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CORNELL ECON 4040 - Exam 2 Study Guide

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Econ 4040 1st EditionExam # 2 Study Guide Lectures: 11 - 20Property Law: Takings Stuff:5th AmendmentNo person shall be . . . be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.CasesKelo v. City of New LondonFacts: City of New London is blighted. To develop the place economically and improve everybody’s quality of life the City of New London makes an economic development plan. They want to take pieces of property with low value, purchase them, and resell to private developersto help with making the city overall better. Kelo doesn’t want to let New London take the property with just compensation. SCOTUS hears the case. Kelo’s Argument in a Nutshell: because private intermediaries get the property the property is not being taken for public use . property rights of the owners = really importantNew London’s Argument in a Nutshell: The economic development is for the broader public. Public benefit = Public UseSCOTUS: New London prevails. Key concepts: meaning of public use Property rights of owners vs. social welfareGoldstein v. NY Urban Development Corporation (Brooklyn – Barclays Center Case)Facts: Goldstein lived in Brooklyn. Not a particularly blighted area. In Brooklyn not Connecticut. Otherwise facts are the same as Kelo. Key concepts: Public use, property rights of owners vs. social welfarePennsylvania Coal v. Mahon Facts: Regulators (Kohler act) say you can’t mine coal. Coal mine-right holder sues. Says completely devaluing the property is a takingHolmes: Agrees with the argument because it amounted to a complete wipeout of the value of the property. Total diminution or elimination of thevalue of the property interest. Total diminution in value because mine rights are separated from the rest of the property rights. Under state law, mining rights are a separate estate, or grouping of rights. Holmes uses this state law. Keystone v. DeBenedictisFacts: Very similar to the Penn case except here the law didn’t say that the interests in mining were a separate property interest from the surface area.Statute that looked like Kohler Act (See Penn) sustained b/c statute was designed to protect public and diminution in value was not as much b/c subsurface interests were not separate interests. NO conceptual severanceLucas v. South Carolina Coastal Council Beach Access Case, 100% diminution of value when coastal council eliminates owner’s access to the beachScalia’s Rule here: A regulation that deprives owner of all economically beneficial use is a per se taking unless the restriction could have been achieved through the common law of nuisance.Contract Law:Key principles:Promote efficient exchange; not all exchange requires a contact (ex. contemporaneous exchange), but promises that may induce reliance should be enforceable as contractsShould not be enforced when:Some “funny” or negative circumstances surrounding the signingIncapacity FraudDuressMistake (outside of buyer’s regret) (i.e Sherwood cow)Unconscionability (i.e Walker-Thomas, etc.)Something happens subsequently to the formation that renders the contractunenforceableImpossibility (think Lady Gaga and the burning down of the Carrier Dome)Remedies for property:InjunctionDamagesNo remedy Remedies for K breach:Specific performance Damages K is voided Voided: declared not valid or legally binding.Specific performance prob not rewarded for:1) Personal services (economically inefficient, unconstitutional)2) When performance is grossly expensive Chicago Board of Realtors v. City of Chicago Facts: landlord wants to evict tenant for non-payment of rentDefendant didn’t pay bc landlord didn’t maintain the room’s habitability Key Concepts:Warranty of habitability: implicit in the contracts that the apartment wouldbe in a certain condition;People cannot possibly contract for every possible contingency-> if the court refuses to look past the contract, you will end up with ridiculously complicated contracts (Coase theory transaction costs problem)Courts use the reasonably contracting parties standard to decide what to include in the contract (implicit in this is the idea of TANSTAAFL)Javins v. First National Realty *simple but important case* Facts: Tenants did not pay rent. LL tries to evict. Tenants allege LL did not meet housing code → basically had constructively evicted the tenants already and the tenants didn’t need to pay rent. Tenants prevail. Landlords have to provide for habitabilityArgumentsJavins RealtorsHousing codes are created by the law. Basically, allresidents are renting with the expectation that the law is being complied with. Wait a second, if we have to comply with onerous codes we have to pass the compliance costs on to tenants like JavinsCoase Theory / Transaction CostsShell Oil v. MarinelloFacts: leasee (gas station) wants his lease not to be terminated but the contract is silent about it. Key concepts:Different contract types in regards to termination: (listed in order of burden levels)Good cause (what the leasee wants)Good faithAt will (what the leasor wants)Berry v. Barbour Facts: general contractors did extra work not covered by the contract, and are suing to recover compensation; defendant argues that the damage they cured was caused by their own negligence.Key concepts:Quasi-contract: Ask “what organization would the (reasonable) parties have arrived at/agreed to?”Successful plaintiffs generally have the following:1) Owner selects contractor 2) Owner has existing relationship w/ contractor 3) Emergency situation occurs Foisting: when contractor performs services that the reasonable parties would not have agreed to and expects compensation for the work performed Sherwood v. Walker Facts: a contract between the two parties to purchase a cow; the contract expresses the belief that the cow is barren (low price). Before delivery of the cow,it gets pregnant. Buyer has the cow, seller wants it back (c/a replevin)Court says that if both parties believed that the cow was barren, then contract is void. Key concepts:Superior Knowledge of buyer/sellerRisk allocation for mistakes: Allocating the risk to the party with the superior knowledge and skill will result in superior allocation of resources Simkin v. BlankFacts: divorcing couple; husband agrees to buy out wife’s half of a Madoff account, pays $700 million-ish; they later found out that there was no money in the


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