Default Rules Research Articles

Jurisdiction without conflict? Remarks on non-adverse proceedings in Italy

The subject. This essay describes the procedural treatment of non-contentious matters inItaly. After a brief historical recount on the evolution of the concept of ‘non-contentiousjurisdiction’, from Roman law to the law in force, the chapter emphasizes the extreme varietyof non-adverse proceedings governed by the Code of civil procedure and special statutesas well.The purpose of the article is to understand the ‘default rules’ of non-adverse proceedings(meaning the rules applicable insofar as the law does not ordain otherwise) provided by theCode of civil procedure. These rules outline a procedure in chambers that is simpler andless time-consuming than the ordinary one: for these reasons, the procedure in chambershas been increasingly adopted for the judicial treatment of a few contentious matters, withmixed results.Methodology. The methodological basis for the study: general scientific methods (analysis,synthesis, comparison, description); private and academic (comparative legal, interpretation,formal-legal).Results. It is difficult to foresee whether in the near future more attention will be devotedby Italian legislators to non-contentious jurisdiction so as to lay down rules that are uniformand consistent. In recent decades, Italian civil procedure has been re-written again andagain in the attempt to solve the most serious and enduring problem of the justice system,namely, the excessive length of proceedings.Conclusions. As far as non-contentious matters, in light of the notorious overload of Italiancourts the author believes that they could be handles more efficiently by administrativeauthorities.

Consumer Protections Against Unconscionable Clauses: American Doctrines, Italian Law

Conventional wisdom holds that with the laws protecting consumers against unconscionable provisions in their contractual relationships with professionals, the European Legislator intended to level the playing field between parties to a contract. This article intends to show that the European Legislator's intent was actually to resolve the problem of an inefficient race to the bottom, based on the fact that consumers do not read every clause in a contract. Rather, consumers tend to pay attention to only a few, and companies take advantage of that lack of attention by including unconscionable clauses, and consequently offering the goods at a lower price. The final result: unconscionable and low prices. Among the solutions proposed in American case law, the theory of (under which the clause that the consumer would have reasonably anticipated is substituted for the original, provided that reasonable expectations can change once sufficient information is obtained), the theory known as default rules, (regulatory provisions that introduce penalty default rules for the professional, who would therefore choose to insert a new clause, thereby properly informing the consumer) and the theory of efficient clauses (identifying the criterion of assessing how to maintain that maximize the benefits for the parties), are the most common and do not hold that unconscionable are a consequence of different bargaining power between parties.

Does mandating cumulative voting weaken controlling shareholders? A difference-in-differences approach

Corporate scholars have long championed the use of mandatory cumulative voting in developing countries. Yet, in comparison to majority or plurality voting, we know very little about its effectiveness. Even though cumulative voting is allowed in most jurisdictions, in practice it is not widely used. Taiwan stands out as a unique jurisdiction which mandates cumulative voting on all companies. Therefore, Taiwan is the only jurisdiction, to the best of our knowledge, that can be used to test the causal effect of cumulative voting on director election. Taking advantage of an exogenous legal change that occurred in Taiwanese corporate law in December 2011, we use panel data on 640 publicly traded companies from 2009 to 2015 in a difference-in-differences framework to tease out the effect of cumulative voting. From 2001 to 2011, cumulative voting was the default rule, and 20 companies opted for majority voting. While directors and supervisors are elected every three years, not all companies change boards in the same year. Fixed-effect panel regression models show that in the 2012 election—about six months after the legal reform—the cumulative voting rule appears to have weakened the controlling shareholders’ control of the companies that had previously opted for majority voting. The controlling shareholders’ control in the 2013, 2014, and 2015 elections, however, did not decrease. The take-away lesson is that mandating cumulative voting may not create a long-term effect because controlling shareholders find other means to maintain influence. Policymakers should leave the governance decisions to the firm and focus on rules that could restrain private benefits of control and enhance transparency to rein in controlling shareholders.

