their disputes. The duty to arbitrate is contractual, and the interpretation of the contract that creates the duty is for the court. ... But courts will not allow a party to unravel a contractual arbitration clause by arguing that the clause was part of a contract that is voidable, perhaps because fraudulently induced. ... The party must show that the arbitration clause itself, which is to say the parties' agreement to arbitrate any disputes over the contract that might arise, is vitiated by fraud, or lack of consideration or assent[;] that in short the parties never agreed to arbitrate their disputes. ... Colfax and the union had in a long course of dealing always agreed to submit their contractual disputes to arbitration, so the only question is whether their dispute in this case was a dispute over the meaning of their contract. It was, so it had to be arbitrated, for that was the parties' chosen method of resolving disagreements, whether or not Colfax would have signed on to the 1991 agreement had it realized what the agreement actually meant or could be interpreted to mean. ...

We go further: Even if, contrary to our earlier analysis, there was no "meeting of the minds" (in the artificial sense in which the law of contracts uses the term) on the manning requirements in the 1991 agreement, there was a meeting of the minds on the mode of arbitrating disputes between the parties arising from any collective bargaining contract (including a summary of changes in a previous contract) that Colfax signed. Under the Supreme Court's decision in Prima Paint, a contract dispute is arbitrable even if one party argues that the contract should be rescinded because it does not express an actual agreement of the parties, for example because it was induced by fraud. All that is important is that the parties have agreed that arbitration rather than adjudication would be the mode of resolving their disputes. A different view would in many cases deprive the arbitrator of an important contract remedy -- rescission. This point has implications for the scope of the arbitrator's responsibilities, of which more presently.

We thus affirm the district judge's decision, but point out that her conclusion that the disputed term unequivocally bears the meaning that she assigned to it (which incidentally is not identical to the union's interpretation, for she thought it a point -- 60-inch presses, period -- while the union thought it a range -- 60-inch presses and down) does not bind the arbitrator. His is the responsibility, subject to the excruciatingly limited right of judicial review of arbitral decisions, to interpret the agreement. It will therefore be open to Colfax to argue to the arbitrator that, under a proper interpretation of the contract, there really was no meeting of the minds over the manning requirements and therefore that the contract should be rescinded after all. The only essential point at this stage of the litigation is that whether or not there was (as we believe, without meaning to bind the arbitrator) such a meeting of minds, there was sufficient mutual understanding to create an enforceable contract to submit the issue to arbitration.

[As with most old English Appellate cases the account begins with a "headnote" by the Court Reporter describing the "facts" as they are revealed by the pleadings, and summarizing the proceedings below.]

At the trial before Crompton J., at the last Gloucester Assizes, it appeared that the plaintiffs [Joseph and Jonah Hadley, whose firm was known as "City Flour Mills"] carried on an extensive business as millers at Gloucester; and that, on the 11th of May, their mill was stopped by a breakage of the crank shaft by which the mill was worked. The steam-engine was manufactured by Messrs. Joyce & Co., the engineers, at Greenwich, and it became necessary to send the shaft as a pattern for a new one to Greenwich. The fracture was discovered on the 12th, and on the 13th the plaintiffs sent one of their servants to the office of the defendants, who are the well-known carriers trading under the name of Pickford & Co., for the purpose of having the shaft carried to Greenwich. The plaintiffs' servant told the clerk that the mill was stopped, and that the shaft must be sent immediately; and in answer to the inquiry when the shaft would be taken, the answer was, that if it was sent up by twelve o'clock any day, it would be delivered at Greenwich on the following day. On the following day the shaft was taken by the defendants, before noon, for the purpose of being conveyed to Greenwich, and the sum of [2 pounds sterling 4 shillings] was paid for its carriage for the whole distance; at the same time the defendants' clerk was told that a special entry, if required, should be made to hasten its delivery. The delivery of the shaft at Greenwich was delayed [for one week, till Saturday the 21st, because the shaft was sent by canal rather than by rail]; and the consequence was, that the plaintiffs did not receive the new shaft for several days after they would otherwise have done, and the working of their mill was thereby delayed, and they thereby lost the profits they would otherwise have received.

[The Hadleys brought an action against Pickfords and named Joseph Baxendale, the London-based managing director of the firm, as the defendant. Pickfords was unincorporated and, therefore, Baxendale was personally liable for any judgment against the firm. Originally the Hadleys contended that they had lost five days of milling and 300 pounds sterling in lost profit because of Pickford's delay. At trial they claimed only 200 pounds sterling in losses, and witnesses testified as to 120 pounds sterling in lost profits. The case was given to the jury, and they awarded the Hadleys 50 pounds sterling in damages. The defendants believed that these damages were too remote, that they were "consequential" and not a direct result of their delay in delivery and that, therefore, the judge below should have instructed the jury to limit their award only to the direct result of the breach. They appealed to the Court of Exchequer, presided over by Barons Alderson, Martin, and Parke.]

ALDERSON, B. We think that there ought to be a new trial in this case; but, in so doing, we deem it to be expedient and necessary to state explicitly the rule which the Judge, at the next trial, ought, in our opinion, to direct the jury to be governed by when they estimate the damages. . .

Now we think the proper rule in such a case as the present is this: Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. Now, if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated. But, on the other hand, if these special circumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such a breach of contract. For, had the special circumstances been known the parties might have specially provided for the breach of contract by special terms as to the damages in that case; and of this advantage it would be very unjust to deprive them. Now the above principles are those by which we think the jury ought to be guided in estimating the damages arising out of any breach of contract. ...

Now, in the present case, if we are to apply the principles above laid down, we find that the only circumstances here communicated by the plaintiffs to the defendants at the time the contract was made, were, that the article to be carried was the broken shaft of a mill, and that the plaintiffs were the millers of that mill. But how do these circumstances shew reasonably that the profits of the mill must be stopped by an unreasonable delay in the delivery of the broken shaft by the carrier to the third person? Suppose the plaintiffs had another shaft in their possession put up or putting up at the time, and that they only wished to send back the broken shaft to the engineer who made it; it is clear that this would be quite consistent with the above circumstances, and yet the unreasonable delay in the delivery would have no effect upon the intermediate profits of the mill. Or, again, suppose that, at the time of the delivery to the carrier, the machinery of the mill had been in other respects defective, then, also, the same results would follow. Here it is true that the shaft was actually sent back to serve as a model for a new one, and that the want of a new one was the only cause of the stoppage of the mill, and that the loss of profits really arose from not sending down the new shaft in proper time, and that this arose from the delay in delivering the broken one to serve as a model. But it is obvious that, in the great multitude of cases of millers sending off broken shafts to third persons by a carrier under ordinary circumstances, such consequences would not, in all probability, have occurred; and these special circumstances were here never communicated by the plaintiffs to the defendants. It follows, therefore, that the loss of profits here cannot reasonably be considered such a consequence of the breach of contract as could have been fairly and reasonably contemplated by both the parties when they made this contract. For such loss would neither have flowed naturally from the breach of this contract in the great multitude of such cases occurring under ordinary circumstances, nor were the special circumstances, which, perhaps, would have made it a reasonable and natural consequence of such breach of contract, communicated to or known by the defendants. The Judge ought, therefore, to have told the jury, that, upon the facts then before them, they ought not to take the loss of profits into consideration at all in estimating the damages. There must therefore be a new trial in this case. ...

See the discussion of this case in Richard Danzig, "Hadley v. Baxendale: A Study in the Industrialization of the Law," 4 J. Legal Stud. 249 (1975).

Note, too, that the facts as reported in the headnote are not exactly the same as those used by Baron Alderson in deciding this case. Specifically, it appears to be the case that the Hadleys' agent did mention to the carrier that there was a special urgency attached to getting the shaft back as quickly as possible.

1. What is the default rule announced in Hadley? Is that rule efficient? Why is it a default rule and not a mandatory rule?

2. What would the state of the world be if the default rule announced in Hadley were the opposite way around? That is, would it be less efficient if the default rule were that the breacher was routinely liable for all the innocent party's losses?

[At a family celebration and in the presence of family and invited guests, William E. Story, Sr., the uncle of William E. Story, 2d, promised his nephew that if the nephew would refrain from drinking, using tobacco, swearing, and playing cards or billiards for money until he was 21 years old, the uncle would pay him $5,000. The nephew agreed and abided by the terms of his uncle's promise. When the nephew asked for his money, the uncle replied that he fully intended to hand over the $5,000, but that he felt that he should keep the money until the nephew got his feet on the ground. The nephew never received the money; eventually he transferred his right to receive the $5,000 plus interest to another person named Hamer. Presumably Hamer was willing to give him immediate cash, say, $4,000. Before Hamer could collect the $5,000 plus interest from the uncle, the uncle died. So, in the opinion excerpted below, Hamer is suing Sidway, who is the executor of the uncle's estate, to recover $5,000 plus interest.

On his 21st birthday the nephew William E. Story, 2d, wrote to his uncle, William E. Story, Sr., to tell him that he had performed his part of the promise and thought he was entitled to the $5,000. The uncle shortly thereafter wrote the following letter to his nephew:

Dear Nephew; Your letter of the 31st ult. came to hand all right, saying that you had lived up to the promise made to me several years ago. I have no doubt but you have, for which you will have five thousand dollars, as I promised you. I had the money in the bank the day you was [sic] twenty one years old that I intend for you, and you have the money certain. Now Willie, I do not intend to interfere with this money in any way till I think you are capable of taking care of it, and the sooner that time comes the better it will please me. I would hate very much to have you start out in some adventure that you thought all right and lose this money in one year. The first five thousand dollars that I got together cost me a heap of hard work ... This money you have earned much easier than I did, besides, acquiring good habits at the same time, and you are quite welcome to the money. Hope you will make good use of it. I was ten long years getting this together after I was your age ... Truly yours, W. E. Story.

The nephew received the letter, and thereafter consented that the money should remain with his uncle in accordance with the terms and conditions of the letter. The uncle died on the 29th day of January, 1887, without having paid over to his nephew any portion of the said $5,000 and interest. Sometime after February, 1875, the nephew had transferred his entitlement to Hamer, who has presented the claim for the money to Sidway, the executor of the uncle's estate.]

PARKER, J. ... The defendant contends that the contract was without consideration to support it, and therefore invalid. He asserts that the promisee, by refraining from the use of liquor and tobacco, was not harmed, but benefited; that that which he did was best for him to do, independently of his uncle's promise,--and insists that it follows that, unless the promisor was benefited, the contract was without consideration,--a contention which, if well founded, would seem to leave open for controversy in many cases whether that which the promisee did or omitted to do was in fact of such benefit to him as to leave no consideration to support the enforcement of the promisor's agreement. Such a rule could not be tolerated, and is without foundation in the law ... "Consideration' means not so much that one party is profiting as that the other abandons some legal right in the present, or limits his legal freedom of action in the future, as an inducement for the promise of the first."

Now, applying this rule to the facts before us, the promisee used tobacco, occasionally drank liquor, and he had a legal right to do so. That right he abandoned for a period of years upon the strength of the promise of the testator that for such forbearance he would give him $5,000. We need not speculate on the effort which may have been required to give up the use of those stimulants. It is sufficient that he restricted his lawful freedom of action within certain prescribed limits upon the faith of his uncle's agreement, and now, having fully performed the conditions imposed, it is of no moment whether such performance actually proved a benefit to the promisor, and the court will not inquire into it; but, were it a proper subject of inquiry, we see nothing in this record that would permit a determination that the uncle was not benefited in a legal sense.

a. The court held that the nephew should be paid the sum promised, even though the promise appeared to have been made informally at a family gathering where toasts and other gestures of goodwill were part of the celebration. How will courts decide which promises are made in earnest and which promises are frivolously made?

b. In this case the parties to the promise were uncle and nephew. Should courts be more reluctant to enforce promises between family members than between strangers?

c. The court indicates that its decision turns on the fact that the nephew had relied on the uncle's promise. Would any type of reliance make the promise of a gift into an enforceable promise? Or must the reliance be "reasonable" under the circumstances?

d. The court in this case indicates that the nephew's abstinence from liquor and tobacco was something of value foregone by the nephew in reliance upon the uncle's promise. Did the uncle benefit from his nephew's reliance? Did the court hold that the uncle must benefit from the reliance in order for his promise to be enforceable?

e. Suppose that instead of making demands on the nephew, the uncle simply promised to give the money, without conditions, as soon as the nephew turned 21 years old. This is the promise of a pure gift. Is there consideration? Would such a promise be enforceable under the bargain theory? Should courts enforce such promises?

[This takings case involved Donald P. Hodel, the Secretary of the Interior, and Mary Irving and others.]

The question presented is whether the original version of the "escheat" provision of the Indian Land Consolidation Act of 1983, Pub.L. 97-459, Tit. II, 96 Stat. 2519, effected a "taking" of appellees' decedents' property without just compensation.

Towards the end of the 19th century, Congress enacted a series of land Acts which divided the communal reservations of Indian tribes into individual allotments for Indians and unallotted lands for non‑Indian settlement. This legislation seems to have been in part animated by a desire to force Indians to abandon their nomadic ways in order to "speed the Indians' assimilation into American society," Solem v. Bartlett, 465 U.S. 463, 466 (1984), and in part a result of pressure to free new lands for further white settlement. Ibid. Two years after the enactment of the General Allotment Act of 1887, ch. 119, 24 Stat. 388, Congress adopted a specific statute authorizing the division of the Great Reservation of the Sioux Nation into separate reservations and the allotment of specific tracts of reservation land to individual Indians, conditioned on the consent of three-fourths of the adult male Sioux. Under the Act, each male Sioux head of household took 320 acres of land and most other individuals 160 acres. In order to protect the allottees from the improvident disposition of their lands to white settlers, the Sioux allotment statute provided that the allotted lands were to be held in trust by the United States. Until 1910, the lands of deceased allottees passed to their heirs "according to the laws of the State or Territory" where the land was located, ibid., and after 1910, allottees were permitted to dispose of their interests by will in accordance with regulations promulgated by the Secretary of the Interior. Those regulations generally served to protect Indian ownership of the allotted lands.

The policy of allotment of Indian lands quickly proved disastrous for the Indians. Cash generated by land sales to whites was quickly dissipated, and the Indians, rather than farming the land themselves, evolved into petty landlords, leasing their allotted lands to white ranchers and farmers and living off the meager rentals. ... The failure of the allotment program became even clearer as successive generations came to hold the allotted lands. Thus 40-, 80-, and 160-acre parcels became splintered into multiple undivided interests in land, with some parcels having hundreds, and many parcels having dozens, of owners. Because the land was held in trust and often could not be alienated or partitioned, the fractionation problem grew and grew over time.

A 1928 report commissioned by the Congress found the situation administratively unworkable and economically wasteful. Good, potentially productive, land was allowed to lie fallow, amidst great poverty, because of the difficulties of managing property held in this manner. ... In discussing the Indian Reorganization Act of 1934, Representative Howard said: "It is in the case of the inherited allotments, however, that the administrative costs become incredible. ... On allotted reservations, numerous cases exist where the shares of each individual heir from lease money may be 1 cent a month. Or one heir may own minute fractional shares in 30 or 40 different allotments. The cost of leasing, bookkeeping, and distributing the proceeds in many cases far exceeds the total income. The Indians and the Indian Service personnel are thus trapped in a meaningless system of minute partition in which all thought of the possible use of land to satisfy human needs is lost in a mathematical haze of bookkeeping." In 1934, in response to arguments such as these, the Congress acknowledged the failure of its policy and ended further allotment of Indian lands. Indian Reorganization Act of 1934, ch. 576, 48 Stat. 984, 25 U.S.C. Sec. 461 et seq.

But the end of future allotment by itself could not prevent the further compounding of the existing problem caused by the passage of time. Ownership continued to fragment as succeeding generations came to hold the property, since, in the order of things, each property owner was apt to have more than one heir. In 1960, both the House and the Senate undertook comprehensive studies of the problem. ... These studies indicated that one‑ half of the approximately 12 million acres of allotted trust lands were held in fractionated ownership, with over 3 million acres held by more than six heirs to a parcel. Further hearings were held in 1966, ... but not until the Indian Land Consolidation Act of 1983 did the Congress take action to ameliorate the problem of fractionated ownership of Indian lands.

Section 207 of the Indian Land Consolidation Act -- the escheat provision at issue in this case -- provided: "No undivided fractional interest in any tract of trust or restricted land within a tribe's reservation or otherwise subjected to a tribe's jurisdiction shall descedent [sic] by intestacy or devise but shall escheat to that tribe if such interest represents 2 per centum or less of the total acreage in such tract and has earned to its owner less than $100 in the preceding year before it is due to escheat." Congress made no provision for the payment of compensation to the owners of the interests covered by Sec. 207. The statute was signed into law on January 12, 1983, and became effective immediately.

The three appellees -- Mary Irving, Patrick Pumpkin Seed, and Eileen Bissonette -- are enrolled members of the Oglala Sioux Tribe. They are, or represent, heirs or devisees of members of the Tribe who died in March, April, and June 1983. Eileen Bissonette's decedent, Mary Poor Bear-Little Hoop Cross, purported to will all her property, including property subject to Sec. 207, to her five minor children in whose name Bissonette claims the property. Chester Irving, Charles Leroy Pumpkin Seed, and Edgar Pumpkin Seed all died intestate. At the time of their deaths, the four decedents owned 41 fractional interests subject to the provisions of Sec. 207. The Irving estate lost two interests whose value together was approximately $100; the Bureau of Indian Affairs placed total values of approximately $2,700 on the 26 escheatable interests in the Cross estate and $1,816 on the 13 escheatable interests in the Pumpkin Seed estates. But for Sec. 207, this property would have passed, in the ordinary course, to appellees or those they represent.

