Rights and Commerce

Abstract

The goal of this article is to identify and fill an important gap in the theory of entitlements. A property rule with respect to a particular entitlement in a contemplated multi-entitlement transaction can mean one of two things: 1. The holder looks to net value received - a kind of collective property rule where consumer surplus with respect to some components of the transaction can subsidize undercompensation with respect to the particular entitlement - i.e., where the market price for the particular entitlement is less than the holder's subjective value (in such case the holder possesses a market holdout right and the entitlement is regulated by a market property rule); or 2. the holder has an absolute right to retain the entitlement while entering into the transaction and thus can compare the value offered specifically for the entitlement (in a competitive market, its market price) with the holder's subjective value in deciding whether to part with it (in such case the holder possesses an absolute holdout right and the entitlement is regulated by an absolute property rule and an anti-bundling inalienability rule). These two different holdout rights distinguish legal standard entitlements — such as most property interests as well as gap-filler default entitlements - from legal autonomy rights - those rights conceived by lawmakers and society as being so fundamental or personal to the individual that, if they can be permitted to be ceded at all, can only be ceded with the autonomous consent of the holder. An autonomy right endows its holder with an absolute holdout right to ensure the holder's ability to retain the right within the right's scope and complete autonomy with respect to any decision to cede the right but precludes potentially efficient bundling of non-negotiable waiver or transfer of the right as part of standardized multi-entitlement transactions. On the other hand, the market holdout right conferred on holders by a standard entitlement provides the holdout right sufficient to elicit useful market prices and permits efficient standardization but compromises autonomy with respect to the individual entitlements that are subject to multi-entitlement transactions. Some legal entitlements, such as the common law right to civil jury trial preserved in the Seventh Amendment, when formed were protected by structural (rather than express legal) absolute holdout rights that have since been eroded by practices (such as standardized consumer commerce contracts) motivated and enabled by technological advances. This creates a choice between articulating a legal absolute holdout right with respect to the entitlement or permitting the content of the legal entitlement to be fundamentally altered.