The Sharing Stick in the Property Rights Bundle: The Case of Short Term Rentals & HOAs

Property owners are now more than ever exercising the “sharing stick” in their metaphorical bundle of property rights. This article examines the right to share one’s property with others as a branch, stemming from the inclusion stick, that itself grows out of the exclusion right held by property owners, along with the legal consequences of that characterization. The right to share, like other rights, can be given up when an owner joins a common interest community (CIC). However, when owners enter CICs and agree to HOA governance, they retain whatever residual parts of their ownership bundle they do not give up. Recent CIC and HOA cases examined in this article illuminate the existence of a “right to share,” where the default rule is that owners of real property have the right to engage in short term rentals unless they have expressly alienated that right through some private agreement. It will only be abrogated upon identifiable language in the initial CIC agreement making such diminishment of the right possible. The issues in several recent cases discussed here, regarding whether homeowners associations can create or enforce rules through their CC&R’s that prohibit short term rentals, are in essence asking whether the association and community are empowered to limit the sharing stick in the bundle. The primary questions discussed relate to whether, when, and how an association can impose limitations or prohibitions on short term rentals under existing authorities where such express substantive authority is not clearly, expressly given, and when the CIC must instead seek to undertake extraordinary measures like amendment to a CIC’s declaration in order to empower an HOA to so limit where it could not before. This Article concludes that the judicial interpretation of scope of CIC and HOA authority in relation to short term rentals demonstrates the strength of the sharing right. However, these cases also reveal that this sharing right may be consensually limited if the initial CIC declaration or valid subsequent amendments grant the proper HOA authority to do so.

System ZFO: Default reasoning with system Z-like ranking functions for unary first-order conditional knowledge bases

A propositional conditional of the form (B|A), representing the default rule “If A, then usually B”, goes beyond the limits of classical logic, and the semantics of a knowledge base consisting of such conditionals must take into account the three-valued nature of conditionals. Ordinal conditional functions (OCF), also called ranking functions, assign a degree of implausibility to possible worlds and provide a convenient semantic framework for conditionals. To each consistent knowledge base R, system Z associates a unique minimal OCF accepting R, enabling inductive reasoning from this model. In this article, we present an approach of transforming the ideas of the popular system Z to the first-order case. We develop system ZFO that considers first-order conditionals of the form (B(x)|A(x)). The notion of tolerance used in system Z is extended to the notion of tolerance pairs, taking also a partition of the domain elements into account. We show that each tolerance pair induces a system Z-like ranking function, and we provide an algorithm systematically generating all tolerance pairs. We introduce the notion of minimal tolerance pairs and a corresponding refinement of the algorithm computing all minimal tolerance pairs. An inference relation based on minimal tolerance pairs is presented, and it is shown that system ZFO properly generalizes the basic ideas underlying system Z.

The Timing of the Passing of Risk Under the English Sale of Goods Act 1979, the Interplay between the Principle of Party Autonomy and the Default Rule: Should the Risk Linked to the Passing of Property or to the Situation of the Goods?

It is common knowledge that, the term ‘unless otherwise agreed’ part one set out in s.20 of SOGA allows for the parties to transfer the risk at a specific time separately before the property, the germane question relates to unascertained goods, where the parties intend to passes the risk before the property. In fact, there is no expressed provision in English statutory law which prevents the parties in the contract from agreeing to pass the risk before the property with regard to unascertained goods, which creates problem, because the goods must be sufficiently identifiable as those to which the risk relates. The aim of the paper will examine the difficulty where the parties intend to pass the risk before property in the case of unascertained goods, where the English law does not proclaim explicitly on this issue, when it, linked the issue of passing of risk to the property, rather than linked to the situation of the goods. Assuming, that the prima facie and general standard of the English law is the sufficiently identifiable goods which the risk relates, and the contract must then be one for the sale of specific goods; as a result, it is illogical to rely upon such standards, due to the fact that they are impossible to apply, because the goods remain unascertained and are not sufficiently identifiable as those to which the risk relates (unknown goods). Accordingly, the risk never passes before the property in relation to unascertained goods. Along the lines of United Nations Convention on Contracts for the International Sale of Goods CISG, article 67, sets out explicitly that the risk does not pass to the buyer until the goods are clearly identified within the contract.

Lord Denning’s influence on contract formation in Singapore—an overdue demise?