Appellees filed suit in the United States District Court for the District of South Dakota, claiming that Sec. 207 resulted in a taking of property without just compensation in violation of the Fifth Amendment. The District Court concluded that the statute was constitutional. It held that appellees had no vested interest in the property of the decedents prior to their deaths and that Congress had plenary authority to abolish the power of testamentary disposition of Indian property and to alter the rules of intestate succession.

The Court of Appeals for the Eighth Circuit reversed. Irving v. Clark, 758 F.2d 1260 (1985). Although it agreed that appellees had no vested rights in the decedents' property, it concluded that their decedents had a right, derived from the original Sioux allotment statute, to control disposition of their property at death. The Court of Appeals held that appellees had standing to invoke that right and that the taking of that right without compensation to decedents' estates violated the Fifth Amendment. ...

The Congress, acting pursuant to its broad authority to regulate the descent and devise of Indian trust lands ... enacted Sec. 207 as a means of ameliorating, over time, the problem of extreme fractionation of certain Indian lands. By forbidding the passing on at death of small, undivided interests in Indian lands, Congress hoped that future generations of Indians would be able to make more productive use of the Indians' ancestral lands. We agree with the Government that encouraging the consolidation of Indian lands is a public purpose of high order. The fractionation problem on Indian reservations is extraordinary and may call for dramatic action to encourage consolidation. The Sisseton-Wahpeton Sioux Tribe, appearing as amicus curiae in support of the Secretary of the Interior, is a quintessential victim of fractionation. Forty-acre tracts on the Sisseton-Wahpeton Lake Traverse Reservation, leasing for about $1,000 annually, are commonly subdivided into hundreds of undivided interests, many of which generate only pennies a year in rent. The average tract has 196 owners and the average owner undivided interests in 14 tracts. The administrative headache this represents can be fathomed by examining Tract 1305, dubbed "one of the most fractionated parcels of land in the world." ,,, Tract 1305 is 40 acres and produces $1,080 in income annually. It is valued at $8,000. It has 439 owners, one-third of whom receive less than $.05 in annual rent and two-thirds of whom receive less than $1. The largest interest holder receives $82.85 annually. The common denominator used to compute fractional interests in the property is 3,394,923,840,000. The smallest heir receives $.01 every 177 years. If the tract were sold (assuming the 439 owners could agree) for its estimated $8,000 value, he [the smallest heir] would be entitled to $.000418. The administrative costs of handling this tract are estimated by the Bureau of Indian Affairs at $17,560 annually. ...

There is no question that the relative economic impact of Sec. 207 upon the owners of these property rights can be substantial. Section 207 provides for the escheat of small undivided property interests that are unproductive during the year preceding the owner's death. Even if we accept the Government's assertion that the income generated by such parcels may be properly thought of as de minimis, their value may not be. While the Irving estate lost two interests whose value together was only approximately $100, the Bureau of Indian Affairs placed total values of approximately $2,700 and $1,816 on the escheatable interests in the Cross and Pumpkin Seed estates. These are not trivial sums. There are suggestions in the legislative history regarding the 1984 amendments to Sec. 207 that the failure to "look back" more than one year at the income generated by the property had caused the escheat of potentially valuable timber and mineral interests. ... Of course, the whole of appellees' decedents' property interests were not taken by Sec. 207. Appellees' decedents retained full beneficial use of the property during their lifetimes as well as the right to convey it inter vivos. There is no question, however, that the right to pass on valuable property to one's heirs is itself a valuable right. Depending on the age of the owner, much or most of the value of the parcel may inhere in this "remainder" interest.

The extent to which any of appellees' decedents had "investment-backed expectations" in passing on the property is dubious. Though it is conceivable that some of these interests were purchased with the expectation that the owners might pass on the remainder to their heirs at death, the property has been held in trust for the Indians for 100 years and is overwhelmingly acquired by gift, descent, or devise. Because of the highly fractionated ownership, the property is generally held for lease rather than improved and used by the owners. None of the appellees here can point to any specific investment-backed expectations beyond the fact that their ancestors agreed to accept allotment only after ceding to the United States large parts of the original Great Sioux Reservation.

Also weighing weakly in favor of the statute is the fact that there is something of an "average reciprocity of advantage," Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 415, (1922), to the extent that owners of escheatable interests maintain a nexus to the Tribe. Consolidation of Indian lands in the Tribe benefits the members of the Tribe. All members do not own escheatable interests, nor do all owners belong to the Tribe. Nevertheless, there is substantial overlap between the two groups. The owners of escheatable interests often benefit from the escheat of others' fractional interests. Moreover, the whole benefit gained is greater than the sum of the burdens imposed since consolidated lands are more productive than fractionated lands.

If we were to stop our analysis at this point, we might well find Sec.207 constitutional. But the character of the Government regulation here is extraordinary. In Kaiser Aetna v. United States, 444 U.S., at 176, 100 S.Ct., at 391, we emphasized that the regulation destroyed "one of the most essential sticks in the bundle of rights that are commonly characterized as property -- the right to exclude others." Similarly, the regulation here amounts to virtually the abrogation of the right to pass on a certain type of property -- the small undivided interest -- to one's heirs. In one form or another, the right to pass on property -- to one's family in particular -- has been part of the Anglo-American legal system since feudal times. ... The fact that it may be possible for the owners of these interests to effectively control disposition upon death through complex inter vivos transactions such as revocable trusts is simply not an adequate substitute for the rights taken, given the nature of the property. Even the United States concedes that total abrogation of the right to pass property is unprecedented and likely unconstitutional. ... Moreover, this statute effectively abolishes both descent and devise of these property interests even when the passing of the property to the heir might result in consolidation of property -- as for instance when the heir already owns another undivided interest in the property. Since the escheatable interests are not, as the United States argues, necessarily de minimis, nor, as it also argues, does the availability of inter vivos transfer obviate the need for descent and devise, a total abrogation of these rights cannot be upheld. ...

There is little doubt that the extreme fractionation of Indian lands is a serious public problem. It may well be appropriate for the United States to ameliorate fractionation by means of regulating the descent and devise of Indian lands. Surely it is permissible for the United States to prevent the owners of such interests from further subdividing them among future heirs on pain of escheat. ... It may be appropriate to minimize further compounding of the problem by abolishing the descent of such interests by rules of intestacy, thereby forcing the owners to formally designate an heir to prevent escheat to the Tribe. What is certainly not appropriate is to take the extraordinary step of abolishing both descent and devise of these property interests even when the passing of the property to the heir might result in consolidation of property. Accordingly, we find that this regulation, in the words of Justice Holmes, "goes too far." Pennsylvania Coal Co. v. Mahon, 260 U.S., at 415. The judgment of the Court of Appeals is

Think about the appropriate resolution of this case in view of the theory articulated by Professors Heller and Krier. (See the discussion of their Article under "Distributive Aspects of Taking" on the Property page.)

American Cyanamid Company, the defendant in this diversity tort suit governed by Illinois law, is a major manufacturer of chemicals, including acrylonitrile, a chemical used in large quantities in making acrylic fibers, plastics, dyes, pharmaceutical chemicals, and other intermediate and final goods. On January 2, 1979, at its manufacturing plant in Louisiana, Cyanamid loaded 20,000 gallons of liquid acrylonitrile into a railroad tank car that it had leased from the North American Car Corporation. The next day, a train of the Missouri Pacific railroad picked up the car at Cyanamid’s siding. The car’s ultimate destination was a Cyanamid plant in New Jersey served by Conrail rather than by Missouri Pacific. The Missouri Pacific train carried the car north to the Blue Island railroad yard of Indiana Harbor Belt Railroad, the plaintiff in this case, a small switching line that has a contract with Conrail to switch cars from other lines to Conrail, in this case for travel east. The Blue Island yard is in the Village of Riverdale, which is just south of Chicago and part of the Chicago metropolitan area.

The car arrived in the Blue Island yard on the morning of January 9, 1979. Several hours after it arrived, employees of the switching line noticed fluid gushing from the bottom outlet of the car. The lid on the outlet was broken. After two hours, the line’s supervisor of equipment was able to stop the leak by closing a shut-off valve controlled from the top of the car. No one was sure at the time just how much of the contents of the car had leaked, but it was feared that all 20,000 gallons had, and since acrylonitrile is flammable at a temperature of 30 degrees Fahrenheit or above, highly toxic, and possibly carcinogenic … the local authorities ordered the homes near the yard evacuated. The evacuation lasted only a few hours, until the car was moved to a remote part of the yard and it was discovered that only about a quarter of the acrylonitrile had leaked. Concerned nevertheless that there had been some contamination of soil and water, the Illinois Department of Environmental Protection ordered the switching line to take decontamination measures that cost the line $981,022.75, which it sought to recover by this suit.

One count of the two-count complaint charges Cyanamid with having maintained the leased tank car negligently. The other count asserts that the transportation of acrylonitrile in bulk through the Chicago metropolitan area is an abnormally dangerous activity, for the consequences of which the shipper (Cyanamid) is strictly liable to the switching line, which bore the financial brunt of those consequences because of the decontamination measures that it was forced to take. …

The question whether the shipper of a hazardous chemical by rail should be strictly liable for the consequences of a spill or other accident to the shipment en route is a novel one in Illinois ...

The parties agree that the question whether placing acrylonitrile in a rail shipment that will pass through a metropolitan area subjects the shipper to strict liability is [the central issue here] ... Restatement (Second) of Torts Sec. 520, comment l (1977) ... sets forth six factors to be considered in deciding whether an activity is abnormally dangerous and the actor therefore strictly liable.

The roots of Section 520 are in nineteenth-century cases. The most famous one is Rylands v. Fletcher, 1 Ex. 265, aff'd, L.R. 3 H.L. 300 (1868), but a more illuminating one in the present context is Guille v. Swan, 19 Johns. (N.Y.) 381 (1822). A man took off in a hot-air balloon and landed, without intending to, in a vegetable garden in New York City. A crowd that had been anxiously watching his involuntary descent trampled the vegetables in their endeavor to rescue him when he landed. The owner of the garden sued the balloonist for the resulting damage, and won. Yet the balloonist had not been careless. In the then state of ballooning it was impossible to make a pinpoint landing.

Guille is a paradigmatic case for strict liability. (a) The risk (probability) of harm was great, and (b) the harm that would ensue if the risk materialized could be, although luckily was not, great (the balloonist could have crashed into the crowd rather than into the vegetables). The confluence of these two factors established the urgency of seeking to prevent such accidents. (c) Yet such accidents could not be prevented by the exercise of due care; the technology of care in ballooning was insufficiently developed. (d) The activity was not a matter of common usage, so there was no presumption that it was a highly valuable activity despite its unavoidable riskiness. (e) The activity was inappropriate to the place in which it took place -- densely populated New York City. The risk of serious harm to others (other than the balloonist himself, that is) could have been reduced by shifting the activity to the sparsely inhabited areas that surrounded the city in those days. (f) Reinforcing (d), the value to the community of the activity of recreational ballooning did not appear to be great enough to offset its unavoidable risks.

These are, of course, the six factors in Sec. 520. They are related to each other in that each is a different facet of a common quest for a proper legal regime to govern accidents that negligence liability cannot adequately control. The interrelations might be more perspicuous if the six factors were reordered. One might for example start with (c), inability to eliminate the risk of accident by the exercise of due care. The baseline common law regime of tort liability is negligence. When it is a workable regime, because the hazards of an activity can be avoided by being careful (which is to say, nonnegligent), there is no need to switch to strict liability. Sometimes, however, a particular type of accident cannot be prevented by taking care but can be avoided, or its consequences minimized, by shifting the activity in which the accident occurs to another locale, where the risk or harm of an accident will be less ((e)), or by reducing the scale of the activity in order to minimize the number of accidents caused by it ((f)). By making the actor strictly liable -- by denying him in other words an excuse based on his inability to avoid accidents by being more careful -- we give him an incentive, missing in a negligence regime, to experiment with methods of preventing accidents that involve not greater exertions of care, assumed to be futile, but instead relocating, changing, or reducing (perhaps to the vanishing point) the activity giving rise to the accident. The greater the risk of an accident ((a)) and the costs of an accident if one occurs ((b)), the more we want the actor to consider the possibility of making accident-reducing activity changes; the stronger, therefore, is the case for strict liability. Finally, if an activity is extremely common ((d)), like driving an automobile, it is unlikely either that its hazards are perceived as great or that there is no technology of care available to minimize them; so the case for strict liability is weakened.

The largest class of cases in which strict liability has been imposed under the standard codified in the Second Restatement of Torts involves the use of dynamite and other explosives for demolition in residential or urban areas. Explosives are dangerous even when handled carefully, and we therefore want blasters to choose the location of the activity with care and also to explore the feasibility of using safer substitutes (such as a wrecking ball), as well as to be careful in the blasting itself. Blasting is not a commonplace activity like driving a car, or so superior to substitute methods of demolition that the imposition of liability is unlikely to have any effect except to raise the activity’s costs.

Against this background we turn to the particulars of acrylonitrile. Acrylonitrile is one of a large number of chemicals that are hazardous in the sense of being flammable, toxic, or both; acrylonitrile is both, as are many others. A table in the record, drawn from Glickman & Harvey, Statistical Trends in Railroad Hazardous Material Safety, 1978 to 1984, at pp. 63-65 (Draft Final Report to the Environmental & Hazardous Material Studies Division of the Association of American Railroads, April 1986) (tab. 4.1), contains a list of the 125 hazardous materials that are shipped in highest volume on the nation’s railroads. Acrylonitrile is the fifty-third most hazardous on the list. Number 1 is phosphorus (white or yellow), and among the other materials that rank higher than acrylonitrile on the hazard scale are anhydrous ammonia, liquified petroleum gas, vinyl chloride, gasoline, crude petroleum, motor fuel antiknock compound, methyl and ethyl chloride, sulfuric acid, sodium metal, and chloroform. The plaintiff’s lawyer acknowledged at argument that the logic of the district court’s opinion dictated strict liability for all 52 materials that rank higher than acrylonitrile on the list, and quite possibly for the 72 that rank lower as well, since all are hazardous if spilled in quantity while being shipped by rail. Every shipper of any of these materials would therefore be strictly liable for the consequences of a spill or other accident that occurred while the material was being shipped through a metropolitan area. The plaintiff’s lawyer further acknowledged the irrelevance, on her view of the case, of the fact that Cyanamid had leased and filled the car that spilled the acrylonitrile; all she thought important is that Cyanamid introduced the product into the stream of commerce that happened to pass through the Chicago metropolitan area. Her concession may have been incautious. One might want to distinguish between the shipper who merely places his goods on his loading dock to be picked up by the carrier and the shipper who, as in this case, participates actively in the transportation. But the concession is illustrative of the potential scope of the district court’s decision.

Siegler v. Kuhlman, 81 Wash. 2d 448, 502 P.2d 1181 (1972), also imposed strict liability on a transporter of hazardous materials, but the circumstances were again rather special. A gasoline truck blew up, obliterating the plaintiff’s decedent and her car. The court emphasized that the explosion had destroyed the evidence necessary to establish whether the accident had been due to negligence; so, unless liability was strict, there would be no liability -- and this as the very consequence of the defendant’s hazardous activity. ...

So we can get little help from precedent, and might as well apply Sec. 520 to the acrylonitrile problem from the ground up. To begin with, we have been given no reason, whether the reason in Siegler or any other, for believing that a negligence regime is not perfectly adequate to remedy and deter, at reasonable cost, the accidental spillage of acrylonitrile from rail cars. Acrylonitrile could explode and destroy evidence, but of course did not here, making imposition of strict liability on the theory of the Siegler decision premature. More important, although acrylonitrile is flammable even at relatively low temperatures, and toxic, it is not so corrosive or otherwise destructive that it will eat through or otherwise damage or weaken a tank car’s valves although they are maintained with due (which essentially means, with average) care. No one suggests, therefore, that the leak in this case was caused by the inherent properties of acrylonitrile. It was caused by carelessness -- whether that of the North American Car Corporation in failing to maintain or inspect the car properly, or that of Cyanamid in failing to maintain or inspect it, or that of the Missouri Pacific when it had custody of the car, or that of the switching line itself in failing to notice the ruptured lid, or some combination of these possible failures of care. Accidents that are due to a lack of care can be prevented by taking care; and when a lack of care can (unlike Siegler) be shown in court, such accidents are adequately deterred by the threat of liability for negligence.

It is true that the district court purported to find as a fact that there is an inevitable risk of derailment or other calamity in transporting “large quantities of anything.” This is not a finding of fact, but a truism: anything can happen. The question is, how likely is this type of accident if the actor uses due care? For all that appears from the record of the case or any other sources of information that we have found, if a tank car is carefully maintained the danger of a spill of acrylonitrile is negligible. If this is right, there is no compelling reason to move to a regime of strict liability, especially one that might embrace all other hazardous materials shipped by rail as well. This also means, however, that the amici curiae who have filed briefs in support of Cyanamid cry wolf in predicting “devastating” effects on the chemical industry if the district court’s decision is affirmed. If the vast majority of chemical spills by railroads are preventable by due care, the imposition of strict liability should cause only a slight, not as they argue a substantial, rise in liability insurance rates, because the incremental liability should be slight. The amici have momentarily lost sight of the fact that the feasibility of avoiding accidents simply by being careful is an argument against strict liability. ...

