The Concept of National Law and the Rule of Recognition

It is a commonly held position that a rule cannot be a legal rule unless it is binding; or to put it differently, that one element that distinguishes legal rules from other kinds of rules is that legal rules are regarded as binding by duly constituted officials - typically, courts - who are called upon to apply them. Similarly, it is an often-held position that the law consists of the rules of a jurisdiction that are duly enacted or adopted by officials who have the power to make rules that are binding in the jurisdiction. The thesis of this article is that both positions are incorrect.I begin by developing a concept that I call national law. The concept of national law is that there is a body of law in the United States that is made by officials across jurisdictions, legal scholars, and scholarly institutions, which constitutes law despite the fact that it is not binding in, and is not necessarily made by, officials of a deciding jurisdiction. Examples of national law are the rules that a donative promise is enforceable if relied upon, that an acceptance is effective on dispatch, and that the remedy for breach of a bargain contract is expectation damages. National law is law because, as I show, under the practice of the legal profession, particularly the courts, the rules of national law (and not simply the reasons for those rules) are invoked as legal rules of decision.Next, I take the concept of a rule of recognition as a postulate, and develop the following four principles concerning the meaning, application, and scope of that concept, which are independent of, but exemplified by, the concept of national law: (1) The social group that must accept a secondary rule for the rule to constitute a rule of recognition is the legal profession, rather than simply judges and other officials. (2) Whether the legal profession accepts a secondary rule as a rule of recognition can be determined by examining the kinds of primary rules that are invoked by the profession as legal rules in resolving legal issues in general, and deciding cases in particular. (3) A rule can be a legal rule even though it is not binding. (4) In the United States, law is made not only by judges and other officials of the deciding jurisdiction, but also by the national judiciary, legal scholars, and professional institutions (in particular, the American Law Institute)

The Disgorgement Interest in Contract Law

Restatement Second of Contracts provided that contract law serves to protect one or more of three interests: the expectation interest, the reliance interest, and the restitution interest. There is, however a fourth interest that contract law should and does protect: the disgorgement interest, which is the promisee\u27s interest in requiring the promisor to disgorge a gain that was made possible by the promisor\u27s breach, but did not consist of a benefit conferred on the promisor by the promisee. It is not clear why Restatement Second excluded the disgorgement interest. Perhaps the drafters believed that this position was compelled by positive law. That proposition, however, would have been doubtful even when Restatement Second was published, and it is clearly wrong today: some appellate cases, and a handful of trial court cases, have denied protection to the disgorgement interest, but a dozen or so American appellate cases, as well as cases decided by the highest courts of several other common law jurisdictions, have afforded such protection. Alternatively, the drafters of Restatement Second may have believed that the disgorgement interest should not be protected as a normative matter That proposition also cannot be supported. On the contrary, there are strong efficiency reasons, as well as moral reasons, for protecting the disgorgement interest, because in certain categories of cases, protection of that interest in contract law is necessary to provide efficient incentives to the promisor, to effectuate contracts, or to prevent unjust enrichment. Of course, the disgorgement interest should not be protected in all cases in which a promise is legally enforceable, any more than the reliance interest, the restitution interest, or for that matter the expectation interest are protected in all cases. Rather, as in the case of those interests, the disgorgement interest should be protected when appropriate, and in certain categories of cases protection of the disgorgement interest is always appropriate

Fairness, Character, and Efficiency in Firms

Agency problems beset firms and prompt opportunistic behavior by employees. Opportunistic behavior redistributes value, whereas cooperative behavior creates value. Firm-specific fairness norms typically promote the firm’s efficiency by increasing cooperation and decreasing opportunism. Firm-specific fairness norms best promote efficiency when supported by reputation effects and when the firm’s agents internalize the norms. People who internalize norms acquire good character. We will develop the concept of “good agent character,” by which we mean agent character that serves the firm’s profitability by embodying the firm’s fairness norms. Good agent character conveys an advantage to superiors and subordinates in forming cooperative relations with other people who can read character

The Expectation Measure and Its Discontents

Article published in the Michigan State Law Review