Commercial Law

Commercial Law

Introduction

The primary remedies for the protection of property rights are injunctions and damages. An injunction is a court order requiring the defendant to cease the behavior that violates the plaintiff's property right in order to prevent “irreparable harm” to the plaintiff in the future. If the defendant violates the injunction, he or she can be held in contempt of court and face large fines or possible incarceration. The plaintiff can agree to have the injunction lifted if an agreement is reached with the offending party.

Damages are intended to compensate the holder of a property right for the damages that have resulted from the violation of his or her property right. As such, they are backward looking. Damages and injunctions are not mutually exclusive remedies—a court may grant an injunction against future harms while awarding damages for past harms.

In their seminal article, Calabresi and Melamed (1972) highlighted a key difference between injunctions and damages as remedies. An injunction prevents another party from using (harming) the property of the owner (assuming that large fines and the threat of incarceration are effective deterrents). Damages, on the other hand, allow the offending party to use (harm) the property of another, as long as compensation is paid. Returning to the Orchard View Farms case, an injunction against emissions from the plant would result in the orchard being free from emissions. If damages were awarded (without an injunction), emissions could continue as long as the orchard owners were compensated for their losses. Calabresi and Melamed classified this distinction as protection by a liability rule (damages) and protection by a property rule (injunction) (Coleman, 2008).

Property law is the body of law that establishes the rules governing ownership rights over scarce resources. Ownership rights are multifaceted—often referred to as a “bundle of rights”—but in general such rights encompass three broad areas of control over a specific resource: the right to exclude (the ability of the owner to prevent others from using the resource), the right to use (the ability of the owner to use the resource in the manner he or she sees fit), and the right to transfer (the ability of the owner to assign ownership rights to the resource to another). The economic analysis of property law is primarily concerned with the effect of various property rules on the allocation of resources and whether such effects conform to the economic concept of efficiency. Equity issues are also addressed but to a lesser degree.

Discussion

The case of Abraham is related to the law of compensation for damaged goods, commonly referred to damages or compensation for damages to that action that gives the creditor or the victim to demand from the debtor or of causing damage to an amount of money equivalent to the utility or benefit to would have reported that effective compliance, integrity and timeliness of the obligation established between the parties or repairing the harm caused to the victim. Despite their diffusion, the correct term to refer to this legal remedy is compensation, since the ...