The district judge and the plaintiff’s lawyer make much of the fact that the spill occurred in a densely inhabited metropolitan area. Only 4,000 gallons spilled; what if all 20,000 had done so? Isn't the risk that this might happen even if everybody were careful sufficient to warrant giving the shipper an incentive to explore alternative routes? Strict liability would supply that incentive. But this argument overlooks the fact that, like other transportation networks, the railroad network is a hub-and-spoke system. And the hubs are in metropolitan areas. Chicago is one of the nation’s largest railroad hubs. In 1983, the latest date for which we have figures, Chicago’s railroad yards handled the third highest volume of hazardous-material shipments in the nation. East St. Louis, which is also in Illinois, handled the second highest volume. Office of Technology Assessment, Transportation of Hazardous Materials 53 (1986). With most hazardous chemicals (by volume of shipments) being at least as hazardous as acrylonitrile, it is unlikely -- and certainly not demonstrated by the plaintiff -- that they can be rerouted around all the metropolitan areas in the country, except at prohibitive cost. Even if it were feasible to reroute them one would hardly expect shippers, as distinct from carriers, to be the firms best situated to do the rerouting. ...

The difference between shipper and carrier points to a deep flaw in the plaintiff’s case. Unlike Guille, and unlike Siegler, and unlike the storage cases, beginning with Rylands itself, here it is not the actors -- that is, the transporters of acrylonitrile and other chemicals -- but the manufacturers, who are sought to be held strictly liable. A shipper can in the bill of lading designate the route of his shipment if he likes, but is it realistic to suppose that shippers will become students of railroading in order to lay out the safest route by which to ship their goods? Anyway, rerouting is no panacea. Often it will increase the length of the journey, or compel the use of poorer track, or both. When this happens, the probability of an accident is increased, even if the consequences of an accident if one occurs are reduced; so the expected accident cost, being the product of the probability of an accident and the harm if the accident occurs, may rise. ... It is easy to see how the accident in this case might have been prevented at reasonable cost by greater care on the part of those who handled the tank car of acrylonitrile. It is difficult to see how it might have been prevented at reasonable cost by a change in the activity of transporting the chemical. This is therefore not an apt case for strict liability. ...

The relevant activity is transportation, not manufacturing and shipping. This essential distinction the plaintiff ignores. But even if the plaintiff is treated as a transporter and not merely a shipper, it has not shown that the transportation of acrylonitrile in bulk by rail through populated areas is so hazardous an activity, even when due care is exercised, that the law should seek to create -- perhaps quixotically -- incentives to relocate the activity to non-populated areas, or to reduce the scale of the activity, or to switch to transporting acrylonitrile by road rather than by rail, perhaps to set the stage for a replay of Siegler v. Kuhlman. It is no more realistic to propose to reroute the shipment of all hazardous materials around Chicago than it is to propose the relocation of homes adjacent to the Blue Island switching yard to more distant suburbs. It may be less realistic. Brutal though it may seem to say it, the inappropriate use to which land is being put in the Blue Island yard and neighborhood may be, not the transportation of hazardous chemicals, but residential living. The analogy is to building your home between the runways at O’Hare.

The briefs hew closely to the Restatement, whose approach to the issue of strict liability is mainly allocative rather than distributive. By this we mean that the emphasis is on picking a liability regime (negligence or strict liability) that will control the particular class of accidents in question most effectively, rather than on finding the deepest pocket and placing liability there. At argument, however, the plaintiff’s lawyer invoked distributive considerations by pointing out that Cyanamid is a huge firm and the Indiana Harbor Belt railroad a fifty-mile-long switching line that almost went broke in the winter of 1979, when the accident occurred. Well, so what? A corporation is not a living person but a set of contracts the terms of which determine who will bear the brunt of liability. Tracing the incidence of a cost is a complex undertaking which the plaintiff sensibly has made no effort to assume, since its legal relevance would be dubious. We add only that however small the plaintiff may be, it has mighty parents: it is a jointly owned subsidiary of Conrail and the Soo line.

The case for strict liability has not been made. Not in this suit in any event. We need not speculate on the possibility of imposing strict liability on shippers of more hazardous materials ... any more than we need differentiate (given how the plaintiff has shaped its case) between active and passive shippers. We noted earlier that acrylonitrile is far from being the most hazardous among hazardous materials shipped by rail in highest volume. Or among materials shipped, period. …

Ordinarily when summary judgment is denied, the movant's rights are not extinguished; the case is simply set down for trial. If this approach were followed here, it would require remanding the case for a trial on whether Cyanamid should be held strictly liable. Yet that would be a mistake. The parties have agreed that the question whether the transportation of acrylonitrile through densely populated areas is abnormally dangerous is one of law rather than of fact; and trials are to determine facts, not law. More precisely -- for there is no sharp line between “law” and “fact” -- trials are to determine adjudicative facts rather than legislative facts. The distinction is between facts germane to the specific dispute, which often are best developed through testimony and cross-examination, and facts relevant to shaping a general rule, which, as the discussion in this opinion illustrates, more often are facts reported in books and other documents not prepared specially for litigation or refined in its fires. Again the line should not be viewed as hard and fast. If facts critical to a decision on whether a particular activity should be subjected to a regime of strict liability cannot be determined with reasonable accuracy without an evidentiary hearing, such a hearing can and should be held, though we can find no reported case where this was done. ...

Other issues are raised, but need not be decided. The plaintiff’s claim that it is entitled to prejudgment interest is premature, since the judgment it obtained must be set aside. The defendant’s alternative ground for reversal, that the switching yard assumed the risk of the abnormally dangerous activity by voluntarily participating (through its contract with Conrail) in the transportation of the tank car filled with acrylonitrile ... is academic. (The argument is that the switching line was a participant in the activity -- even a joint tortfeasor -- that has become transmogrified into a victim only because it incurred costs to prevent harm to the real potential victims of the accident.) ...

[W]ith damages having been fixed at a relatively modest level by the district court and not challenged by the plaintiff, and a voluminous record having been compiled in the summary judgment proceedings, we trust the parties will find it possible now to settle the case. Even the Trojan War lasted only ten years.

The judgment is reversed (with no award of costs in this court) and the case remanded for further proceedings, consistent with this opinion, on the plaintiff’s claim for negligence.

CARDOZO, J. The plaintiff built a country residence for the defendant at a cost of upwards of $77,000, and now sues to recover balance of $3,483.46, remaining unpaid. The work of construction ceased in June, 1914, and the defendant then began to occupy the dwelling. There was no complaint of defective performance until March, 1915. One of the specifications for the plumbing work provides that

The defendant learned in March, 1915, that some of the pipe, instead of being made in Reading, was the product of other factories. The plaintiff was accordingly directed by the architect to do the work anew. The plumbing was then encased within the walls except in a few places where it had to be exposed. Obedience to the order meant more than the substitution of other pipe. It meant the demolition at great expense of substantial parts of the completed structure. The plaintiff left the work untouched and asked for a certificate that the final payment was due. Refusal of the certificate was follow by this suit.

The evidence sustains a finding that the omission of the prescribed brand of pipe was neither fraudulent nor willful. It was the result of the oversight and inattention of the plaintiff's subcontractor. Reading pipe is distinguished from Cohoes pipe and other brands only by the name of the manufacturer stamped upon it at intervals of between six and seven feet. Even the defendant's architect, though he inspected the pipe upon arrival, failed to notice the discrepancy. The plaintiff tried to show that the brands installed, though made by other manufacturers, were the same in quality, in appearance, in market value, and in cost as the brand stipulated in the contract -- that they were, indeed, the same thing, though, manufactured in another place. The evidence was excluded, and a verdict directed for the defendant. The Appellate Division reversed, and granted a new trial.

We think the evidence, if admitted, would have supplied some basis for the inference that the defect was insignificant in its relation to the project. The courts never say that one who makes a contract fills the measure of his duty by less than full performance. They do say, however, that an omission, both trivial and innocent, will sometimes be atoned for by allowance of the resulting damage, and will not always be the breach of a condition to be followed by a forfeiture. The distinction is akin to that between dependent and independent promises, or between promises and conditions. … Some promises are so plainly independent that they can never by fair construction be conditions of one another. Others are so plainly dependent that they must always be conditions. Others, though dependent and thus conditions when there is departure in point of substance, will be viewed as independent and collateral when the departure is insignificant. Considerations partly of justice and partly of presumable intention are to tell us whether this or that promise shall be placed in one class or in another. The simple and the uniform will call for different remedies from the multifarious and the intricate. … There will be no assumption of a purpose to visit venial faults with oppressive retribution.

Those who think more of symmetry and logic in the development of legal rules than of practical adaptation to the attainment of a just result will be troubled by a classification where the lines of division are so wavering and blurred. Something, doubtless, may be said on the score of consistency and certainty in favor of a stricter standard. The courts have balanced such considerations against those of equity and fairness, and found the latter to be the weightier. The decisions in this state commit us to the liberal view, which is making its way, nowadays, in jurisdictions slow to welcome it. … Where the line is to be drawn between the important and the trivial cannot be settled by a formula. “In the nature of the case precise boundaries are impossible.” 2 Williston on Contracts, Sec. 841. The same omission may take on one aspect or another according to its setting. Substitution of equivalents may not have the same significance in fields of art on the one side and in those of mere utility on the other. Nowhere will change be tolerated, however, if it is so dominant or pervasive as in any real or substantial measure to frustrate the purpose of the contract. … There is no general license to install whatever, in the builder's judgment, may be regarded as “just as good.” The question is one of degree, to be answered, if there is doubt, by the triers of the facts [], and, if the inferences are certain, by the judges of the law []. We must weigh the purpose to be served, the desire to be gratified, the excuse for deviation from the letter, the cruelty of enforced adherence. Then only can we tell whether literal fulfillment is to be implied by law as a condition. This is not to say that the parties are not free by apt and certain words to effectuate a purpose that performance of every term shall be a condition of recovery. That question is not here. This is merely to say that the law will be slow to impute the purpose, in the silence of the parties, where the significance of the default is grievously out of proportion to the oppression of the forfeiture. The willful transgressor must accept the penalty of his transgression. For him there is no occasion to mitigate the rigor of implied conditions. The transgressor whose default is unintentional and trivial may hope for mercy if he will offer atonement for his wrong. …

In the circumstances of this case, we think the measure of the allowance is not the cost of replacement, which would be great, but the difference in value, which would be either nominal or nothing. Some of the exposed sections might perhaps have been replaced at moderate expense. The defendant did not limit his demand to them, but treated the plumbing as a unit to be corrected from cellar to roof. In point of fact, the plaintiff never reached the stage at which evidence of the extent of the allowance became necessary. The trial court had excluded evidence that the defect was unsubstantial, and in view of that ruling there was no occasion for the plaintiff to go farther with an offer of proof. We think, however, that the offer, if it had been made, would not of necessity have been defective because directed to difference in value. It is true that in most cases the cost of replacement is the measure. … The owner is entitled to the money which will permit him to complete, unless the cost of completion is grossly and unfairly out of proportion to the good to be attained. When that is true, the measure is the difference in value. Specifications call, let us say, for a foundation built of granite quarried in Vermont. On the completion of the building, the owner learns that through the blunder of a subcontractor part of the foundation has been built of granite of the same quality quarried in New Hampshire. The measure of allowance is not the cost of reconstruction. … The rule that gives a remedy in cases of substantial performance with compensation for defects of trivial or inappreciable importance has been developed by the courts as an instrument of justice. The measure of the allowance must be shaped to the same end.

The order should be affirmed, and judgment absolute directed in favor of the plaintiff upon the stipulation, with costs in all courts.

McLAUGHLIN, J. I dissent. The plaintiff did not perform its contract. Its failure to do so was either intentional or due to gross neglect which, under the uncontradicted facts, amounted to the same thing, nor did it make any proof of the cost of compliance, where compliance was possible.

Under its contract it obligated itself to use in the plumbing only pipe (between 2,000 and 2,500 feet) made by the Reading Manufacturing Company. The first pipe delivered was about 1,000 feet and the plaintiff's superintendent then called the attention of the foreman of the subcontractor, who was doing the plumbing, to the fact that the specifications annexed to the contract required all pipe used in the plumbing to be of the Reading Manufacturing Company. They then examined it for the purpose of ascertaining whether this delivery was of that manufacture and found it was. Thereafter, as pipe was required in the progress of the work, the foreman of the subcontractor would leave word at its shop that he wanted a specified number of feet of pipe, without in any way indicating of what manufacture. Pipe would thereafter be delivered and installed in the building, without any examination whatever. Indeed, no examination, so far as appears, was made by the plaintiff, the subcontractor, defendant's architect, or any one else, of any of the pipe except the first delivery, until after the building had been completed. Plaintiff's architect then refused to give the certificate of completion, upon which the final payment depended, because all of the pipe used in the plumbing was not of the kind called for by the contract. After such refusal, the subcontractor removed the covering or insulation from about 900 feet of pipe which was exposed in the basement, cellar, and attic, and all but 70 feet was found to have been manufactured, not by the Reading Company, but by other manufacturers, some by the Cohoes Rolling Mill Company, some by the National Steel Works, some by the South Chester Tubing Company, and some which bore no manufacturer's mark at all. The balance of the pipe had been so installed in the building that an inspection of it could not be had without demolishing, in part at least, the building itself.

I am of the opinion the trial court was right in directing a verdict for the defendant. The plaintiff agreed that all the pipe used should be of the Reading Manufacturing Company. Only about two-fifths of it, so far as appears, was of that kind. If more were used, then the burden of proving that fact was upon the plaintiff, which it could easily have done, since it knew where the pipe was obtained. The question of substantial performance of a contract of the character of the one under consideration depends in no small degree upon the good faith of the contractor. If the plaintiff had intended to, and had, complied with the terms of the contract except as to minor omissions, due to inadvertence, then he might be allowed to recover the contract price, less the amount necessary to fully compensate the defendant for damages caused by such omissions. … But that is not this case. It installed between 2,000 and 2,500 feet of pipe, of which only 1,000 feet at most complied with the contract. No explanation was given why pipe called for by the contract was not used, nor that any effort made to show what it would cost to remove the pipe of other manufacturers and install that of the Reading Manufacturing Company. The defendant had a right to contract for what he wanted. He had a right before making payment to get what the contract called for. It is no answer to this suggestion to say that the pipe put in was just as good as that made by the Reading Manufacturing Company, or that the difference in value between such pipe and the pipe made by the Reading Manufacturing Company would be either “nominal or nothing.” Defendant contracted for pipe made by the Reading Manufacturing Company. What his reason was for requiring this kind of pipe is of no importance. He wanted that and was entitled to it. It may have been a mere whim on his part, but even so, he had a right to this kind of pipe, regardless of whether some other kind, according to the opinion of the contractor or experts, would have been “just as good, better, or done just as well.” He agreed to pay only upon condition that the pipe installed were made by that company and he ought not to be compelled to pay unless that condition be performed. The rule, therefore, of substantial performance, with damages for unsubstantial omissions, has no application.

What was said by this court in Smith v. Brady, [cited earlier by the court,] is quite applicable here:

I am of the opinion the trial court did not err in ruling on the admission of evidence or in directing a verdict for the defendant.

For the foregoing reasons I think the judgment of the Appellate Division should be reversed and the judgment of the Trial Term affirmed.

1. If the plaintiff (Kent) was entitled to his contract price minus damages, why did the court use the “diminution in value” measure of damages, rather than the “cost of performance” measure? Would the kind of damages you award have an effect on future contractual behavior?

2. Suppose you learned that Kent’s son-in-law was an officer of the Reading Pipe Company (as is sometimes alleged to be the case). Would that make a difference in how you resolved this matter?

3. Does it matter why Kent wanted Reading pipe? Suppose that, in his heart of hearts, he really did not care what kind of pipe the contractor installed. He merely saw an opportunity here to take advantage of a minor error on the part of the contractor to lower the price he paid for the house. Would this opportunistic account change how you resolved the case?

4. Would an award of specific performance be efficient? What would you expect to happen between Kent and Jacob & Youngs if Kent had been awarded specific performance? What might have been the effect of that award on future contracting parties?

WACHTLER, J. On August 31, 1965 the plaintiffs, who are welfare recipients, agreed to purchase a home freezer unit for $900 as the result of a visit from a salesman representing Your Shop At Home Service, Inc. With the addition of the time credit charges, credit life insurance, credit property insurance, and sales tax, the purchase price totaled $1,234.80. Thus far the plaintiffs have paid $619.88 toward their purchase. The defendant claims that with various added credit charges paid for an extension of time there is a balance of $819.81 still due from the plaintiffs. The uncontroverted proof at the trial established that the freezer unit, when purchased, had a maximum retail value of approximately $300. The question is whether this transaction and the resulting contract could be considered unconscionable within the meaning of ' 2‑302 of the Uniform Commercial Code which provides in part:

(1) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.

(2) When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination.

There was a time when the shield of caveat emptor would protect the most unscrupulous in the marketplace -- a time when the law, in granting parties unbridled latitude to make their own contracts, allowed exploitive and callous practices which shocked the conscience of both legislative bodies and the courts.

The effort to eliminate these practices has continued to pose a difficult problem. On the one hand it is necessary to recognize the importance of preserving the integrity of agreements and the fundamental right of parties to deal, trade, bargain, and contract. On the other hand there is the concern for the uneducated and often illiterate individual who is the victim of gross inequality of bargaining power, usually the poorest members of the community.

Concern for the protection of these consumers against overreaching by the small but hardy breed of merchants who would prey on them is not novel. The dangers of inequality of bargaining power were vaguely recognized in the early English common law when Lord Hardwicke wrote of a fraud, which “may be apparent from the intrinsic nature and subject of the bargain itself; such as no man in his senses and not under delusion would make.” The English authorities on this subject were discussed in Hume v. United States (132 U.S. 406, 411 (1889)), where the United States Supreme Court characterized (p. 413) these as “cases in which one party took advantage of the other’s ignorance of arithmetic to impose upon him, and the fraud was apparent from the face of the contracts.”

