4 ms·

Contract terms, like laws, might be outdated or imbalanced, like when they're based on fears from an age with far less of our modern credit/reputation/identity-

by gojomo 12y ago

Contract terms, like laws, might be outdated or imbalanced, like when they're based on fears from an age with far less of our modern credit/reputation/identity-monitoring, or when circumstances have changed significantly since their negotiation (or in the case of residential leases, rote templatization). Thus there's the idea of "efficient breach" - where the right thing to do might be to break the terms and compensate the counterparties, leaving everyone better off: http://en.wikipedia.org/wiki/Efficient_breach http://en.wikipedia.org/wiki/Efficient_breach There are many tiny breaches of leases and other contracts that leave society better off: looking the other way if a small pet or temporary houseguest arrives, or there's an occasional bit of "medicine smoking" on the premises, or some unapproved property improvements. It's tough to work up moral outrage if there's no evidence of actual harm, just technical violations. Compare malum prohibitum vs. malum in se: http://en.wikipedia.org/wiki/Malum_prohibitum http://en.wikipedia.org/wiki/Malum_prohibitum http://en.wikipedia.org/wiki/Malum_in_se http://en.wikipedia.org/wiki/Malum_in_se

tptacek 12y ago
A contract is an agreement between two private individuals. If one of those individuals believes that the terms of the contract are antiquated and thus cannot honestly provide an assurance of honoring them, that person is ethically bound not to execute the contract. All the Latin in the world doesn't get you around that. While some cities will probably revise occupancy and hospitality regulations to accommodate things like Airbnb, the tension between renters and landlords w/r/t/ sublettors is quite old and quite well explored by the courts (check out your local tenants union for chapter-and-verse citations). The lease provisions that forbid Airbnb will stand up in court.
- lesterbuck 12y ago
  >A contract is an agreement between two private individuals. If one of those individuals believes that the terms of the contract are antiquated and thus cannot honestly provide an assurance of honoring them, that person is ethically bound not to execute the contract. All the Latin in the world doesn't get you around that. That is really a very simplistic view of the real world of real estate. For example, in 1983 when I bought a Houston house, I read every scrap of paper involved in the transaction. (Title company closers call us "readers.") The faded Nth generation copy of the deed restrictions ("an agreement between two private individuals") had horrific language about not allowing those of other than the white race to live in the property (unless in servants quarters). By that time, that language had been neutralized by the Supreme Court, but there was a good period of time where it had legal force but had to be ignored by those of good conscience. George W. Bush got the one news cycle treatment about that as the same language was in the deed restrictions he signed, as well as in many subdivisions from that era. That language carries on in the record forever.
  - rayiner 12y ago
    Lease contracts are contracts but deeds aren't really contracts. Terms of a deed can run with the property in a way that terms of a contract cannot.
    - lesterbuck 12y ago
      A deed isn't a contract, but a deed restriction sure is: http://en.wikipedia.org/wiki/Deed_restriction http://en.wikipedia.org/wiki/Deed_restriction
      - rayiner 12y ago
        In American law, a covenant is best thought of as something different than a contract. They are related, but covenants are a property law concept, while contracts are their own area of law. A covenant can run with the land: someone in 1920 can put a restriction in a covenant that the owner of the property in 2014 must abide by, even if the property has changed hands many times in the interim. However, contracts only bind the parties that agree to it. The distinction between the two is very relevant vis-a-vis your response to 'tptacek. The terms of a lease contract are freely bargained-for between buyer and seller in the present day. Because contracts cannot bind non-parties, they will only contain provisions that at least one party considers meaningful. However, a covenant is not freely bargained-for between buyer and seller in the present day. Both the buyer and seller may be bound by provisions that both believe to be antiquated (like covenants not to sell to particular minority groups). If you think a contractual term is antiquated, you're free to bargain with the seller to have it eliminated. With a covenant provision, however, both you and the seller might be stuck with what someone wrote-in decades ago.
