George Mason School of Law

George Mason School of Law Contracts I Paternalism II F.H. Buckley fbuckley@gmu.edu

Next day • Tuesday, not Monday • Fraud: assigned Restatement sections • Casebook: 409-18

Free bargaining makes people better off… • Provided that we assume that their choices satisfy the assumptions of rational choice

Rational Choice: Six Assumptions • Full Information • Choices are Freely Made • Non-satiation • Completeness or comparability • No third party effects (externalities) • Perfect rationality

Relaxing the rationality assumption:Paternalism • Suppose that, lacking perfect rationality, we knew that our choices might harm us. • Might we not, in such cases, wish to let the paternalist choose for us? • The state as parens patriae

Relaxing the rationality assumption:Paternalism • So when do we lack perfect rationality…

Relaxing the rationality assumption:Paternalism • So when do we lack perfect rationality… • Infants • Mental Incompetents • Broader categories?

Infants • The age of majority standard is over- and under-inclusive • Restatement § 14.

Infants • The age of majority standard is over- and under-inclusive • The evidence from criminal law

Infants • The age of majority standard is over- and under-inclusive • But protects both parties to the contract

Infants • The age of majority standard is over- and under-inclusive • The incentive effects of imprecise standards

Infants • The age of majority standard is over- and under-inclusive • What, hypothetically, would the child want, had it full rationality?

Hypothetical Bargain ModelsContracts for necessities

The Limits of Parental Authority • What did Brooke Shields seek in Shields v. Gross?

Shields v. Gross Brooke Shields at age 10 in Sugar and Spice Magazine

Brooke Shields two years laterPenthouse Magazine 1978

Shields v. Gross Gee Thanks, Mom!

Shields v. Gross • Should infants never be bound by contracts entered into on their behalf by their parents?

Shields v. Gross • Should infants always be bound by contracts entered into on their behalf by their parents?

Shields v. Gross • Should infants always be bound by contracts entered into on their behalf by their parents? • Jasen’s dissent: A general rule or only where the state has a compelling interest to protect children? 20

Shields v. Gross • Should infants always be bound by contracts entered into on their behalf by their parents? • Jasen’s dissent • What if the pictures had been pornographic?

Federal Child Pornography Laws Mandatory Minimum of 15 years (2) (A)“sexually explicit conduct” means actual or simulated— (v)lascivious exhibition of the genitals or pubic area of any person; (8) “child pornography” meansany visual depiction, including any photograph, film, video, picture, or computer or computer-generated image or picture, whether made or produced by electronic, mechanical, or other means, of sexually explicit conduct, where— (A) the production of such visual depiction involves the use of a minor engaging in sexually explicit conduct;

There is justice, after all… People Exclusive Brooke Shields: Tabloid Checked My Mother Out of Nursing Home Friday May 15, 2009 Brooke Shields's mother, who suffers from dementia, was checked out of a New Jersey nursing home Thursday by a journalist seeking a "tabloid story," the outraged actress tells PEOPLE.

Mental Incompetence Goya, The sleep of reason brings forth monsters

Mental Incompetence • Mental incompetence and the law • Involuntary committal • Criminal law • Civil law

Mental Incompetence • Mental incompetence and the law • The trend: freedom without responsibility

Mental Incompetence • What constitutes mental incompetence in contract law? • Restatement § 15(1)(a)

Mental Incompetence • What constitutes mental incompetence in contract law? • Restatement § 15(1)(a) • Cf. the M’Naughten Rule of Aldrich v. Bailey?

Mental Incompetence • What constitutes mental incompetence in contract law? • What does Restatement § 15(1)(b) mean?

Mental Incompetence • What constitutes mental incompetence? • What does Restatement § 15(1)(b) mean? • What about a loss of control due to an insane impulse? • Newton v. Mutual Benefit

FaberAbnormal acts performed by a bipolar person • The evidence of incompetence?

FaberAbnormal acts performed by a bipolar person • So something was excessive here? I don’t get it!

Faber • Which party was in the better position to cure the problem?

Faber • Which party was in the better position to cure the problem? • Would you have applied Restatement § 15(2)?

Uribe • Should the Δ have been on notice?

Uribe • Should the Δ have been on notice? • Is fairness of terms relevant to a determination of competency?

Uribe • Should the Δ have been on notice? • Suppose the contract had been set aside. • How might this change the advice you’d give to one who buys from an elderly seller? Or to the elderly seller?

Mahan • It could happen to anyone…

Mahan • It could happen to anyone… • What result under Restatement § 16?

Paternalism’s questionable historySo you want to help victims? How about… • Restrictions on women • Slavery

Arthur Leff “The benevolent have a tendency to colonize, whether geographically or legally.” Unconscionability and the Code—The Emperor’s New Clause, 115 U.Pa.L.Rev. 485 (1967) 41

George Fitzhugh The mudsill

Lincoln’s Wisconsin State Fair Speech 1860 By the "mud-sill" theory it is assumed that labor and education are incompatible; and any practical combination of them impossible. According to that theory, a blind horse upon a tread-mill, is a perfect illustration of what a laborer should be -- all the better for being blind, that he could not tread out of place, or kick understandingly. According to that theory, the education of laborers, is not only useless, but pernicious, and dangerous. Lincoln in 1860

Lincoln’s Wisconsin State Fair Speech 1860 But Free Labor says "no!" Free Labor argues that, as the Author of man makes every individual with one head and one pair of hands, it was probably intended that heads and hands should cooperate as friends… Lincoln in 1860

The New Paternalism • Unlike the Old Paternalism, the new Paternalism does not discriminate • It is also based on better science

The New Paternalism:When might our desires misfire? • When might we agree to let the Paternalist second-guess our decisions? • Judgment Biases: Because we miscalculate what is good for us • Akrasia: Because we lack the strength of will to pursue what we know is good for us

Judgement Biases • Do we always calculate correctly? • We should have to be monsters of calculation, like Laplace’s Demon?

Laplace’s Demon • An intellect which at a certain moment would know all forces that set nature in motion, and all positions of all items of which nature is composed, if this intellect were also vast enough to submit these data to analysis, it would embrace in a single formula the movements of the greatest bodies of the universe and those of the tiniest atom. • For such an intellect nothing would be uncertain and the future just like the past would be present before its eyes.

Pierre-Simon Laplace • Napoleon: “M. Laplace, They tell me you have written this large book on the system of the universe, and have never even mentioned its Creator.” • Laplace: “Sire, I had no need of that hypothesis."

Our brains are not wired like Laplace’s supercomputer • Instead we get through life by relying on heuristics or mental shortcuts: • Intuitions • Hunches • Emotions

George Mason School of Law