The law is beginning to fight back against those who once took advantage of the poor and illiterate without risk of either exposure or interference. From the common-law doctrine of intrinsic fraud we have, over the years, developed common and statutory law which tells not only the buyer but also the seller to beware. This body of laws recognizes the importance of a free enterprise system but at the same time will provide the legal armor to protect and safeguard the prospective victim from the harshness of an unconscionable contract.

Section 2-302 of the Uniform Commercial Code enacts the moral sense of the community into the law of commercial transactions. It authorizes the court to find, as a matter of law, that a contract or a clause of a contract was “unconscionable at the time it was made,” and upon so finding the court may refuse to enforce the contract, excise the objectionable clause or limit the application of the clause to avoid an unconscionable result. “The principle,” states the Official Comment to this section, “is one of the prevention of oppression and unfair surprise.” It permits a court to accomplish directly what heretofore was often accomplished by construction of language, manipulations of fluid rules of contract law and determinations based upon a presumed public policy.

There is no reason to doubt, moreover, that this section is intended to encompass the price term of an agreement. In addition to the fact that it has already been so applied [in various cases], the statutory language itself makes it clear that not only a clause of the contract, but the contract in toto, may be found unconscionable as a matter of law. Indeed, no other provision of an agreement more intimately touches upon the question of unconscionability than does the term regarding price.

Fraud, in the instant case, is not present; nor is it necessary under the statute. The question which presents itself is whether or not, under the circumstances of this case, the sale of a freezer unit having a retail value of $300 for $900 ($1,439.69 including credit charges and $18 sales tax) is unconscionable as a matter of law. The court believes it is.

Concededly, deciding the issue is substantially easier than explaining it. No doubt, the mathematical disparity between $300, which presumably includes a reasonable profit margin, and $900, which is exorbitant on its face, carries the greatest weight. Credit charges alone exceed by more than $100 the retail value of the freezer. These alone, may be sufficient to sustain the decision. Yet, a caveat is warranted lest we reduce the import of ' 2‑302 solely to a mathematical ratio formula. It may, at times, be that; yet it may also be much more. The very limited financial resources of the purchaser, known to the sellers at the time of the sale, is entitled to weight in the balance. Indeed, the value disparity itself leads inevitably to the felt conclusion that knowing advantage was taken of the plaintiffs. In addition, the meaningfulness of choice essential to the making of a contract can be negated by a gross inequality of bargaining power. (Williams v. Walker-Thomas Furniture Co., 350 F. 2d 445.)

There is no question about the necessity and even the desirability of installment sales and the extension of credit. Indeed, there are many, including welfare recipients, who would be deprived of even the most basic conveniences without the use of these devices. Similarly, the retail merchant selling on installment or extending credit is expected to establish a pricing factor which will afford a degree of protection commensurate with the risk of selling to those who might be default prone. However, neither of these accepted premises can clothe the sale of this freezer with respectability. ...

Having already paid more than $600 toward the purchase of this $300 freezer unit, it is apparent that the defendant has already been amply compensated. In accordance with the statute, the application of the payment provision should be limited to amounts already paid by the plaintiffs and the contract be reformed and amended by changing the payments called for therein to equal the amount of payment actually so paid by the plaintiffs.

[Plaintiffs are granted judgment reforming the contract so as to total $619.88.]

1. What exactly does the court say? Why exactly is this contract unconscionable?

2. Can you think of any reason why the Joneses did not go to a nearby store to purchase the freezer? Is that reason enough to warrant enforcing the contract as written?

The primary issue presented here is whether an owner may protect personal property in an unoccupied boarded-up farm house against trespassers and thieves by a spring gun capable of inflicting death or serious injury.

We are not here concerned with a man's right to protect his home and members of his family. Defendants' home was several miles from the scene of the incident to which we refer infra.

Plaintiff's action is for damages resulting from serious injury caused by a shot from a 20-gauge spring shotgun set by defendants in a bedroom of an old farm house which had been uninhabited for several years. Plaintiff and his companion, Marvin McDonough, had broken and entered the house to find and steal old bottles and dated fruit jars which they considered antiques.

At defendants' request plaintiff's action was tried to a jury consisting of residents of the community where defendants' property was located. The jury returned a verdict for plaintiff and against defendants for $20,000 actual and $10,000 punitive damages.

After careful consideration of defendants' motions for judgment notwithstanding the verdict and for new trial, the experienced and capable trial judge overruled them and entered judgment on the verdict. Thus we have this appeal by defendants. …

II. Most of the facts are not disputed. In 1957 defendant Bertha L. Briney inherited her parents' farm land in Mahaska and Monroe Counties. Included was an 80-acre tract in southwest Mahaska County where her grandparents and parents had lived. No one occupied the house thereafter. Her husband, Edward, attempted to care for the land. He kept no farm machinery thereon. The outbuildings became dilapidated.

For about 10 years, 1957 to 1967, there occurred a series of trespassing and housebreaking events with loss of some household items, the breaking of windows and 'messing up of the property in general'. The latest occurred June 8, 1967, prior to the event on July 16, 1967 herein involved.

Defendants through the years boarded up the windows and doors in an attempt to stop the intrusions. They had posted 'no trespass' signs on the land several years before 1967. The nearest one was 35 feet from the house. On June 11, 1967 defendants set 'a shotgun trap' in the north bedroom. After Mr. Briney cleaned and oiled his 20-gauge shotgun, the power of which he was well aware, defendants took it to the old house where they secured it to an iron bed with the barrel pointed at the bedroom door. It was rigged with wire from the doorknob to the gun's trigger so it would fire when the door was opened. Briney first pointed the gun so an intruder would be hit in the stomach but at Mrs. Briney's suggestion it was lowered to hit the legs. He admitted he did so 'because I was mad and tired of being tormented' but 'he did not intend to injure anyone'. He gave to explanation of why he used a loaded shell and set it to hit a person already in the house. Tin was nailed over the bedroom window. The spring gun could not be seen from the outside. No warning of its presence was posted.

Plaintiff lived with his wife and worked regularly as a gasoline station attendant in Eddyville, seven miles from the old house. He had observed it for several years while hunting in the area and considered it as being abandoned. He knew it had long been uninhabited. In 1967 the area around the house was covered with high weeds. Prior to July 16, 1967 plaintiff and McDonough had been to the premises and found several old bottles and fruit jars which they took and added to their collection of antiques. On the latter date about 9:30 p.m. they made a second trip to the Briney property. They entered the old house by removing a board from a porch window which was without glass. While McDonough was looking around the kitchen area plaintiff went to another part of the house. As he started to open the north bedroom door the shotgun went off striking him in the right leg above the ankle bone. Much of his leg, including part of the tibia, was blown away. Only by McDonough's assistance was plaintiff able to get out of the house and after crawling some distance was put in his vehicle and rushed to a doctor and then to a hospital. He remained in the hospital 40 days.

Plaintiff's doctor testified he seriously considered amputation but eventually the healing process was successful. Some weeks after his release from the hospital plaintiff returned to work on crutches. He was required to keep the injured leg in a cast for approximately a year and wear a special brace for another year. He continued to suffer pain during this period.

There was undenied medical testimony plaintiff had a permanent deformity, a loss of tissue, and a shortening of the leg.

The record discloses plaintiff to trial time had incurred $710 medical expense, $2056.85 for hospital service, $61.80 for orthopedic service and $750 as loss of earnings. In addition thereto the trial court submitted to the jury the question of damages for pain and suffering and for future disability.

III. Plaintiff testified he knew he had no right to break and enter the house with intent to steal bottles and fruit jars therefrom. He further testified he had entered a plea of guilty to larceny in the nighttime of property of less than $20 value from a private building. He stated he had been fined $50 and costs and paroled during good behavior from a 60-day jail sentence. Other than minor traffic charges this was plaintiff's first brush with the law. On this civil case appeal it is not our prerogative to review the disposition made of the criminal charge against him.

IV. The main thrust of defendants' defense in the trial court and on this appeal is that 'the law permits use of a spring gun in a dwelling or warehouse for the purpose of preventing the unlawful entry of a burglar or thief'. They repeated this contention in their exceptions to the trial court's instructions 2, 5 and 6. They took no exception to the trial court's statement of the issues or to other instructions. …

The overwhelming weight of authority, both textbook and case law, supports the trial court's statement of the applicable principles of law.

In Volume 2, Harper and James, The Law of Torts, section 27.3, pages 1440, 1441, this is found:

Under our law punitive damages are not allowed as a matter of right. Sebastian v. Wood, 246 Iowa 94, 100, 101, 66 N.W.2d 841, 844. When malice is shown or when a defendant acted with wanton and reckless disregard of the rights of others, punitive damages may be allowed as punishment to the defendant and as a deterrent to others. Although not meant to compensate a plaintiff, the result is to increase his recovery. He is the fortuitous beneficiary of such an award simply because there is no one else to receive it.

The jury's findings of fact including a finding defendants acted with malice and with wanton and reckless disregard, as required for an allowance of punitive or exemplary damages, are supported by substantial evidence. We are bound thereby.

This opinion is not to be taken or construed as authority that the allowance of punitive damages is or is not proper under circumstances such as exist here. We hold only that question of law not having been properly raised cannot in this case be resolved.

Study and careful consideration of defendants' contentions on appeal reveal no reversible error.

1. Does economic efficiency argue for allowing property owners to protect their property by means of potentially dangerous devices -- such as spring guns, electrical shocks, and the like? Is the issue one of notice -- i.e., the property owner may do as he likes to protect his property but must give adequate notice to potential invaders about the dangerous devices?

2. Compare your answer to the first question with Judge Posner's excellent discussion of the issues in "Killing or Wounding to Protect a Property Interest," 14 J. Law and Economics 201 (1971). For a more recent work that looks at the issues of Katko v. Briney in light of the modern perils of home invasions and carjackings, see Stuart P. Green, "Castles and Carjacks: Proportionality and the Use of Deadly Force in Defense of Dwellings and Vehicles," 1999 U. Ill. L. Rev. 1.

[Miller and his neighbors are the owners of red cedar trees. Acting under the provisions of a state statute, Schoene, the state entomologist of Virginia, ordered them to cut down those trees in order to stop the spread of a communicable plant disease called "cedar rust" that threatened the trees in a nearby apple orchard. The statute did not require Virginia or the apple orchard owners to compensate Miller and his neighbors for the losses they suffered from the destruction of their trees. Indeed, Miller et al. had to bear the costs of cutting down the red cedar trees, although they were allowed to keep the trees for firewood.

At the trial court level the Circuit court of Shenandoah County affirmed the state entomologist's order and allowed Miller $100 towards the cost of removing the offending red cedar trees. The Supreme Court of Appeals of Virginia affirmed. In his appeal to the United States Supreme Court Miller claimed that the Virginia act violated the Due Process Clause of the 14th Amendment to the United States Constitution. In essence what he meant was that the Virginia statute was wrong to allow for the uncompensated destruction of his property to benefit another private individual.

In the opinion below Miller et al. are referred to as the "plaintiffs in error" and Schoene, the State Entomologist, is referred to as the "defendant in error."]

[The Cedar Rust Act of Virginia, embodied in Va. Code (1924) as Secs. 885 to 893, provides "for the cutting down of red cedar trees within two miles of any apple orchard when found upon official investigation to be the source or 'host plant' of the communicable plant disease called cedar rust and to 'constitute a menace to the health of any apple orchard in said locality.' The owner is allowed a judicial review of the order of the State Entomologist directing such cutting, and may use the trees when cut, but no compensation is allowed him for their value standing or for decrease in market value of the realty caused by their destruction. The evidence shows that the life cycle of the parasite has two phases, passed alternately on the cedar and the apple; that it is communicable by spores from the cedar to the apple over a radius of at least two miles; that the only practicable method of controlling it is destruction of all red cedar trees within that distance of apple orchard; and that the economic value of cedars in Virginia is small as compared with that of the apple orchards." "The provision of the statute that the investigation of the locality shall be made upon the request of ten or more reputable freeholders of the county or magisterial district does not make it objectionable as subjecting private property to arbitrary or irresponsible action of private citizens, since the decision whether the facts revealed bring the case within the statute is made by the State Entomologist and subject to judicial review."]

The red cedar, aside from its ornamental use, has occasional use and value as lumber. It is indigenous to Virginia, is not cultivated or dealt in commercially on any substantial scale, and its value throughout the state is shown to be small as compared with that of the apple orchards of the state. Apple growing is one of the principal agricultural pursuits in Virginia. The apple is used there and exported in large quantities. Many millions of dollars are invested in the orchards, which furnish employment for a large portion of the population, and have induced the development of attendant railroad and cold storage facilities.

On the evidence we may accept the conclusion of the Supreme Court of Appeals that the state was under the necessity of making a choice between the preservation of one class of property and that of the other wherever both existed in dangerous proximity. It would have been none the less a choice if, instead of enacting the present statute, the state, by doing nothing, had permitted serious injury to the apple orchards within its borders to go on unchecked. When forced to such a choice the state does not exceed its constitutional powers by deciding upon the destruction of one class of property in order to save another which, in the judgment of the legislature, is of greater value to the public. It will not do to say that the case is merely one of a conflict of tow private interests and that the misfortune of apple growers may not be shifted to cedar owners by ordering the destruction of their property; for it is obvious that there may be, and that here there is, a preponderant public concern in the preservation of the one interest over the other . . .

[The "ten or more reputable freeholders" who must, under the Cedar Rust Act, petition the state entomologist] do not determine the action of the state entomologist. They merely request him to conduct an investigation. In him is vested the discretion to decide, after investigation, whether or not conditions are such that the other provisions of the statute shall be brought into action; and his determination is subject to judicial review. The property of plaintiffs in error is not subjected to the possibly arbitrary and irresponsible action of a group of private citizens. …

1. What about the argument that the plaintiffs make that the statute is invalid because it provides for the taking of private property not for public use but for the benefit of other private persons?

2. What is the economic basis for the Court's decision? Would a bargain between the apple-orchard owners and the owners of red cedars be possible? Why or why not?

3. Are the cedar tree owners entitled to compensation or is this a non-compensable regulation?

MOORE, Circuit Judge: Dr. Oswald, a coin collector from Switzerland, was interested in Mrs. Allen's collection of Swiss coins. In April of 1964 Dr. Oswald was in the United States and arranged to see Mrs. Allen's coins. The parties drove to the Newburgh Savings Bank of Newburgh, New York, where two of her collections referred to as the Swiss Coin Collection and the Rarity Coin Collection were located in separate vault boxes. After examining and taking notes on the coins in the Swiss Coin Collection, Dr. Oswald was shown several valuable Swiss coins from the Rarity Coin Collection. He also took notes on these coins and later testified that he did not know that they were in a separate 'collection.' The evidence showed that each collection had a different key number and was housed in labeled cigar boxes.

On the return to New York City, Dr. Oswald sat in the front seat of the car while Mrs. Allen sat in the back with Dr. Oswald's brother, Mr. Victor Oswald, and Mr. Cantarella of the Chase Manhattan Bank's Money Museum, who had helped arrange the meeting and served as Dr. Oswald's agent. Dr. Oswald could speak practically no English and so depended on his brother to conduct the transaction. After some negotiation a price of $50,000 was agreed upon. Apparently the parties never realized that the references to 'Swiss coins' and the 'Swiss Coin Collection' were ambiguous. The trial judge found that Dr. Oswald thought the offer he had authorized his brother to make was for all of the Swiss coins, while Mrs. Allen thought she was selling only the Swiss Coin Collection and not the Swiss coins in the Rarity Coin Collection.

On April 8, 1964, Dr. Oswald wrote to Mrs. Allen to 'confirm my purchase of all your Swiss coins (gold, silver and copper) at the price of $50,000.00.' The letter mentioned delivery arrangements through Mr. Cantarella. In response Mrs. Allen wrote on April 15, 1964, that 'Mr. Cantarella and I have arranged to go to Newburgh Friday April 24.' This letter does not otherwise mention the alleged contract of sale or the quantity of coins sold. On April 20, realizing that her original estimation of the number of coins in the Swiss Coin Collection was erroneous, Mrs. Allen offered to permit a re-examination and to undertake not to sell to anyone else. Dr. Oswald cabled from Switzerland to Mr. Alfred Barth of the Chase Manhattan Bank, giving instruction to proceed with the transaction. Upon receiving the cable, Barth wrote a letter to Mrs. Allen stating Dr. Oswald's understanding of the agreement and requesting her signature on a copy of the letter as a 'mere formality.' Mrs. Allen did not sign and return this letter. On April 24, Mrs. Allen's husband told Barth that his wife did not wish to proceed with the sale because her children did not wish her to do so.

Appellant attacks the conclusion of the Court below that a contract did not exist since the minds of the parties had not met. The opinion below states:

In such a factual situation the law is settled that no contract exists. The Restatement of Contracts in section 71(a) adopts the rule of Raffles v. Wichelhaus, 2 Hurl. & C. 906, 159 Eng. Rep. 375 (Ex. 1864). Professor Young states that rule as follows:

Even though the mental assent of the parties is not requisite for the formation of a contract (see Comment to Restatement of Contracts 71 (1932)), the facts found by the trial judge clearly place this case within the small group of exceptional cases in which there is 'no sensible basis for choosing between conflicting understandings.' Young, at 647. The rule of Raffles v. Wichelhaus is applicable here. …

1. Was the Second Circuit correct in affirming the District Court's decision to void the agreement?

2. The basis of the holding here is that there was no "meeting of the minds" -- just as in Example 2 (p. 178) at the start of Chapter 6 about the sale of the Rusty Chevy or the pristine Cadillac. Can you give an economic justification for the holding in the case? What, for example, might be the consequences for future parties of enforcing this agreement according to Dr. Oswald's understanding? Of enforcing it according to Mrs. Allen's very different understanding? Will the allocation of risk for misunderstandings be different?

