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George Mason School of Law

George Mason School of Law. Contracts I A. Common Law Illegality F.H. Buckley fbuckley@gmu.edu. We ’ ve discussed why promises should be binding. Now: when should they not be binding ?. We ’ ve discussed why promises should be binding. Now: when should they not be binding ?

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George Mason School of Law

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  1. George Mason School of Law Contracts I A. Common Law Illegality F.H. Buckley fbuckley@gmu.edu

  2. We’ve discussed why promises should be binding • Now: when should they not be binding?

  3. We’ve discussed why promises should be binding • Now: when should they not be binding? • We’ve assumed that bargains make people better off. But what if they don’t?

  4. What does it mean to choose badly? • Immoral choices • Choices that Harm Others • Self-Defeating Choices

  5. 1. Immoral Choices • Should the state enforce morals? • The Borders of Private and Public Law

  6. 2. Choices that Harm Others • Third Party Externalities • But what counts as a harm?

  7. 3. Self-defeating Choices • Do the parties have capacity to choose wisely • Did they consent to the choice?

  8. 3. Self-defeating Choices • Capacity to Contract • “I wanted x but somehow I chose not-x.”

  9. 3. Self-defeating Choices • Vices of Consent • Fraud • Duress • Unconscionability?

  10. Mill On Liberty (1859) • What does this mean? • It really is of importance, not only what men do, but also what manner of men they are that do it. Among the works of man, which human life is rightly employed in perfecting and beautifying, the first in importance surely is man himself.

  11. Immoral Choices • Wait, that was a value judgment!!!!

  12. Immoral Choices • Clint and Bill meet up…

  13. Immoral Choices • The moral landscape: subjectivists and anti-subjectivists • Subjectivism: Each individual is the source of his personal moral judgment and there is no external basis for morality (relativism) • Anti-subjectivism: An individual’s moral judgment may be second-guessed, even when the individual holds it sincerely

  14. Immoral Choices Maggie Gallagher Vaughn Walker

  15. Immoral Choices • Is there such a thing as being too judgmental?

  16. Immoral Choices • Is there such a thing as being too judgmental? • Especially when the state enforces morals?

  17. Enforcing morality

  18. Mill’s Position

  19. Neutralism • Mill’s harm principle: • “The only purpose for which power can rightfully be exercised over any member of a civilized community, against his will, is to prevent harm to others.” • Mill, On Liberty (1859)

  20. Neutralism

  21. John Stuart Mill & Harriet Taylor

  22. The Film Version: as done by Merchant & Ivory With Hugh Grant as JSM

  23. The Film Version And Emma Thompson As Harriet Taylor

  24. “Hi Mom. Hi Dad. I’m home!” And Jerry Mathers As The Beaver

  25. Mill’s harm principle • What does this mean? • It is proper to state that I forego any advantage which could be derived to my argument from the idea of abstract right as a thing independent of utility. I regard utility as the ultimate appeal on all ethical questions

  26. Mill’s harm principle • “The only purpose for which power can rightfully be exercised over any member of a civilized community, against his will, is to prevent harm to others.” • And just what does that mean?

  27. Mill’s harm principle • “The only purpose for which power can rightfully be exercised over any member of a civilized community, against his will, is to prevent harm to others.” • Self-regarding harms don’t provide a basis for state interference

  28. Mill’s harm principle • So what does that leave? • What choices would Mill restrict?

  29. Neutralism • So what does that leave? • Other-regarding harms: Externalities • Children, etc.… • “The time when mankind have become capable of being improved by free and equal discussion”

  30. The Legal Response • Statutory and Common Law Illegality

  31. Statutory and Common Law Illegality • Contracts rendered illegal by statute: Watts v. Malatesta • Contracts illegal at common law: Baby M

  32. Statutory Illegality: Gambling The game is pool—straight pool

  33. Statutory Illegality: Gambling Looks like a church … Yeah. The Church of the Good Hustle. The Hustler

  34. Why should gambling be stigmatized?

  35. Is gambling inconsistent with the norms of capitalism? Daniel Bell, The Cultural Contradictions of Capitalism You can scissors-and-paste the Ross Douthat piece 35

  36. Gambling: Criminal Sanctions • VA § 18.2-325. 1. "Illegal gambling" means the making, placing or receipt, of any bet or wager in this Commonwealth of money or other thing of value, made in exchange for a chance to win a prize, stake or other consideration or thing of value, dependent upon the result of any game, contest or any other event the outcome of which is uncertain or a matter of chance… • NY § 991 in Watts

  37. Gambling: Civil Law Effects • VA § 11-14. Gaming contracts void. Except as otherwise provided in this section, all wagers, conveyances, assurances, and all contracts and securities whereof the whole or any part of the consideration is money or other valuable thing won, laid, or bet, at any game, horse race, sport or pastime, and all contracts to repay any money knowingly lent at the time and place of such game, race, sport or pastime, to any person for the purpose of so gaming, betting, or wagering, or to repay any money so lent to any person who shall, at such time and place, so pay, bet or wager, shall be utterly void. • NY § 992 in Watts

  38. But it’s OK when we do it • § 11-14. Gaming contracts void. Except as otherwise provided in this section, all wagers, conveyances, assurances, and all contracts and securities whereof the whole or any part of the consideration is money or other valuable thing won, laid, or bet, at any game, horse race, sport or pastime, and all contracts to repay any money knowingly lent at the time and place of such game, race, sport or pastime, to any person for the purpose of so gaming, betting, or wagering, or to repay any money so lent to any person who shall, at such time and place, so pay, bet or wager, shall be utterly void. • Notwithstanding any other provision of law, a contract governing the distribution of state lottery proceeds shall be valid and enforceable as between the parties to the contract.

  39. Watts at 481 • What happened…

  40. Watts Π Δ Lost and paid $37,500 Lost and paid net $100,000 • Π sues to recover his losses. • Can Δ offset against this claim • his far greater losses to Π?

  41. Watts • What does Ex turpicausaoritur non actiomean? 41

  42. Watts • What does Ex turpicausaoritur non actiomean? • Contract void as to future performance 42

  43. Watts • How as this changed by NY § 994? 43

  44. Watts • How as this changed by NY § 994? • “any person” can recover gambling losses 44

  45. Watts • How as this changed by NY § 994 • Which rule has better incentive effects? 45

  46. Watts • What does In pari delicto portiorestconditiodefendentismean? 46

  47. Wait a minute… • Just how do professional gamblers collect their winnings?

  48. How do professional gamblers collect their winnings? • Remember Nick the Chin I’m tinkin’ youse should pay what youse owe

  49. The real problem • Is every contract made in breach of statute void for illegality?

  50. Simple regulations with no criminal penalty attached • If breached, what are the consequences in contract law?

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