  - tptacek 12y ago
    I'm not sure what your point is. Sublettor restrictions on leases have been challenged in court, and there are classes of restrictions that have been judged unconscionable; you cannot, for instance, rent out an apartment in Chicago and absolutely forbid sublettors, nor (obviously) can you forbid African American sublettors. So my point isn't that the black letter language of any contract must in all cases stand up in court. My point is that the restrictions in leases that block Airbnb will stand up, because despite the relative novelty of Airbnb, the lease restrictions they butt up against aren't obscure. They are central to the tensions between renters and landlords and thus well-tested. Also: if someone puts a contract in front of you that requires you to discriminate against African Americans: no, I don't think you can ethically sign it.
bradleyjg 12y ago
If it's efficient breach than surely AirBnB sublettors violating their inefficient leases are compensating landlords for the breach making both parties better off. Right? Surely it's not one party secretly violating the terms of the contract and keeping all the benefits? That doesn't sound very efficient at all; don't think that's what Posner had in mind.
- gojomo 12y ago
  Quite common, in my experience: Landlord has been using the same faded form contract for a decade; doesn't even know for sure which provisions are in it, or still legal under recent legislation or court decisions. (But, a standard 'severability' clause protects them when they've got illegal and unenforceable terms inside their template.) Renter skims contract, but doesn't consider its terms negotiable, practically speaking. They often ignore the precise terms regarding notices, houseguests for more than X days, small pets, drugs on the premises, new roommates, sublettors, etc. In many cases the local law, or tenants' legal support groups, will defend them for violations of such terms - because the signed lease was illegal or unreasonable. During the course of the lease, both the landlord and the renter may deviate from the exact terms from time to time, by tacit agreement, or occasionally verbal agreement (even if the contract stipulates "no verbal amendments"). Many renter violations are essentially in the realm of "don't ask, don't tell". The landlord doesn't really care and also doesn't want to know, because knowing would force conscious acknowledgement, perhaps encouraging further violations or incurring liability. Only if there's actual property damage or risk of harm/liability (or other adversarialism has begun from other factors) does the landlord become interested in monitoring and enforcing every clause. Into this mix comes AirBnB. Many landlords won't notice the activity. Or they'll suspect it but don't want to pry. Or they'll know, but don't want to be known to "know". Yet they may notice the rental rates the market will bear go up, benefiting them for looking-the-other-way. They may notice the renter's treatment of the property improving – as they now share an extra interest in its appeal. Compared to an empty room/apartment, the presence of good guests can make the property and neighborhood a safer and more pleasant place. So landlords can benefit implicitly even without an explicit renegotiation of terms. In fact, they may prefer this sort of indirect benefit – because they retain the optionality of enforcing the terms, if things go poorly, without the risk of formally approving the activity. Real economic and social relationships are way more complicated than, "the letter of the rules is X so everyone is duty-bound to do no more nor less than X".