JACKSON, J. In the trial court, plaintiffs Willie and Lucille Peevyhouse sued the defendant, Garland Coal and Mining Company, for damages for breach of contract. Judgment was for plaintiffs in an amount considerably less than was sued for. Plaintiffs appeal and defendant cross-appeals ...

Briefly stated, the facts are as follows: plaintiffs owned a farm containing coal deposits, and in November, 1954, leased the premises to defendant for a period of five years for coal mining purposes. A "strip-mining" operation was contemplated in which the coal would be taken from pits on the surface of the ground, instead of from underground mine shafts. In addition to the usual covenants found in a coal mining lease, defendant specifically agreed to perform certain restorative and remedial work at the end of the lease period. It is unnecessary to set out the details of the work to be done, other than to say that it would involve the moving of many thousands of cubic yards of dirt, at a cost estimated by expert witnesses at about $29,000.00. However, plaintiffs sued for only $25,000.00.

During the trial, it was stipulated that all covenants and agreements in the lease contract had been fully carried out by both parties, except the remedial work mentioned above; defendant conceded that this work had not been done.

Plaintiffs introduced expert testimony as to the amount and nature of the work to be done. Over plaintiffs' objections, defendant thereafter introduced expert testimony as to the "diminution in value" of plaintiffs' farm resulting from the failure of defendant to render performance as agreed in the contract—that is, the difference between the present value of the farm, and what its value would have been if defendant had done what it agreed to ...

[The jury] returned a verdict for plaintiffs for $5,000.00—only a fraction of the "cost of performance," but more than the total value of the farm even after the remedial work is done. [Emphasis in original.]

On appeal, the issue is sharply drawn. Plaintiffs contend that the true measure of damages in this case is what it will cost plaintiffs to obtain performance of the work that was not done because of defendant's default. Defendant argues that the measure of damages is the cost of performance "limited, however, to the total difference in the market value before and after the work was performed."...

[The court notes that if the remedial work were done, the market value of the Peevyhouse's farm would increase by only $300.]

We therefore hold that where, in a coal mining lease, lessee agrees to perform certain remedial work on the premises concerned at the end of the lease period, and thereafter the contract is fully performed by both parties except that the remedial work is not done, the measure of damages in an action by lessor against lessee for damages for breach of contact is ordinarily the reasonable cost of performance of the work; however, where the contract provision breached was merely incidental to the main purpose in view, and where the economic benefit which would result to lessor by full performance of the work is grossly disproportionate to the cost of performance, the damages which lessor may recover are limited to the diminution in value resulting to the premises because of the non-performance.

Under the most liberal view of the evidence herein, the diminution in value resulting to the premises because of non-performance of the remedial work was $300.00 ... It thus appears that the judgment was clearly excessive, and that the amount for which judgment should have been rendered is definitely and satisfactorily shown by the record.

IRWIN, Justice (dissenting) ... Although the contract speaks for itself, there were several negotiations between the plaintiffs and defendant before the contract was executed. Defendant admitted in the trial of the action, that plaintiffs insisted the [provisions regarding remedial work] be included in the contract and that they would not agree to the coal mining lease unless [those] provisions were included.

The cost for performing the contract in question could have been reasonably approximated when the contract was negotiated and executed, and there are no conditions now existing which could not have been reasonably anticipated by the parties. Therefore, defendant had knowledge, when it prevailed upon the plaintiffs to execute the lease, that the cost of performance might be disproportionate to the value or benefits received by plaintiff for the performance ...

In the instant action defendant has made no attempt to even substantially perform. The contract in question is not immoral, is not tainted with fraud, and was not entered into through mistake or accident and is not contrary to public policy. It is clear and unambiguous and the parties understood the terms thereof, and the approximate cost of fulfilling the obligations could have been approximately ascertained. There are no conditions existing now which could not have been reasonably anticipated when the contract was negotiated and executed. The defendant could have performed the contract if it desired. It has accepted and reaped the benefits of its contract and now urges that plaintiffs under the contract be denied [their benefits from performance] ...

Therefore, in my opinion, the plaintiffs were entitled to specific performance of the contract and since defendant has failed to perform, the proper measure of damages should be the cost of performance.

a. Is breach efficient or inefficient in this factual setting? Does the court's decision create incentives for efficient breach in future cases similar to this one?

b. What forms of precaution by the promisor (the coal company) and reliance by the promisee (the Peevyhouses) might be relevant to this case? What are the incentive effects of the court's decision on precaution and reliance by future contracting parties?

c. The court asserts that the diminished-value measure of damages is more appropriate here than is the cost-of-performance measure. The reason it gives is that the cost-of-performance measure will lead to something the court calls "economic waste." Do you agree?

d. Suppose that the costs of remedial work given in the opinion are accurate. What evidence does the court mention as to the benefits of the remedial work? Is that evidence on the objective (market) value of the farm or on the subjective (personal) value of the farm to the Peevyhouses? Is it possible to find any evidence on the Peevyhouses' subjective valuation on remedial work?

e. What about the effect of this decision on future contracting parties in Oklahoma? If you are a coal company that has signed a lease committing you to perform remedial work after surface mining, would you restore the property? What if you were a coal company contemplating signing a lease with private individuals like the Peevyhouses? Would you agree to do remedial work after this decision? Would you include a discount in the price you paid for the lease to cover the anticipated costs of restoration? Suppose that you are a private property owner with a high subjective valuation on your property; perhaps your family has lived on this land for five generations. If a coal company offered to lease a portion of your property for surface mining, what would you do?

f. Would the efficiency problems with the court's decision disappear if the remedy in the case were specific performance rather than damages?

Be certain to see the discussion of a fascinating article on Peevyhouse -- Judith L. Maute, "Peevyhouse v. Garland Coal & Mining Co. Revisited: The Ballad of Willie and Lucille," 89 Northwestern U. L. Rev.1341 (1995) -- on the Contracts page on this Web site.

Pennsylvania Coal Co. v. Mahon

[Mahon was a property owner whose surface structure was in danger of subsiding because of the sub-surface coal-mining of the Pennsylvania Coal Company. In 1878 a previous owner of Mahon’s property had sold the Coal Company the right to mine coal under the property, retaining for himself and for subsequent owners the surface and other rights. The company claimed that Mahon bought the property knowing that the coal company had the right to sub-surface mining and that he, therefore, willingly assumed the risk that structures on the surface might subside and waived all claims to damages that might occur.

After Mahon bought the property the legislature of Pennsylvania in 1921 passed the Kohler Act, which forbade “the mining of anthracite coal in such way as to cause the subsidence of, among other things, any structure used as a human habitation,” unless the structure was the property of the owner of the underlying coal and was more than 150 feet from the improved property of someone else. Relying on that act, Mahon sued the coal company to have the sub-surface mining halted. The Pennsylvania Coal Company contended that the statute destroyed its property right to mine under Mahon’s property and asked that it be compensated for this lost property. The court below refused to compensate the Coal Company, and it appealed to the Supreme Court of the United States.]

MR. JUSTICE HOLMES. Government hardly could go on if to some extent values incident to property could not be diminished without paying for every such change in the general law. As long recognized, some values are enjoyed under an implied limitation and must yield to the police power. But obviously the implied limitation must have its limits, or the contract and due process clauses are gone. One fact for consideration in determining such limits is the extent of the diminution. When it reaches a certain magnitude, in most if not in all cases there must be an exercise of eminent domain and compensation to sustain the act. So the question depends upon the particular facts. The greatest weight is given to the judgment of the legislature, but it always is open to interested parties to contend that the legislature has gone beyond its constitutional power. …

What makes the right to mine coal valuable is that it can be exercised with profit. To make it commercially impracticable to mine certain coal has very nearly the same effect for constitutional purposes as appropriating or destroying it. This we think that we are warranted in assuming that the statute does. …

The general rule at least is, that while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking. It may be doubted how far exceptional cases, like the blowing up of a house to stop a conflagration, go. … We are in danger of forgetting that a strong public desire to improve the public condition is not enough to warrant achieving the desire by a shorter cut than the constitutional way of paying for the change. As we already said, this is a question of degree—and therefore cannot be disposed of by general propositions. …

But the question at bottom is upon whom the loss of the changes desired should fall. So far as private persons or communities have seen fit to take the risk of acquiring only surface rights, we cannot see that the fact that their risk has become a danger warrants the giving to them greater rights than they bought.

MR. JUSTICE BRANDEIS, dissenting. Coal in place is land; and the right of the owner to use his land is not absolute. He may not so use it as to create a public nuisance; and uses once harmless, may, owing to changed conditions, seriously threaten the public welfare. Whenever they do, the legislature has power to prohibit such uses without paying compensation; and the power to prohibit extends alike to the manner, the character and the purpose of the use. …

Every restriction upon the use of property imposed in the exercise of the police power deprives the owner of some right theretofore enjoyed, and is, in that sense, an abridgment by the States of rights in property without making compensation. But restriction imposed to protect the public health, safety or morals from dangers threatened is not a taking. The restriction here in question is merely the prohibition of a noxious use. The property so restricted remains in the possession of its owner. The State does not appropriate it or make any use of it. The State merely prevents the owner from making a use which interferes with paramount rights of the public. …

b. If you had to advise a governmental body or private owner, would you tell him that a 30 percent decline in value was sufficient to constitute a taking? Or would it need to be 70 percent? Is it possible that there is no precise answer? Might this ambiguity introduce inefficient incentives into the behavior of governments and of private owners? If so, would a flat rule about the decline in value that will trigger compensation—e.g., a 60 percent reduction in value—minimize those inefficiencies?

c. How is the reduction in value to be determined? Suppose that a site purchased for the construction of a nuclear power plant can no longer be used for that purpose because the government promulgates a regulation forbidding the construction of nuclear power plants on earthquake fault lines. How much value has the owner lost? What contribution can the concept of “opportunity cost” make?

d. Justice Brandeis’ position is, in essence, that to require compensation for property losses that follow from legitimate regulation would reduce the government’s incentive to regulate public nuisances. He says, “If by mining anthracite coal the owner would necessarily unloose poisonous gases, I suppose no one would doubt the power of the State to prevent that mining, without buying his coal fields. And why may not the State, likewise, without paying compensation, prohibit one from digging so deep or excavating so near the surface as to expose the community to like dangers? In the latter case, as in the former, carrying on the business would be a public nuisance.” Is this an apt analogy?

MUNSON, J. [O]n the 13th day of November, 1904, the defendant [Putnam] was the owner of a certain island in Lake Champlain, and of a certain dock attached thereto, which island and dock were then in charge of the defendant’s servant; that the plaintiff [Ploof] was then possessed of and sailing upon said lake a certain loaded sloop, on which were the plaintiff and his wife and two minor children; that there then arose a sudden and violent tempest, whereby the sloop and the property and persons therein were placed in great danger of destruction; that to save these from destruction or injury the plaintiff was compelled to, and did, moor the sloop to defendant’s dock; that the defendant by his servant unmoored the sloop, whereupon it was driven upon the shore by the tempest, without the plaintiff’s fault; and that the sloop and its contents were thereby destroyed, and the plaintiff and his wife and children cast into the lake and upon the shore, receiving injuries. ...

[The defendant, Putnam, argues that his property is his own and that no one may use it without his permission. He is under no legal compulsion to let others—even others in distress—trespass upon his property. Thus, his servant was well within the owner’s rights to untie the sloop and set it free. Putnam says, therefore, that he owes the Ploof and his family nothing for their injuries.

The plaintiff, Ploof, argues that every property owner has a duty to provide involuntary access to his property in the event of an emergency. Therefore, Putnam and his servant should not have untied Ploof’s sloop. They should be liable for the losses that Ploof and his family suffered.]

1. Is there an economic justification for the court's holding? That is, how is efficiency served if the property owner cannot exclude people in distress from his property?

2. Can you distinguish between unwanted invasions of a person's property that are economically efficient from those that are not? What about the familiar example of a snowmobiler who is out late at night, crashes, and breaks into an unoccupied cabin in order to take shelter from the cold?

3. In both Ploof and the case of the snowmobiler, for what damages, if any, should the involuntary invader be held liable?

Poletown Neighborhood Council v. City of Detroit

PER CURIAM. This case raises a question of paramount importance to the future welfare of this state and its residents: Can a municipality use the power of eminent domain granted to it by the Economic Development Corporations Act … to condemn property for transfer to a private corporation to build a plant to promote industry and commerce, thereby adding jobs and taxes to the economic base of the municipality and state? …

The Economic Development Corporations Act is a part of the comprehensive legislation dealing with planning, housing and zoning whereby the State of Michigan is attempting to provide for the general health, safety, and welfare through alleviating unemployment, providing economic assistance to industry, assisting the rehabilitation of blighted areas, and fostering urban redevelopment. … To further the objectives of this act, the legislature has authorized municipalities to acquire property by condemnation in order to provide industrial and commercial sites and the means of transfer from the municipality to private users.

What plaintiffs-appellants do challenge is the constitutionality of using the power of eminent domain to condemn one person’s property to convey it to another private person in order to bolster the economy. They argue that whatever incidental benefit may accrue to the public, assembling land to General Motors’ specifications for conveyance to General Motors for its uncontrolled use in profit making is really a taking for private use and not a public use because General Motors is the primary beneficiary of the condemnation.

The defendant-appellees contend, on the other hand, that the controlling public purpose in taking this land is to create an industrial site which will be used to alleviate and prevent conditions of unemployment and fiscal distress. The fact that it will be conveyed to and ultimately used by a private manufacturer does not defeat this predominant public purpose. …

The power of eminent domain is to be used in this instance primarily to accomplish the essential public purposes of alleviating unemployment and revitalizing the economic base of the community. The benefit to a private interest is merely incidental. … If the public benefit was not so clear and significant, we would hesitate to sanction approval of such a project.

RYAN, Justice (dissenting). This is more than an example of a hard case making bad law [;] it is, in the last analysis, good faith but unwarranted judicial imprimatur upon government action taken under the policy of the end justifying the means. …

It was, of course, evident to all interested observers that the removal by General Motors of its Cadillac manufacturing operations to a more favorable economic climate would mean the loss to Detroit of at least 6,000 jobs as well as the concomitant loss of literally thousands of allied and supporting automotive design, manufacture and sales functions. There would necessarily follow, as a result, the loss of millions of dollars in real estate and income tax revenues.

[General Motors had announced its intention to close the plant and move to the South unless the site of the Cadillac plant could be significantly improved. GM asked the City of Detroit to make extensive improvements to the freeways, streets, sewers, and other aspects of the site. If those changes were made, GM said that it would keep the Cadillac plant open. The cost of the acquisition of the property and of making these improvements was over $200 million. The City intended to sell the site to General Motors for $8 million.] Faced with the unacceptable prospect of losing two automotive plants and the jobs that go with them, the city chose to march in fast lock-step with General Motors to carve a “green field” out of an urban setting which ultimately required sweeping away a tightly-knit residential enclave of first- and second-generation Americans, for many of whom their home was their most valuable and cherished asset and their stable ethnic neighborhood the unchanging symbol of the security and quality of their lives.

It is plain, of course, that condemnation of property for transfer to private corporations is not wholly proscribed. For many years, and probably since the date of Michigan’s statehood, an exception to the general rule has been recognized. The exception, which for ease of reference might be denominated the instrumentality of commerce exception, has permitted condemnation for the establishment or improvement of the avenues of commerce—highways, railroads, and canals, for example. … It cannot for an instant be maintained, however, nor has anyone suggested, that the case before us falls within the instrumentality of commerce exception. … It may be argued, however, that the fact that the case before us lies outside the exception does not end the inquiry if the reasons justifying the existing exception are present here. I turn now to determine whether such reasons exist.

Examination of the cases involving the instrumentality of commerce exceptions reveal[s] that three common elements appear in those decisions that go far toward explicating and justifying the use of eminent domain for private corporations: 1) public necessity of the extreme sort, 2) continuing accountability to the public, and 3) selection of land according to facts of independent public significance. …

With regard to highways, railroads, canals, and other instrumentalities of commerce, it takes little imagination to recognize that without eminent domain these essential improvements, all of which require particular configurations of property—narrow and generally straight ribbons of land—would be “otherwise impracticable”; they would not exist at all. … [I]t could hardly be contended that the existence of the automotive industry or the construction of a new General Motors assembly plant requires the use of eminent domain. …

One of the reasons advanced by the defendants as justification of the taking in this case, and adopted by the majority, is the claim of alleviation of unemployment. Even assuming, arguendo, that employment per se is a “necessity of the extreme sort,” there are no guarantees from General Motors about employment levels at the new assembly plant. … But the fact of the matter is that once [the Central Industrial Park or CIP] is sold to General Motors, there will be no public control whatsoever over the management, or operation, or conduct of the plant to be built there. … The level of employment at the new GM plant will be determined by private corporate managers primarily with reference, not to the rate of regional unemployment, but to profit.