ABSTRACTIn a series of inconsistent decisions by the Singapore courts on contract formation in continuing negotiations cases, Lord Denning’s broad approach—which does away with the traditional offer and acceptance analysis—appears to have been simultaneously adopted and rejected. This article suggests that the continued uncertainty in Singapore regarding the scope of application of the traditional approach and Lord Denning’s approach arises from a conflation of both as being substantially similar. This article further argues that both approaches are conceptually and practically distinct. A better way forward for Singapore law in the area of contract formation in continuing negotiations cases, having regard to developments in English law and a comparative study of various approaches taken in international instruments and jurisdictions around the world, is to affirm the traditional approach as the default rule, subject to displacement in exceptional situations.

Judicial refusal to apply treaty law: domestic law limitations on the CISG’s application

In numerous cases, courts have declined to apply the United Nations Convention on Contracts for the International Sale of Goods in litigation where the parties have pleaded domestic law, notwithstanding that the underlying contract satisfies criteria necessary for the CISG to serve as governing law. Courts that have reached this conclusion maintain that domestic procedural law permits exclusion of the CISG notwithstanding that it would otherwise be applicable. Other courts and numerous commentators maintain that the judicial refusal to apply to the CISG in these cases violates both the substantive provisions of the CISG and the law of treaties that governs the obligations of states that have adopted it. In this article, we maintain that courts that invoke domestic procedural doctrines to avoid application of the CISG are acting reasonably and consistently with the intent of Contracting States. In the first instance, the substantive provisions of the CISG do not preclude use of procedural doctrines in as broad of a set of cases as commentators who read the domain of the CISG more broadly maintain. More generally, the argument that states are obligated to subordinate domestic procedural doctrines where a treaty is silent about its effect on those doctrines fails to consider whether those states intended to displace domestic procedures. We conclude that in the case of many treaties, including the CISG, the appropriate default rule would consider the costs to the signatory state of displacing domestic procedures, and that those costs would often lead a state to desire to allow its domestic procedural doctrines to prevail over application of substantive treaty provisions.

Nudges that fail

AbstractWhy are some nudges ineffective, or at least less effective than choice architects hope and expect? Focusing primarily on default rules, this essay emphasizes two reasons for this. The first involves strong antecedent preferences on the part of choosers. The second involves successful “counternudges,” which persuade people to choose in a way that confounds the efforts of choice architects. Nudges might also be ineffective, and less effective than expected, for five other reasons: (1) some nudges produce confusion in the target audience; (2) some nudges have only short-term effects; (3) some nudges produce “reactance” (though this appears to be rare); (4) some nudges are based on an inaccurate (though initially plausible) understanding on the part of choice architects of what kinds of choice architecture will move people in particular contexts; and (5) some nudges produce compensating behavior, resulting in no net effect. When a nudge turns out to be insufficiently effective, choice architects have three potential responses: (1) do nothing; (2) nudge better (or differently); and (3) fortify the effects of the nudge, perhaps through counter-counternudges, or perhaps through incentives, mandates, or bans.

Public Restrooms: Flipping the Default Rules

This article argues that single-sex public restrooms violate the equal protection clause of the Constitution because they constitute a violation of sexual stereotyping and formal equality principles. Restrooms signs are symbolic “Barbie” dolls with their exaggerated and reinforcing sense of what it means to be “female.” Even if the iconic stick-figure signage were to change, people must needlessly sort themselves by gender each time they use a public restroom and comply with the differing gender-based norms within those spaces. They also violate formal equality principles as they echo the educational segregation of the past when students lined up by sex each time they entered the school building and perpetuate a type of all-male private club by excluding women from business, social, and political interactions with men. The article makes the novel suggestion that we should flip the default rules. We should transition towards making large, communal public restrooms available to “all-comers,” with a variety of private toileting options, as well as have available a limited number of single-stall restrooms. This solution would allow anyone to pick an entirely private option of a single stall while not forcing anyone to sex-identify as a precondition to entering a communal restroom. The stick-figure signage of sex-segregation would become an historical relic.

From description-logic programs to multi-context systems

The combination of logic program-style rules with other reasoning systems has been a fertile topic of research in the last years, with the proposal of several different systems that achieve this goal. In this work, we look at two of these systems, dl-programs and multi-context systems, which address different aspects of this combination, and include different, incomparable programming constructs. We prove that every dl-program can be transformed into a multi-context system in such a way that the different semantics for each paradigm are naturally related. As a consequence, constructions developed for dl-programs can be automatically ported to multi-context systems. In particular, we show how to model default rules over ontologies with the usual semantics.