by gojomo 12y ago

tptacek 12y ago

A contract is an agreement between two private individuals. If one of those individuals believes that the terms of the contract are antiquated and thus cannot honestly provide an assurance of honoring them, that person is ethically bound not to execute the contract. All the Latin in the world doesn't get you around that. While some cities will probably revise occupancy and hospitality regulations to accommodate things like Airbnb, the tension between renters and landlords w/r/t/ sublettors is quite old and quite well explored by the courts (check out your local tenants union for chapter-and-verse citations). The lease provisions that forbid Airbnb will stand up in court.

lesterbuck 12y ago
>A contract is an agreement between two private individuals. If one of those individuals believes that the terms of the contract are antiquated and thus cannot honestly provide an assurance of honoring them, that person is ethically bound not to execute the contract. All the Latin in the world doesn't get you around that. That is really a very simplistic view of the real world of real estate. For example, in 1983 when I bought a Houston house, I read every scrap of paper involved in the transaction. (Title company closers call us "readers.") The faded Nth generation copy of the deed restrictions ("an agreement between two private individuals") had horrific language about not allowing those of other than the white race to live in the property (unless in servants quarters). By that time, that language had been neutralized by the Supreme Court, but there was a good period of time where it had legal force but had to be ignored by those of good conscience. George W. Bush got the one news cycle treatment about that as the same language was in the deed restrictions he signed, as well as in many subdivisions from that era. That language carries on in the record forever.
- rayiner 12y ago
  Lease contracts are contracts but deeds aren't really contracts. Terms of a deed can run with the property in a way that terms of a contract cannot.
  - lesterbuck 12y ago
    A deed isn't a contract, but a deed restriction sure is: http://en.wikipedia.org/wiki/Deed_restriction http://en.wikipedia.org/wiki/Deed_restriction
    - rayiner 12y ago
      In American law, a covenant is best thought of as something different than a contract. They are related, but covenants are a property law concept, while contracts are their own area of law. A covenant can run with the land: someone in 1920 can put a restriction in a covenant that the owner of the property in 2014 must abide by, even if the property has changed hands many times in the interim. However, contracts only bind the parties that agree to it. The distinction between the two is very relevant vis-a-vis your response to 'tptacek. The terms of a lease contract are freely bargained-for between buyer and seller in the present day. Because contracts cannot bind non-parties, they will only contain provisions that at least one party considers meaningful. However, a covenant is not freely bargained-for between buyer and seller in the present day. Both the buyer and seller may be bound by provisions that both believe to be antiquated (like covenants not to sell to particular minority groups). If you think a contractual term is antiquated, you're free to bargain with the seller to have it eliminated. With a covenant provision, however, both you and the seller might be stuck with what someone wrote-in decades ago.
- tptacek 12y ago
  I'm not sure what your point is. Sublettor restrictions on leases have been challenged in court, and there are classes of restrictions that have been judged unconscionable; you cannot, for instance, rent out an apartment in Chicago and absolutely forbid sublettors, nor (obviously) can you forbid African American sublettors. So my point isn't that the black letter language of any contract must in all cases stand up in court. My point is that the restrictions in leases that block Airbnb will stand up, because despite the relative novelty of Airbnb, the lease restrictions they butt up against aren't obscure. They are central to the tensions between renters and landlords and thus well-tested. Also: if someone puts a contract in front of you that requires you to discriminate against African Americans: no, I don't think you can ethically sign it.

bradleyjg 12y ago

If it's efficient breach than surely AirBnB sublettors violating their inefficient leases are compensating landlords for the breach making both parties better off. Right? Surely it's not one party secretly violating the terms of the contract and keeping all the benefits? That doesn't sound very efficient at all; don't think that's what Posner had in mind.

gojomo 12y ago
Quite common, in my experience: Landlord has been using the same faded form contract for a decade; doesn't even know for sure which provisions are in it, or still legal under recent legislation or court decisions. (But, a standard 'severability' clause protects them when they've got illegal and unenforceable terms inside their template.) Renter skims contract, but doesn't consider its terms negotiable, practically speaking. They often ignore the precise terms regarding notices, houseguests for more than X days, small pets, drugs on the premises, new roommates, sublettors, etc. In many cases the local law, or tenants' legal support groups, will defend them for violations of such terms - because the signed lease was illegal or unreasonable. During the course of the lease, both the landlord and the renter may deviate from the exact terms from time to time, by tacit agreement, or occasionally verbal agreement (even if the contract stipulates "no verbal amendments"). Many renter violations are essentially in the realm of "don't ask, don't tell". The landlord doesn't really care and also doesn't want to know, because knowing would force conscious acknowledgement, perhaps encouraging further violations or incurring liability. Only if there's actual property damage or risk of harm/liability (or other adversarialism has begun from other factors) does the landlord become interested in monitoring and enforcing every clause. Into this mix comes AirBnB. Many landlords won't notice the activity. Or they'll suspect it but don't want to pry. Or they'll know, but don't want to be known to "know". Yet they may notice the rental rates the market will bear go up, benefiting them for looking-the-other-way. They may notice the renter's treatment of the property improving – as they now share an extra interest in its appeal. Compared to an empty room/apartment, the presence of good guests can make the property and neighborhood a safer and more pleasant place. So landlords can benefit implicitly even without an explicit renegotiation of terms. In fact, they may prefer this sort of indirect benefit – because they retain the optionality of enforcing the terms, if things go poorly, without the risk of formally approving the activity. Real economic and social relationships are way more complicated than, "the letter of the rules is X so everyone is duty-bound to do no more nor less than X".