With this case the Court has subordinated a constitutional right to private corporate interests. As demolition of existing structures on the future plant site goes forward, the best that can be hoped for, jurisprudentially, is that the precedential value of this case will be lost in the accumulating rubble.

a. Would you characterize what the City of Detroit intends to do with this land as being the provision of a public good?

b. Justice Ryan describes the area where the taking is to occur as a “tightly-knit residential enclave of first- and second-generation Americans, for many of whom their home was their most valuable and cherished asset and their stable ethnic neighborhood the unchanging symbol of the security and quality of their lives.” If this description is accurate, does it raise any special efficiency concerns about the government’s taking this property at fair market value? Specifically, is there a particular problem here in under-compensating the residents of Poletown for their large subjective valuation on their homes and community?

c. Consider this case as an extension of Boomer, where transaction costs blocked bargaining over a public nuisance. The courts stepped in to move the entitlement to the party whose use was, presumably, more valuable. Is that what is really going on in Poletown? The bargaining costs between GM and the neighbors are so high that, even if the valuation of GM’s desire to use their property was greater than the valuation on the neighbors’ desire to remain where they were, no bargain could have been struck. What the court is sanctioning here is a hypothetical market transaction that would have taken place but for the level of transaction costs. Evaluate this interpretation of Poletown.

d. There is no question that maximizing employment and minimizing the social dislocation of unemployment when an employer leaves town is a legitimate and worthy governmental goal. What other policies were available to the City of Detroit in pursuing this goal? How else, other than by taking this property, might the City have assisted General Motors to remain in Detroit?

e. How would you have financed these alternative policies? Would using general tax revenues from all over Detroit or all over Michigan to purchase the neighbors’ property at their reservation prices have been more equitable than taking at fair market value?

f. What adverse economic incentives might this decision create for future business organizations thinking of leaving Michigan? What adverse economic incentives might it create for municipal governments in Michigan?

Must buyers of computer software obey the terms of shrinkwrap licenses? The district court held not, for two reasons: first, they are not contracts because the licenses are inside the box rather than printed on the outside; second, federal law forbids enforcement even if the licenses are contracts. … The parties and numerous amici curiae have briefed many other issues, but these are the only two that matter--and we disagree with the district judge's conclusion on each. Shrinkwrap licenses are enforceable unless their terms are objectionable on grounds applicable to contracts in general (for example, if they violate a rule of positive law, or if they are unconscionable). Because no one argues that the terms of the license at issue here are troublesome, we remand with instructions to enter judgment for the plaintiff.

ProCD, the plaintiff, has compiled information from more than 3,000 telephone directories into a computer database. We may assume that this database cannot be copyrighted, although it is more complex, contains more information (nine-digit zip codes and census industrial codes), is organized differently, and therefore is more original than the single alphabetical directory at issue in Feist Publications, Inc. v. Rural Telephone Service Co., 499 U.S. 340, 111 S.Ct. 1282, 113 L.Ed.2d 358 (1991). … ProCD sells a version of the database, called SelectPhone (trademark), on CD-ROM discs. (CD-ROM means "compact disc--read only memory." The "shrinkwrap license" gets its name from the fact that retail software packages are covered in plastic or cellophane "shrinkwrap," and some vendors, though not ProCD, have written licenses that become effective as soon as the customer tears the wrapping from the package. Vendors prefer "end user license," but we use the more common term.) A proprietary method of compressing the data serves as effective encryption too. Customers decrypt and use the data with the aid of an application program that ProCD has written. This program, which is copyrighted, searches the database in response to users' criteria (such as "find all people named Tatum in Tennessee, plus all firms with 'Door Systems' in the corporate name"). The resulting lists (or, as ProCD prefers, "listings") can be read and manipulated by other software, such as word processing programs.

The database in SelectPhone (trademark) cost more than $10 million to compile and is expensive to keep current. It is much more valuable to some users than to others. The combination of names, addresses, and SIC codes enables manufacturers to compile lists of potential customers. Manufacturers and retailers pay high prices to specialized information intermediaries for such mailing lists; ProCD offers a potentially cheaper alternative. People with nothing to sell could use the database as a substitute for calling long distance information, or as a way to look up old friends who have moved to unknown towns, or just as an electronic substitute for the local phone book. ProCD decided to engage in price discrimination, selling its database to the general public for personal use at a low price (approximately $150 for the set of five discs) while selling information to the trade for a higher price. It has adopted some intermediate strategies too: access to the SelectPhone (trademark) database is available via the America Online service for the price America Online charges to its clients (approximately $3 per hour), but this service has been tailored to be useful only to the general public.

If ProCD had to recover all of its costs and make a profit by charging a single price--that is, if it could not charge more to commercial users than to the general public--it would have to raise the price substantially over $150. The ensuing reduction in sales would harm consumers who value the information at, say, $200. They get consumer surplus of $50 under the current arrangement but would cease to buy if the price rose substantially. If because of high elasticity of demand in the consumer segment of the market the only way to make a profit turned out to be a price attractive to commercial users alone, then all consumers would lose out--and so would the commercial clients, who would have to pay more for the listings because ProCD could not obtain any contribution toward costs from the consumer market.

To make price discrimination work, however, the seller must be able to control arbitrage. An air carrier sells tickets for less to vacationers than to business travelers, using advance purchase and Saturday-night-stay requirements to distinguish the categories. A producer of movies segments the market by time, releasing first to theaters, then to pay-per-view services, next to the videotape and laserdisc market, and finally to cable and commercial tv. Vendors of computer software have a harder task. Anyone can walk into a retail store and buy a box. Customers do not wear tags saying "commercial user" or "consumer user." Anyway, even a commercial-user-detector at the door would not work, because a consumer could buy the software and resell to a commercial user. That arbitrage would break down the price discrimination and drive up the minimum price at which ProCD would sell to anyone.

Instead of tinkering with the product and letting users sort themselves--for example, furnishing current data at a high price that would be attractive only to commercial customers, and two-year-old data at a low price--ProCD turned to the institution of contract. Every box containing its consumer product declares that the software comes with restrictions stated in an enclosed license. This license, which is encoded on the CD‑ROM disks as well as printed in the manual, and which appears on a user's screen every time the software runs, limits use of the application program and listings to non-commercial purposes.

Matthew Zeidenberg bought a consumer package of SelectPhone (trademark) in 1994 from a retail outlet in Madison, Wisconsin, but decided to ignore the license. He formed Silken Mountain Web Services, Inc., to resell the information in the SelectPhone (trademark) database. The corporation makes the database available on the Internet to anyone willing to pay its price--which, needless to say, is less than ProCD charges its commercial customers. Zeidenberg has purchased two additional SelectPhone (trademark) packages, each with an updated version of the database, and made the latest information available over the World Wide Web, for a price, through his corporation. ProCD filed this suit seeking an injunction against further dissemination that exceeds the rights specified in the licenses (identical in each of the three packages Zeidenberg purchased). The district court held the licenses ineffectual because their terms do not appear on the outside of the packages. The court added that the second and third licenses stand no different from the first, even though they are identical, because they might have been different, and a purchaser does not agree to--and cannot be bound by--terms that were secret at the time of purchase. …

Following the district court, we treat the licenses as ordinary contracts accompanying the sale of products, and therefore as governed by the common law of contracts and the Uniform Commercial Code. … Zeidenberg does argue, and the district court held, that placing the package of software on the shelf is an "offer," which the customer "accepts" by paying the asking price and leaving the store with the goods. … In Wisconsin, as elsewhere, a contract includes only the terms on which the parties have agreed. One cannot agree to hidden terms, the judge concluded. So far, so good--but one of the terms to which Zeidenberg agreed by purchasing the software is that the transaction was subject to a license. Zeidenberg's position therefore must be that the printed terms on the outside of a box are the parties' contract--except for printed terms that refer to or incorporate other terms. But why would Wisconsin fetter the parties' choice in this way? Vendors can put the entire terms of a contract on the outside of a box only by using microscopic type, removing other information that buyers might find more useful (such as what the software does, and on which computers it works), or both. The "Read Me" file included with most software, describing system requirements and potential incompatibilities, may be equivalent to ten pages of type; warranties and license restrictions take still more space. Notice on the outside, terms on the inside, and a right to return the software for a refund if the terms are unacceptable (a right that the license expressly extends), may be a means of doing business valuable to buyers and sellers alike. See E. Allan Farnsworth, 1 Farnsworth on Contracts § 4.26 (1990); Restatement (2d) of Contracts § 211 comment a (1981) ("Standardization of agreements serves many of the same functions as standardization of goods and services; both are essential to a system of mass production and distribution. Scarce and costly time and skill can be devoted to a class of transactions rather than the details of individual transactions."). Doubtless a state could forbid the use of standard contracts in the software business, but we do not think that Wisconsin has done so.

Transactions in which the exchange of money precedes the communication of detailed terms are common. Consider the purchase of insurance. The buyer goes to an agent, who explains the essentials (amount of coverage, number of years) and remits the premium to the home office, which sends back a policy. On the district judge's understanding, the terms of the policy are irrelevant because the insured paid before receiving them. Yet the device of payment, often with a "binder" (so that the insurance takes effect immediately even though the home office reserves the right to withdraw coverage later), in advance of the policy, serves buyers' interests by accelerating effectiveness and reducing transactions costs. Or consider the purchase of an airline ticket. The traveler calls the carrier or an agent, is quoted a price, reserves a seat, pays, and gets a ticket, in that order. The ticket contains elaborate terms, which the traveler can reject by canceling the reservation. To use the ticket is to accept the terms, even terms that in retrospect are disadvantageous. … Just so with a ticket to a concert. The back of the ticket states that the patron promises not to record the concert; to attend is to agree. A theater that detects a violation will confiscate the tape and escort the violator to the exit. One could arrange things so that every concertgoer signs this promise before forking over the money, but that cumbersome way of doing things not only would lengthen queues and raise prices but also would scotch the sale of tickets by phone or electronic data service.

Consumer goods work the same way. Someone who wants to buy a radio set visits a store, pays, and walks out with a box. Inside the box is a leaflet containing some terms, the most important of which usually is the warranty, read for the first time in the comfort of home. By Zeidenberg's lights, the warranty in the box is irrelevant; every consumer gets the standard warranty implied by the UCC in the event the contract is silent; yet so far as we are aware no state disregards warranties furnished with consumer products. Drugs come with a list of ingredients on the outside and an elaborate package insert on the inside. The package insert describes drug interactions, contraindications, and other vital information -- but, if Zeidenberg is right, the purchaser need not read the package insert, because it is not part of the contract.

Next consider the software industry itself. Only a minority of sales take place over the counter, where there are boxes to peruse. A customer may place an order by phone in response to a line item in a catalog or a review in a magazine. Much software is ordered over the Internet by purchasers who have never seen a box. Increasingly software arrives by wire. There is no box; there is only a stream of electrons, a collection of information that includes data, an application program, instructions, many limitations ("MegaPixel 3.14159 cannot be used with BytePusher 2.718"), and the terms of sale. The user purchases a serial number, which activates the software's features. On Zeidenberg's arguments, these unboxed sales are unfettered by terms--so the seller has made a broad warranty and must pay consequential damages for any shortfalls in performance, two "promises" that if taken seriously would drive prices through the ceiling or return transactions to the horse-and-buggy age. …

What then does the current version of the UCC have to say? We think that the place to start is § 2-204(1): "A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract." A vendor, as master of the offer, may invite acceptance by conduct, and may propose limitations on the kind of conduct that constitutes acceptance. A buyer may accept by performing the acts the vendor proposes to treat as acceptance. And that is what happened. ProCD proposed a contract that a buyer would accept by using the software after having an opportunity to read the license at leisure. This Zeidenberg did. He had no choice, because the software splashed the license on the screen and would not let him proceed without indicating acceptance. So although the district judge was right to say that a contract can be, and often is, formed simply by paying the price and walking out of the store, the UCC permits contracts to be formed in other ways. ProCD proposed such a different way, and without protest Zeidenberg agreed. Ours is not a case in which a consumer opens a package to find an insert saying "you owe us an extra $10,000" and the seller files suit to collect. Any buyer finding such a demand can prevent formation of the contract by returning the package, as can any consumer who concludes that the terms of the license make the software worth less than the purchase price. Nothing in the UCC requires a seller to maximize the buyer's net gains. …

“The two prisoners, Thomas Dudley and Edwin Stephens, were indicted for the murder of Richard Parker on the high seas on the 25th of July in the present year. They were tried ... and ... the jury returned a special verdict, the legal effect of which has been argued before us, and on which we are now to pronounce judgment.

[O]n July 5, 1884, the prisoners, Thomas Dudley and Edwin Stephens, with one Brooks, all able-bodied English seamen, and the deceased, also an English boy, between seventeen and eighteen years of age, the crew of an English yacht, a registered English vessel, were cast away in a storm on the high seas 1600 miles from the Cape of Good Hope, and were compelled to put into an open boat belonging to the said yacht. That in this boat they had no supply of water and no supply of food, except two 1 lb. tins of turnips, and for three days they had nothing else to subsist upon. That on the fourth day they caught a small turtle, upon which they subsisted for a few days, and this was the only food they had up to the twentieth day when the act now in question was committed. That on the twelfth day the remains of the turtle were entirely consumed, and for the next eight days they had nothing to eat. That they had no fresh water, except such rain as they from time to time caught in their oilskin capes. That the boat was drifting on the ocean, and was probably more than 1000 miles away from land. That on the eighteenth day, when they had been seven days without food and five without water, the prisoners spoke to Brooks as to what should be done if no succor came, and suggested that someone should be sacrificed to save the rest, but Brooks dissented, and the boy, to whom they were understood to refer, was not consulted. That on the 24^th day of July, the day before the act now in question, the prisoner Dudley proposed to Stephens and Brooks that lots should be cast who should be put to death to save the rest, but Brooks refused to consent, and it was not put to the boy, and in point of fact there was no drawing of lots. That on that day the prisoners spoke of their having families, and suggested it would be better to kill the boy that their lives should be saved, and Dudley proposed that if there was no vessel in sight by the morrow morning the boy should be killed. That next day, the 25^th of July, no vessel appearing, Dudley told Brooks that he had better go and have a sleep, and made signs to Stephens and Brooks that the boy had better be killed. The prisoner Stephens agreed to the act, but Brooks dissented from it. That the boy was then lying at the bottom of the boat quite helpless, and extremely weakened by famine and by drinking sea water, and unable to make any resistance, nor did he ever assent to his being killed. The prisoner Dudley offered a prayer asking forgiveness for them all if either of them should be tempted to commit a rash act, and that their souls might be saved. That Dudley, with the assent of Stephens, went to the boy, and telling him that his time was come, put a knife into his throat and killed him then and there; that the three men fed upon the body and blood of the boy for four days; that on the fourth day after the act had been committed the boat was picked up by a passing vessel, and the prisoners were rescued, still alive, but in the lowest state of prostration. That they were carried to the port of Falmouth, and committed for trial at Exeter. That if the men had not fed upon the body of the boy they would … within the four days have died of famine. That the boy, being in a much weaker condition, was likely to have died before them. That at the time of the act in question there was no sail in sight, nor any reasonable prospect of relief. That under these circumstances there appeared to the prisoners every probability that unless they then fed or very soon fed upon the boy or one of themselves they would die of starvation. That there was no appreciable chance of saving life except by killing some one for the others to eat. That assuming any necessity to kill anybody, there was no greater necessity for killing the boy than any of the other three men. But whether, upon the whole matter by the jurors found, the killing of Richard Parker by Dudley and Stephens be felony and murder the jurors are ignorant, and pray the advice of the Court thereupon, and if upon the whole matter the Court shall be of opinion that the killing of Richard Parker be felony and murder, then the jurors say that Dudley and Stephens were each guilty of felony and murder as alleged in the indictment.”

1. Would you find Dudley and Stephens guilty of murder? That is, is their act excusable?

2. Be certain you look at the "Case of the Speluncean Explorers" above. Compare your answers to that that case and this one.

[The following dispute arose between private citizens in the State of New York in the 1880s. At issue was the division of the estate of a Mr. Francis Palmer between his daughters, Mrs. Riggs and Mrs. Preston, and his grandson, Elmer Palmer. Francis Palmer had left a last will and testament that specified how his property was to be divided among those parties. Elmer Palmer wishes his grandfather’s wishes to be followed to the letter; Mrs. Riggs and Mrs. Preston want the court to amend their father’s will to exclude Elmer Palmer from inheriting any of their father’s property. Their reason for so requesting is that Elmer Palmer murdered his grandfather when he learned that Francis was planning to change his will so as to exclude Elmer from inheriting. This dispute presented a novel and, obviously, fascinating question of law: Can a murderer inherit from the person whom he has murdered?]

EARL, J. On the 13th day of August, 1880, Francis B. Palmer made his last will and testament, in which he gave small legacies to his two daughters, Mrs. Riggs and Mrs. Preston, the plaintiffs in this action, and the remainder of the estate to his grandson, the defendant Elmer E. Palmer, subject to the support of Susan Palmer, his mother, with a gift over to the two daughters, subject to the support of Mrs. Palmer in case Elmer should survive him and die under age, unmarried, and without any issue. The testator, at the date of his will, owned a farm, and considerable personal property. He was a widower, and thereafter, in March, 1882, he was married to Mrs. Bresee, with whom before his marriage, he entered into an antenuptial contract, in which it was agreed that in lieu of dower and all other claims upon his estate in case she survived him she should have her support upon his farm during her life, and such support was expressly charged upon the farm. At the date of the will, and subsequently to the death of the testator, Elmer lived with him as a member of his family, and at his death was 16 years old. He knew of the provisions made in his favor in the will, and, that he might prevent his grandfather from revoking such provisions, which he had manifested some intention to do, and to obtain the speedy enjoyment and immediate possession of his property, he willfully murdered him by poisoning him. He now claims the property, and the sole question for our determination is, can he have it?