Optimal Defaults in Consumer Markets

AbstractThe design of default provisions in consumer contracts involves an aspect that does not normally arise in other contexts. Unlike commercial parties, consumers have only limited information about the content of the default rule and how it fits with their preferences. Inefficient default rules may not lead to opt outs when they deal with technical aspects that consumers rarely experience and over which consumers’ preferences are defined only crudely. This paper develops a model in which consumers are uninformed about their preferences but can acquire costly information and then choose a contract term that best matches their preferences. The paper explores the optimal design of default rules in such environments and how it differs from the existing conceptions of efficient default rule design.

Regulating by Example

Agency regulations are full of examples. Regulated parties and their advisors parse the examples to develop an understanding of the applicable law and to determine how to conduct their affairs. However, neither the legal nor theoretical literature contains any study of regulatory examples or explains how they might be interpreted. This Article fills this gap. In this Article, we explore regulatory examples and set forth a theory for how to interpret them. We examine how regulatory examples, like common law cases, serve as data points that help communicate legal content. We argue that regulatory examples are best understood through analogical, or common law, reasoning, and illustrate this through a variety of examples. Since regulatory examples are part of a broader regulatory and statutory scheme, the legal content of examples must also be reconciled with the rest of that law. We show how this reconciliation can be done through a variety of background interpretive approaches such as textualism or purposivism, and we argue for a default rule that treats the legal content in regulatory examples as co-equal with the non-example portion of the regulation. By acknowledging and exploring how regulatory examples communicate law, our theory places regulatory examples in dialogue with their broader regulatory and statutory schemes. This both empowers and constrains courts, agencies, and regulated parties in their efforts to understand the meaning of regulations

Altering Rules, Cumulative Voting, and Venture Capital

Legal scholars have long debated the proper balance between mandatory and default rules in corporate law. One group—the contractarians—maintain that corporate law should function as an off-the-rack set of default rules that approximate, as much as possible, the rules that the transacting parties would have agreed to if bargaining were costless. The contractarians are generally skeptical of mandatory rules because they interfere with the ability of the parties to decide for themselves how to organize their economic relationships. Another group of scholars—the anti-contractarians—have argued that corporate law should seek to achieve certain regulatory objectives separate and apart from the goal of private wealth maximization. In order to achieve these objectives, such as the protection of uninformed investors, these scholars argue that it is necessary that corporate law contain some mandatory rules that cannot be altered by the transacting parties.

Trade and Investment Agreements: Implications for Health Protection

Trade and Investment Agreements (TIAs) have been widely criticized for their potentially negative effects on health. Many governments, particularly from low- and middle-income countries, have voiced concerns that mega-regional agreements such as the Trans-Pacific Partnership agreement, and the Transatlantic Trade and Investment Partnership, will erode governments’ scope for health protection, weakening for instance those options that remain permissible under World Trade Organization rules. Further, these mega-regional agreements will set default standards and rules of the game that even non-signatories will need to emulate in order to be competitive in the global market. This article begins by reviewing the changing structure of trade and investment policy, global production, and the relation between the two. The effects of TIAs on health are then analysed, based on some of the most relevant evidence. Key power asymmetries within the global trade and investment architecture are described, and the way they influence how trade rules are made, implemented and adjudicated. Section 5 examines a particularly striking and topical instance of such power asymmetries, investor-state dispute settlement provisions in TIAs, and their relevance to health. The article concludes with recommendations to mitigate the potential negative health externalities of TIAs.

An abstract model for branching and its application to mixed integer programming

The selection of branching variables is a key component of branch-and-bound algorithms for solving mixed-integer programming (MIP) problems since the quality of the selection procedure is likely to have a significant effect on the size of the enumeration tree. State-of-the-art procedures base the selection of variables on their “LP gains”, which is the dual bound improvement obtained after branching on a variable. There are various ways of selecting variables depending on their LP gains. However, all methods are evaluated empirically. In this paper we present a theoretical model for the selection of branching variables. It is based upon an abstraction of MIPs to a simpler setting in which it is possible to analytically evaluate the dual bound improvement of choosing a given variable. We then discuss how the analytical results can be used to choose branching variables for MIPs, and we give experimental results that demonstrate the effectiveness of the method on MIPLIB 2010 “tree” instances where we achieve a $$5\%$$ geometric average time and node improvement over the default rule of SCIP, a state-of-the-art MIP solver.

Efficient Material Breach of Contract

In an environment in which sellers can reduce the probability of defective delivery through cooperative investment, and in which enforcement of default remedies for breach of contract is imperfect, an optimal performance standard grants buyers the option to reject goods for some but not all defects, in other words, when the delivery is sufficiently defective and the seller is said to be in “material breach” of contract. This optimal performance standard implements efficient cooperative investment more often under a policy that, in addition, allows buyers to collect compensation for nondelivery of the good (upon rightful rejection) than a policy that limits buyers’ compensation to the recovery of the price. Although contracts with liquidated damages (i.e. a customized compensation function) can solve the investment problem as long as court enforcement is not too imperfect (in which case optimal liquidated damages are excessive and likely not enforced), the doctrine of material breach with an option to reject performs well as a default rule.

It's Now Or Never! Using Deadlines as Nudges

Incorporating behavioral insights into regulation is plausibly the most significant development in regulatory theory and practice in recent years. Behaviorally informed regulation encourages self-benefiting and socially desirable behaviors with little intrusion on autonomy. Drawing on new empirical findings, this article puts forward the hitherto overlooked possibility of employing the deadline effect as a regulatory tool. Deadlines serve as an antidote to procrastination and forgetfulness. Many empirical and experimental studies have examined the use of deadlines in marketing. This study explores the possible use of deadlines by legal policy makers. It describes two survey experiments, a randomized field experiment and a natural experiment, which suggest that deadlines may encourage self-benefiting and socially desirable behaviors, and that relaxing deadlines may discourage less desirable behavior. The article discusses the practical and normative aspects of using deadlines as a regulatory means, compared to alternative tools, such as default rules and required choices.

Why Do Most People Follow the Default Matrimonial Property Regime in Chile?

Spouses in Chile have three different choices of matrimonial property regimes to regulate their pecuniary relationships among themselves and with third parties: marital partnership, separation of goods, and community of gains. The default regime is the marital partnership, and most people go along with it at the moment of marriage. Spouses can, however, opt out before and after the marriage to any of the two other alternatives. Taking into consideration data from 2006 to 2014, on average, 55% of spouses went along with the default regime. The prevalence of marital partnership occurs despite the increase in divorce rates, the discriminatory nature of the regime towards women, and a significant rate of ex-post opt-outs. The preceding sheds doubt on the reasons why people—and particularly women—might prefer the marital partnership. This study intends to determine: (i) whether the default regime imposes an emotional tax on spouses or prevails because of inertia; (ii) the impact of social norms in people’s decision making; (iii) misperceptions about divorce rates; (iv) optimism bias; and (v) knowledge of current restrictions women face under the marital partnership. Finally, this study assessed (vi) whether people would find it acceptable to switch the default rule to separation of property. With this purpose, I surveyed married people in Chile with the help of social media. The findings showed that the default did not impose an emotional burden for most people who decided to stick to it. While inertia and herd behavior might have influenced 33% of people who went along with the default, ignorance about the actual divorce rates, optimism, and unawareness about the restrictions the marital partnership imposes on women provided a better explanation on the high rate of spouses that stuck to the marital partnership. In light of current divorce rates, this is a sub-optimal outcome. Informational campaigns should overcome this failure. Also, switching the default rule would be a positive nudge to help people make better decisions.

Rational Inattention Dynamics: Inertia and Delay in Decision-Making

We solve a general class of dynamic rational-inattention problems in which an agent repeatedly acquires costly information about an evolving state and selects actions. The solution resembles the choice rule in a dynamic logit model, but it is biased towards an optimal default rule that does not depend on the realized state. We apply the general solution to the study of (i) the sunk-cost fallacy; (ii) inertia in actions leading to lagged adjustments to shocks; and (iii) the tradeoff between accuracy and delay in decision-making.