The defendants say that the testator is dead; that his will was made in due form, and has been admitted to probate; and that therefore it must have effect according to the letter of the law. It is quite true that statutes regulating the making, proof, and effect of wills and the devolution of property, if literally construed, and if their force and effect can in no way and under no circumstances be controlled or modified, give this property to the murderer. The purpose of those statutes was to enable testators to dispose of their estates to the objects of their bounty at death, and to carry into effect their final wishes legally expressed; and in considering and giving effect to them this purpose must be kept in view. It was the intention of the law-makers that the donees in a will should have the property given to them. But it never could have been their intention that a donee who murdered the testator to make the will operative should have any benefit under it. If such a case had been present to their minds, and it had been supposed necessary to make some provision of law to meet it, it cannot be doubted that they would have provided for it. … The writers of laws do not always express their intention perfectly, but either exceed it or fall short of it, so that judges are to collect it from probable or rational conjectures only…

What could be more unreasonable than to suppose that it was the legislative intention in the general laws passed for the orderly, peaceable, and just devolution of property that they should have operation in favor of one who murdered his ancestor that he might speedily come into the possession of his estate? Such an intention is inconceivable. We need not, therefore, be much troubled by the general language contained in the laws. Besides, all laws, as well as all contracts, may be controlled in their operation and effect by general, fundamental maxims of the common law. No one shall be permitted to profit by his own fraud, or to take advantage of his own wrong, or to found any claim upon his own iniquity, or to acquire property by his own crime. These maxims are dictated by public policy, have their foundation in universal law administered in all civilized countries, and have nowhere been superseded by statutes. They were applied in the decision of the case of Insurance Co. v. Armstrong, 117 U.S. 599, 6 Sup. Ct. Rep. 877. There it was held that the person who procured a policy upon the life of another, payable at his death, and then murdered the assured to make the policy payable, could not recover thereon ...

Here there was no certainty that this murderer would survive the testator, or that the testator would not change his will, and there was no certainty that he would get this property if nature was allowed to take its course. He therefore murdered the testator expressly to vest himself with an estate. Under such circumstances, what law, human or divine, will allow him to take the estate and enjoy the fruits of his crime? The will spoke and became operative at the death of the testator. He caused that death, and thus by his crime made it speak and have operation. Shall it speak and operate in his favor? If he had met the testator, and taken his property by force, he would have had no title to it. Shall he acquire title by murdering him? If he had gone to the testator’s house, and by force compelled him, or by fraud or undue influence had induced him, to will him to hold it. But can he give effect and operation to a will by murder, and yet take the property? To answer these questions in the affirmative it seems to me would be a reproach to the jurisprudence of our state, and an offense against public policy. Under the civil law, evolved from the general principles of natural law and justice by many generations of jurisconsults, philosophers, and statesmen, one cannot take property by inheritance or will from an ancestor or benefactor whom he has murdered. ...

My view of this case does not inflict upon Elmer any greater or other punishment for his crime than the law specifies. It takes from him no property, but simply holds that he shall not acquire property by his crime, and thus be rewarded for its commission.

Our attention is called to Owens v. Owens, 100 N. C. 240, 6 S. E. Rep. 794, as a case quite like this. There a wife had been convicted of being an accessory before the fact to the murder of her husband, and it was held that she was nevertheless entitled to dower. I am unwilling to assent to the doctrine of that case. The statutes provide dower for a wife who has the misfortune to survive her husband, and thus lose his support and protection. It is clear beyond their purpose to make provision for a wife who by her own crime makes herself a widow, and willfully and intentionally deprives herself of the support and protection of her husband. As she might have died before him, and thus never have been his widow, she cannot by her crime vest herself with an estate. The principle which lies at the bottom of the maxim volenti non fit injuria [“He who consents cannot receive an injury”] should be applied to such a case, and a widow should not, for the purpose of acquiring, as such, property rights, be permitted to allege a widowhood which she has wickedly and intentionally created.[1]

The facts found entitled the plaintiffs to the relief they seek. ... The judgment of the general term and that entered upon the report of the referee should therefore be reversed, and judgment should be entered as follows: That Elmer E. Palmer and the administrator be enjoined from using any of the personalty or real estate left by the testator for Elmer’s benefit; that the devise and bequest in the will to Elmer be declared ineffective to pass the title to him; that by reason of the crime of murder committed upon the grandfather he is deprived of any interest in the estate left by him; that the plaintiffs are the true owners of the real and personal estate left by the testator, subject to the charge in favor of Elmer’s mother and the widow of the testator, under the antenuptial agreement, and that the plaintiffs have costs in all the courts against Elmer. …

GRAY, J., (dissenting.) This appeal presents an extraordinary state of facts, and the case, in respect of them, I believe, is without precedent in this state. The respondent, a lad of 16 years of age, being aware of the provisions in his grandfather’s will, which constituted him the residuary legatee of the testator’s estate, caused his death by poison, in 1882. For this crime he was tried, and was convicted of murder in the second degree, and at the time of the commencement of this action he was serving out his sentence in the state reformatory. This action was brought by two of the children of the testator for the purpose of having those provisions of the will in the respondent’s favor canceled and annulled. The appellants’ argument for a reversal of the judgment, which dismissed their complaint, is that the respondent unlawfully prevented a revocation of the existing will, or a new will from being made, by his crime: and that he terminated the enjoyment by the testator of his property, and effected his own succession to it, by the same crime. They say that to permit the respondent to take the property willed to him would be to permit him to take advantage of his own wrong. To sustain their position the appellants’ counsel has submitted an able and elaborate brief, and, if I believed that the decision of the question could be effected by considerations of an equitable nature, I should not hesitate to assent to views which commend themselves to the conscience. But the matter does not lie within the domain of conscience. We are bound by the rigid rules of law, which have been established by the legislature, and within the limits of which the determination of this question is confined. The question we are dealing with is whether a testamentary disposition can be altered, or a will revoked, after the testator’s death, through an appeal to the courts, when the legislature has by its enactments prescribed exactly when and how wills may be made, altered, and revoked, and apparently, as it seems to me, when they have been fully complied with, has left no room for the exercise of an equitable jurisdiction by courts over such matters. Modern jurisprudence, in recognizing the right of the individual, under more or less restrictions, to dispose of his property after his death, subjects it to legislative control, both as to extent and as to mode of exercise. Complete freedom of testamentary disposition of one’s property has not been and is not the universal rule, as we see from the provisions of the Napoleonic Code, from the systems of jurisprudence in countries which are modeled upon the Roman law, and from the statutes of many of our states. To the statutory restraints which are imposed upon the disposition of one’s property by will are added strict and systematic statutory rules for the execution, alteration, and revocation of the will, which must be, at least substantially, if not exactly, followed to insure validity and performance. The reason for the establishment of such rules, we may naturally assume, consists in the purpose to create those safeguards about these grave and important acts which experience has demonstrated to be the wisest and surest. That freedom which is permitted to be exercised in the testamentary disposition of one’s estate by the laws of the state is subject to its being exercised in conformity with the regulations of the statutes. The capacity and the power of the individual to dispose of his property after death, and the mode by which that power can be exercised, are matters of which the legislature has assumed the entire control, and has undertaken to regulate with comprehensive particularity.

The appellants’ argument is not helped by reference to those rules of the civil law, or to those laws of other governments, by which the heir, or legatee, is excluded from benefit under the testament if he has been convicted of killing, or attempting to kill, the testator. In the absence of such legislation here, the courts are now empowered to institute such a system of remedial justice. The deprivation of the heir of his testamentary succession by the Roman law, when guilty of such a crime, plainly was intended to be in the nature of a punishment imposed upon him ...

The statutes of this state have prescribed various ways in which a will may be altered or revoked; but the very provision defining the modes of alteration and revocation implies a prohibition of alteration or revocation in any other way. The words of the section of the statute are: “No will in writing, except in the cases hereinafter mentioned, nor any part thereof, shall be revoked or altered otherwise,” etc. Where, therefore, none of the cases mentioned are met by the facts, and the revocation is not in the way described in the section, the will of the testator is unalterable. I think that a valid will must continue as will always, unless revoked in the manner provided by the statutes. Mere intention to revoke a will does not have the effect of revocation. The finding of fact of the referee that presumably the testator would have altered his will had he known of his grandson’s murderous intent cannot affect the question. We may concede it to the fullest extent; but still the cardinal objection is undisposed of, B that the making and the revocation of a will are purely matters of statutory regulation, by which the court is bound in the determination of questions relating to these acts. ...

I cannot find any support for the argument that the respondent’s succession to the property should be avoided because of his criminal act, when the laws are silent. Public policy does not demand it; for the demands of public policy are satisfied by the proper execution of the laws and the punishment of the crime. ... Practically the court is asked to make another will for the testator. The laws do not warrant this judicial action, and mere presumption would not be strong enough to sustain it. But, more than this, to concede the appellants’ views would involve the imposition of an additional punishment or penalty upon the respondent. What power or warrant have the courts to add to the respondent’s penalties by depriving him of property? The law has punished him for his crime, and we may not say that it was an insufficient punishment. In the trial and punishment of the respondent the law has vindicated itself for the outrage which he committed, and further judicial utterance upon the subject of punishment or deprivation of rights is barred. We may not, in the language of the court in People v. Thornton, 25 Hun, 456, “enhance the pains, penalties, and forfeitures provided by law for the punishment of crime.” The judgment should be affirmed, with costs.

1. Who are the plaintiffs in Riggs v. Palmer? What are they asking the court to do?

You will often find that there are multiple plaintiffs and multiple defendants and yet the case is entitled in such a way as for you to believe that there was only one plaintiff and one defendant. In fact, that was the case here. Why is there this disparity between who the parties really were and what the title of the case is? The answer is that this is purely a matter of convenience. The full title of the case you have just read is Riggs et al. v. Palmer et al., where et al. means, in Latin, “and other people.” It is easier to remember this case as simply Riggs or as Palmer or even as Riggs v. Palmer than to add the full title. You will find that famous cases are often referred to in an abbreviated form (e.g., Riggs) rather than by their full name.

2. Is there a New York statute involved in this dispute? From the context of the opinions, what does that statute say about the resolution of the current dispute? Did the legislators who wrote that statute anticipate the sort of situation that we see here? Why not?

Oliver Wendell Holmes characterized much of what common law judges do in the course of making law as “interstitial legislating.” Southern Pacific Co. v. Jensen, 2444 U.S. 205, 221 (1917) (dissenting opinion). What he meant was that the common law judges were filling in the gaps in the work undertaken by legislators. Is that a fair characterization of what the majority is doing in this case?

4. How does the majority opinion seek to support its conclusion? Does it use analogy? Give two examples of analogies used by Justice Earl. Does the majority cite other cases as support? Are those other cases binding precedent or merely persuasive? Why is Insurance Co. v. Armstrong, 117 U.S. 599, a United States Supreme Court opinion, not binding authority? What about the North Carolina case, Owens v. Owens, 100 N.C. 240?

An important argument made in the majority opinion is that if the testator (Francis Palmer) had thought of the possibility that his grandson (or anyone else) would kill him to prevent him changing his will so as to disinherit them, then the testator would have explicitly excluded a murdering heir. How do we know that the testator would have excluded Elmer? It’s a guess, but it’s a highly plausible guess. Experience, common sense, reflection—all those things and more suggest that Francis Palmer, like the vast majority of human beings, would not have wanted Elmer to profit from murdering his grandfather. (Notice that exactly the same argument could be made about the New York state legislature and its failure to specify what should be done in the case of a murdering heir. If the legislators had thought of this possibility, then they would have excluded a murdering heir.)

You should know just a little about wills in order to appreciate Justice Gray’s dissent. For centuries in the common-law world there has been an extremely strong general rule to honor the explicit wishes of the testator in his last will and testament. Thus, even where there might be a mistake in the will, the judges have generally enforced the terms anyway. Suppose, for instance, that Henderson’s last will and testament says, “I leave $100,000 in cash to the Sam Charles who lives on Woodhaven in Amherst, NY.” Henderson dies. Suppose that it is then discovered that Henderson really meant to leave the $100,000 to a Sam Charles who lives on Main St. in Amherst. Somehow, Henderson or his attorney made a mistake in writing down the address. Perhaps there are two Sam Charles listed in the phone book and in writing down the address, Henderson or his attorney meant to indicate the one on Main St. but wrote down the one on Woodhaven instead. Can the court correct this mistake and give the $100,000 to the real Sam Charles? In general, no. The testator is gone, and it is often impossible after the fact to be sure that this really was a mistake. Courts have made the determination that, all things considered, it is better to honor the explicit wishes of the decedent rather than to entertain speculation about what he or she really intended.

There are, of course, circumstances in which it is impossible to honor the testator’s wishes. Suppose, in the previous paragraph, that there was no one named Sam Charles on Woodhaven. What is to be done? Generally speaking, the court will try to ascertain in whatever way it can what the testator’s wishes were and then come as close to complying with those wishes as it is possible to do. For example, suppose there is a Charles Sams who lives on Woodhaven. That’s easy; the testator simply scrambled the names. But what if there is no Sam Charles and no Woodhaven? Finding an appropriate means of coming close to Henderson’s wishes in those circumstances is a more difficult matter.

This background should help you to see that Justice Gray’s position is not without merit. He says, in essence, that the New York Statute is silent on what to do in the situation before the court and that, therefore, the court should follow the testator’s explicit wishes. That is, Justice Gray argues for doing exactly what the will says to do. This view is in line with the strong presumption of the common law that we noted above. We’ll explore the implications of Justice Gray’s position in the following questions.

7. What precisely does Justice Gray think the appropriate solution to this dispute is?

8. How does he justify this position? Does he mention the strong presumption in favor of honoring a testator’s explicit wishes? How does he deal with the fact that the New York State legislature’s statute does not cover this situation? Does he rely on other authority to support his position? Whom does he cite? How does he make use of analogous reasoning in his dissenting opinion?

9. Suppose that Justice Gray, instead of being in the minority, had carried the day so that the law in New York was that a murderer could inherit. What are some of the consequences of this decision? Would you expect the number of testators who are murdered by prospective inheritors to increase? Would testators re-write their wills so as to explicitly exclude a murdering heir? What might the state legislature do in its next session? Would it amend the statute to exclude a murderer from inheritance?

An interesting aspect of the difference between the majority and minority opinions is the difference between a theory of (common law) judicial activism and restraint. Justice Earl and his colleagues felt that the gap in the New York statute should be filled. It was an oversight not to have thought of the possibility of a murdering heir, and the justices see no harm and a great deal of virtue in correcting that oversight. Justice Gray, on the other hand, can be interpreted as saying that this is not the court’s business. If the legislature had wanted to exclude murdering heirs, then they should have said so explicitly. Moreover, he can be interpreted as saying, “If it really was an oversight not to exclude murdering heirs under the statute, then the legislature, not the court, can take the appropriate corrective action at the earliest opportunity.” These two views—one of common-law judges actively filling in the gaps in the law, the other of judges deferring to the legislature—are characteristic of the debate between the civil law and common law countries and of a continuing debate within the common law countries about the appropriate role of judges and legislatures.

10. Suppose that you are member of a state legislature in 1890. Word of the majority opinion in Riggs reaches you and you decide that you should amend your state’s statute governing inheritance to exclude murdering heirs. Consider how you would deal with the following situations:

· the heir kills the testator in a fit of passion, not in the premeditated fashion that Elmer Palmer chose. Should he be allowed to inherit?

· the heir kills the testator in self-defense. Should he be allowed to inherit?

· the heir and the testator are killed fighting one another. (Suppose that one of the heir’s creditors or heirs brings the action against the testator’s estate.) Does it matter if the testator was the aggressor? Should the heir’s estate be allowed to inherit?

None of these is particularly easy to answer. Perhaps now you realize why common-law judges confine themselves to the exact facts presented to them rather than imagining all the possibilities.

[1] The judge’s point reminds us of the story of the young man who killed his parents and at his murder trial begged for mercy on the ground that he was an orphan.

Security Stove & Mfg. Co. v. American Railway Express Co.

BLAND, J. This is an action for damages for the failure of defendant to transport, from Kansas City to Atlantic City, New Jersey, within a reasonable time, a furnace equipped with a combination of oil and gas burner. The cause was tried before the court without the aid of a jury, resulting in a judgment in favor of plaintiff in the sum of $801.50 and interest, or in a total sum of $1,000.00. Defendant has appealed.

The facts show that plaintiff manufactured a furnace equipped with a special combination oil and gas burner it desired to exhibit at the American Gas Association Convention held in Atlantic City in October, 1926. The president of plaintiff testified that plaintiff engaged space for the exhibit for the reason “that the Henry L. Dougherty Company was very much interested in putting out a combination oil and gas burner; we had just developed one, after we got through, better than anything on the market and we thought this show would be the psychological time to get in contact with the Dougherty Company”; that “the thing wasn’t sent there for sale but primarily to show”; that at the time the space was engaged it was too late to ship the furnace by freight so plaintiff decided to ship it by express, and, on September 18th, 1926, wrote the office of the defendant in Kansas City, stating that it had engaged a booth for exhibition purposes at Atlantic City, New Jersey, from the American Gas Association, for the week beginning October 11th; that its exhibit consisted of an oil burning furnace, together with two oil burners which weighed at least 1,500 pounds; that, “In order to get this exhibit in place on time it should be in Atlantic City not later than October the 8th. What we want you to do is to tell us how much time you will require to assure the delivery of the exhibit on time?” ...

On October 1st, plaintiff wrote the defendant at Kansas City, referring to its letter of September 18th, concerning the fact that the furnace must be in Atlantic City not later than October 8th, and [stating]: “Now Mr. Bangs [the American Railway Express Company agent], we want to make doubly sure that this shipment is in Atlantic City not later than October 8th and the purpose of this letter is to tell you that you can have your truck call for the shipment between 12 and 1 o’clock on Saturday, October 2nd for this.” (Italics plaintiff's.) On October 2d, plaintiff called the office of the express company in Kansas City and told it that the shipment was ready. Defendant came for the shipment on the last mentioned day, received it and delivered the express receipt to plaintiff. The shipment contained 21 packages. Each package was marked with stickers backed with glue and covered with silica of soda, to prevent the stickers being torn off in shipping. Each package was given a number. They ran from 1 to 21.

Plaintiff’s president made arrangements to go to Atlantic City to attend the convention and install the exhibit, arriving there about October 11th. When he reached Atlantic City, he found the shipment had been placed in the booth that had been assigned to plaintiff. The exhibit was set up, but it was found that one of the packages shipped was not there. This missing package contained the gas manifold, or that part of the oil and gas burner that controlled the flow of gas in the burner. This was the most important part of the exhibit and a like burner could not be obtained in Atlantic City.

Wires were sent and it was found that the stray package was at the “over and short bureau” of defendant in St. Louis. Defendant reported that the package would be forwarded to Atlantic City and would be there by Wednesday, the 13th. Plaintiff’s president waited until Thursday, the day the convention closed, but the package had not arrived at the time, so he closed up the exhibit and left. About a week after he arrived in Kansas City, the package was returned by the defendant.

Mr. Bangs testified that the reasonable time for a shipment of this kind to reach Atlantic City from Kansas City would be four days; that if the shipment was received on October 4th, it would reach Atlantic City by October 8th; that plaintiff did not ask defendant for any special rate; that the rate charged was the regular one; that plaintiff asked no special advantage in the shipment; that all defendant, under its agreement with plaintiff was required to do was to deliver the shipment at Atlantic City in the ordinary course of events; that the shipment was found in St. Louis about Monday afternoon or Tuesday morning; that is was delivered at Atlantic City at the Ritz Carlton Hotel, on the 16th of the month. ...

Plaintiff asked damages, which the court in its judgment allowed as follows: $147.00 express charges (on the exhibit); $45.12 freight on the exhibit from Atlantic City to Kansas City; $101.39 railroad and Pullman fares to and from Atlantic City, expended by plaintiff's president and a workman taken by him to Atlantic City; $48.00 hotel room for the two; $150.00 for the time of the president; $40.00 for wages of plaintiff's other employee and $270.00 for rental of the booth, making a total of $801.51.

Defendant contends ... that the court erred in allowing plaintiff's expenses as damages; that the only damages, if any, that can be recovered in cases of this kind are for loss of profits and that plaintiff's evidence is not sufficient to base any recovery on this ground. ...

We think, under the circumstances in this case, that it was proper to allow plaintiff's expenses as its damages. Ordinarily the measure of damages where the carrier fails to deliver a shipment at destination within a reasonable time is the difference between the market value of the goods at the time of the delivery and the time when they should have been delivered. But where the carrier has notice of peculiar circumstances under which the shipment is made, which will result in an unusual loss by the shipper in case of delay in delivery, the carrier is responsible for the real damage sustained from such delay if the notice given is of such character, and goes to such extent, in informing the carrier of the shipper's situation, that the carrier will be presumed to have contracted with reference thereto. ...

Defendant contends that plaintiff “is endeavoring to achieve a return of the status quo in a suit based on a breach of contract. Instead of seeking to recover what he would have had, had the contract not been broken, plaintiff is trying to recover what he would have had, had there never been any contract of shipment”; that the expenses sued for would have been incurred in any event.[1] ...

The case at bar was [not] to recover damages for loss of profits by reason of the failure of the defendant to transport the shipment within a reasonable time, so that it would arrive in Atlantic City for the exhibit. There were no profits contemplated. ... There was no money loss, except the expenses, that was of such a nature as any court would allow as being sufficiently definite or lacking in pure speculation. Therefore, unless plaintiff is permitted to recover the expenses that it went to, which were a total loss to it by reason of its inability to exhibit the furnace and equipment, it will be deprived of any substantial compensation for its loss. The law does not contemplate any such injustice. It ought to allow plaintiff, as damages, the loss in the way of expenses that it sustained, and which it would not have been put to if it had not been for its reliance upon the defendant to perform its contract. There is not contention that the exhibit would have been entirely valueless and whatever it might have accomplished defendant knew of the circumstances and ought to respond for whatever damages plaintiff suffered. In cases of this kind, the method of estimating the damages should be adopted which is the most definite and certain and which best achieves the fundamental purpose of compensation. ...

While it is true that plaintiff already had incurred some of these expenses, in that it had rented space at the exhibit and this part of plaintiff's damages, in a sense, arose out of a circumstance which transpired before the contract was even entered into, yet, plaintiff arranged for the exhibit knowing that it could call upon defendant to perform its common law duty to accept and transport the shipment with reasonable dispatch. The whole damage, therefore, was suffered in contemplation of defendant performing its contract, which it failed to do, and would not have been sustained except for the reliance by plaintiff upon defendant to perform it. It can, therefore, be fairly said that the damages or loss suffered by plaintiff grew out of the breach of the contract, for had the shipment arrived on time, plaintiff would have had the benefit of the contract, which was contemplated by all parties, defendant being advised of the purpose of the shipment.

[1] On this point the opinion later reports that the defendant’s brief said,

"The plaintiff introduced not one whit of evidence showing or tending to show that he would have made any sales as a result of his exhibit but for the negligence of the defendant. On the contrary, Blakesley testified that the main purpose of the exhibit was to try to interest the Henry L. Dougherty Company in plaintiff's combination oil and gas burner, yet that was all the evidence that there was as to the benefit plaintiff expected to get from the exhibit.

As a matter of evidence, it is clear that the plaintiff would not have derived a great deal of benefit from the exhibit by any stretch of the imagination ...

Nowhere does plaintiff introduce evidence showing that the Henry L. Dougherty Company in all probability would have become interested in the combination oil and gas burner and made a profitable contract with the plaintiff.”

The court then adds, “There is evidence that the exhibit was not sent to make a sale.”

CAMERON, Vice Chief Justice. From a judgment permanently enjoining the defendant, Spur Industries, Inc. from operating a cattle feedlot near the plaintiff Del E. Webb Development Company’s Sun City, Spur appeals. … [W]e feel that it is necessary to answer only two questions. They are:

1. Where the operation of a business, such as a cattle feedlot, is lawful in the first instance, but becomes a nuisance by reason of a nearby residential area, may the feedlot operation be enjoined in an action brought by the developer of the residential area?

2. Assuming that the nuisance may be enjoined, may the developer of a completely new town or urban area in a previously agricultural area be required to indemnify the operator of the feedlot who must move or cease operation because of the presence of the residential area created by the developer?

The area in question is located in Maricopa County, Arizona, some 14 to 15 miles west of the urban area of Phoenix. In 1956, Spur’s predecessors in interest, H. Marion Welborn and the Northside Hay Mill and Trading Company, developed feedlots, about one-half mile south of Olive Avenue. … The area is well suited for cattle feeding and in 1959, there were 25 cattle feeding pens or dairy operations within a 7-mile radius of the location developed by Spur’s predecessors. …

In May of 1959, Del Webb began to plan the development of an urban area to be known as Sun City. For this purpose, the Marinette and the Santa Fe Ranches, some 20,000 acres of farmland, were purchased for $15,000,000 or $750 per acre. This price was considerably less than the price of land located near the urban area of Phoenix. …

By September 1959, Del Webb had started construction of a golf course south of Grand Avenue, and Spur’s predecessors had started to level ground for more feedlot area. In 1960, Spur purchased the property in question and began a rebuilding and expansion program extending both to the north and south of the original facilities. …

Accompanied by an extensive advertising campaign, homes were first offered by Del Webb in January, 1960, and the first unit to be completed was south of Grand Avenue and approximately 2½ miles north of Spur. By 2 May 1960, there were 450 to 500 houses completed or under construction. At this time, Del Webb did not consider odors from the Spur pens a problem, and Del Webb continued to develop in a southerly direction, until sales resistance became so great that the parcels were difficult if not impossible to sell. …

By December 1967, Del Webb’s property had extended south to Olive Avenue, and Spur was within 500 feet of Olive Avenue to the north … Del Webb filed its original complaint alleging that in excess of 1,300 lots in the southwest portion were unfit for development for sale as residential lots because of the operation of the Spur feedlot.

Del Webb’s suit complained that the Spur feeding operation was a public nuisance because of the flies and the odor which were drifting or being blown by the prevailing south to north wind over the southern portion of Sun City. At the time of the suit, Spur was feeding between 20,000 and 30,000 head of cattle, and the facts amply support the finding of the trial court that the feed pens had become a nuisance to the people who resided in the southern part of Del Webb’s development. The testimony indicated that cattle in a commercial feedlot will produce 35 to 40 pounds of wet manure per day, per head, or over a million pounds of wet manure per day for 30,000 head of cattle, and that despite the admittedly good feedlot management and good housekeeping practices by Spur, the resulting odor and flies produced an annoying if not unhealthy situation as far as the senior citizens of southern Sun City were concerned. There is no doubt that some of the citizens of Sun City were unable to enjoy the outdoor living that Del Webb had advertised and that Del Webb was faced with sales resistance from prospective purchasers as well as strong and persistent complaints from the people who had purchased homes in that area.

[The court next discusses the difference between a public and a private nuisance. It says that the former threatens to harm the general public while the latter threatens to harm only easily identifiable individuals. The court asserts that a private nuisance can be adequately dealt with through the payment of money damages but that a public nuisance, for which the total harm is much greater, is subject to an injunction. The trial court had held that Spur’s feedlot had become a public nuisance, and the Arizona Supreme Court agreed. The court next discusses whether Spur should be exonerated from being a public nuisance because Webb “came to the nuisance.”]

In the so-called “coming to the nuisance” cases, the courts have held that the residential landowner may not have relief if he knowingly came into a neighborhood reserved for industrial or agricultural endeavors and has been damaged thereby. [In Dill v. Excel Packing Company, 183 Kan. 513 (1958), the Kansas Supreme Court said,] “People employed in a city who build their homes in suburban areas of the county beyond the limits of a city and zoning regulations do so for a reason. Some do so to avoid the high taxation rate imposed by cities, or to avoid special assessments for street, sewer and water projects. They usually build on improved or hard surface highways, which have been built either at state or county expense and thereby avoid special assessments for these improvements. It may be the case that they desire to get away from the congestion of traffic, smoke, noise, foul air and the many other annoyances of city life. But with all these advantages in going beyond the area which is zoned and restricted to protect them in their homes, they must be prepared to take disadvantages.”

Were Webb the only party injured, we would feel justified in holding that the doctrine of “coming to the nuisance” would have been a bar to the relief asked by Webb, and, on the other hand, had Spur located the feedlot near the outskirts of a city and had the city grown toward the feedlot, Spur would have to suffer the cost of abating the nuisance as to those people locating within the growth pattern of the expanding city. …

There was no indication in the instant case at the time Spur and its predecessors located in western Maricopa County that a new city would spring up, full-blown, alongside the feeding operation and that the developer of that city would ask the court to order Spur to move because of the new city. Spur is required to move not because of any wrongdoing on the part of Spur, but because of a proper and legitimate regard of the courts for the rights and interests of the public.

Del Webb, on the other hand, is entitled to the relief prayed for (a permanent injunction), not because Webb is blameless, but because of the damage to the people who have been encouraged to purchase houses in Sun City. It does not equitably or logically follow, however, that Webb, being entitled to the injunction, is then free of any liability to Spur if Webb has in fact been the cause of the damage Spur has sustained. It does not seem harsh to require a developer, who has taken advantage of the lower land values in a rural area as well as the availability of large tracts of land on which to build and develop a new town or city in the area, to indemnify those who are forced to leave as a result.

Having brought people to the nuisance to the foreseeable detriment of Spur, Webb must indemnify Spur for a reasonable amount of the cost of moving or shutting down. It should be noted that this relief to Spur is limited to a case wherein a developer has, with foreseeability, brought into a previously agricultural or industrial area the population which makes necessary the granting of an injunction against a lawful business and for which the business has no adequate relief.

It is therefore the decision of this court that the matter be remanded to the trial court for a hearing upon the damages sustained by the defendant Spur as a reasonable and direct result of the granting of the permanent injunction.

a. In reaching its conclusion the Supreme Court of Arizona made much of the distinction between a public and a private nuisance. The court said that for a private nuisance, where the injury is to only a few individuals, a payment of money damages would adequately deal with the situation. But when a large number of people are involved, so that the nuisance is public, the Court says that the appropriate course is to enjoin the nuisance. Explain what is wrong with the Court’s view.

b. What is the economic interpretation of the defense of “coming to the nuisance”? Could it be said that Webb, by paying less for the property, was already compensated for the nuisance because the land values reflected the disamenity of the nearby feedlots?

c. Suppose that the price Webb paid for the land was not lower than the price of comparable land that was free from the stench. Could you argue that Webb knew or should have known about the nuisance so that whether the price of land was lower is irrelevant to resolving this dispute?

d. Would the result of this dispute have been less efficient if the court had excused Spur on the grounds that Webb had come to the nuisance? If the court had resolved the dispute in that way, what, if any, bargaining might have taken place among the parties afterward? In terms of the Calabresi-Melamed theory of protecting entitlements by property rules or liability rules, who would have received the entitlement and would that entitlement have been protected by a property rule or a liability rule?

e. How might the behavior of other nuisance-creators be affected by this decision? Would those nuisance-creators behave differently if the court had dismissed Webb’s suit?

f. Was a cooperative solution to the nuisance possible between Spur and Webb? Between Spur and the residents of Sun City?

g. If the case against Spur had been dismissed on “coming to the nuisance” grounds, do you think that the residents of Sun City would have had a cause of action against Del Webb? On what grounds?

h. Suppose that the case against Spur had been dismissed on “coming to the nuisance” grounds. And suppose that Spur had remained where they were and had continued to operate a cattle feedlot. Now suppose that ten years later, the Surgeon General of the United State has announced that persistent exposure to odor and flies is carcinogenic. Several of the residents of Sun City have developed cancer during that ten-year period and can make a plausible claim that the nearby cattle feedlots are responsible. Do the residents now have a cause of action against the feedlot? Is the feedlot now a public nuisance? Use the economic theory of remedies to suggest how a new suit by the residents against Spur can most efficiently be resolved.

[The facts in this case concern the loss of a barge and its cargo in New York Harbor. A number of barges were secured by a single mooring line to several piers. The defendant’s tug was hired to take one of those barges out of the harbor. In order to release that barge, the crew of the defendant’s tug, finding no one aboard any of the barges, re-adjusted the mooring lines themselves. The adjustment was not done properly, with the result that one of the barges later broke loose, collided with another ship, and sank with its cargo. The barge’s owner sued the tug owner, claiming that the tug owner’s employees were negligent in re-adjusting the mooring lines. The tug owner’s response was that the barge owner was negligent in that his agent, called a “bargee,” was not on the barge at the time the tug’s crew sought to adjust the mooring lines. Judge Hand’s opinion addresses the questions of whether the barge owner was negligent and how that should be determined.]

L. HAND, J. … It appears from the foregoing review that there is no general rule to determine when the absence of a bargee or other attendant will make the owner of a barge liable for injuries to other vessels if she breaks away from her moorings. ... Since there are occasions when every vessel will break away from her moorings, and since, if she does, she becomes a menace to those about her; the owner’s duty, as in other similar situations, to provide against resulting injuries is a function of three variables: (1) the probability that she will break away; (2) the gravity of the resulting injury, if she does; (3) the burden of adequate precautions. Possibly it serves to bring this notion into relief to state it in algebraic terms: if the probability be called P, the injury, L; and the burden, B; liability depends upon whether B is less than L multiplied by P, i.e., whether B < PL. Applied to the situation at bar, the likelihood that a barge will break from her fasts and the damage she will do, vary with the place and time: for example, if a storm threatens, the danger is greater; so it is, if she is in a crowded harbor where moored barges are constantly being shifted about. On the other hand, the barge must not be the bargee’s prison, even though he lives aboard; he must go ashore at times. ... In the case at bar the bargee left at five o’clock in the afternoon of January 3rd, and the flotilla broke away at about two o’clock in the afternoon of the following day, twenty-one hours afterwards. The bargee had been away all the time, and we hold that his fabricated story was affirmative evidence that he had no excuse for his absence. At the locus in quo—especially during the short January days, and in the full tide of war activity—barges were being constantly “drilled” in and out. Certainly it was not beyond reasonable expectation that, with the inevitable haste and bustle, the work might not be done with adequate care. In such circumstances we hold—and it is all that we do hold—that it was a fair requirement that the [barge owner] should have had a bargee aboard (unless he had some excuse for his absence), during the working hours of daylight. ...

a. Suppose that the value of the barge and its cargo are $100,000. Assume that the probability that the barge would break loose if the bargee is not present is 0.001. If the bargee is present, then the probability of the barge’s breaking loose is reduced by half, to 0.0005. However, in order to realize the reduction in the probability of accident, the barge owner must either induce the bargee to give up his scheduled time ashore by offering him a higher wage or by policing the bargee’s behavior more closely. Assume that either increase in precaution will cost the barge owner $25. If the barge owner does not incur this $25 expense, is his behavior negligent?

b. In making the calculation of expected costs, should the accident costs be “reasonably expected” accident costs or the worst possible case? For example, in the previous question we stated that the value of the barge and its cargo was $100,000. When making his calculations about precautionary behavior, the owner of the tug would probably use an average figure for the expected losses in the event of an accident. Thus, he would implicitly be assuming that the barge was an average barge with an average cargo. If, however, the barge contains a cargo that is far more valuable than average, won’t the tug owner have taken too little precaution if he used the average figure?

c. Does the Hand Rule formulation assume a particular attitude toward risk on the part of the defendant? For example, would a risk-averse defendant be more or less likely than a risk-neutral defendant to take precaution if the marginal cost of precaution is just equal to the expected marginal benefits of precaution? Does that make any difference, in the sense that to apply the rule the court should determine the defendant’s attitude toward risk before making the Hand calculation? (Recall that attitudes towards risk are discussed in Chapter 2.)

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Batsakis v. Demotsis	Miller v. Schoene
BMW v. Gore (coming soon)	Moore v. Regents of the University of California (coming soon)
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Jones v. Star Credit Corp	Vokes v. Murray (coming soon)
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