Kanning, Arnald J. --- "Coordination of Legal Systems" [2006] ELECD 170; in Smits, M. Jan (ed), "Elgar Encyclopedia of Comparative Law" (Edward Elgar Publishing, 2006)

Book Title: Elgar Encyclopedia of Comparative Law

Editor(s): Smits, M. Jan

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781845420130

Section: Chapter 19

Section Title: Coordination of Legal Systems

Author(s): Kanning, Arnald J.

Number of pages: 6

Extract:

19 Coordination of legal systems*
Arnald J. Kanning


Suppose that a seller values his `widgets' at $1 each. A buyer in another juris-
diction is willing to spend as much as $4 for a widget. The different values a
buyer and a seller place on the widget make a mutually beneficial agreement
possible. Legal rules should ensure that parties who want to perform this
agreement are able to do so. After all, such an agreement can leave both
parties better off. In this example, the potential gains from the economic
activity are maximally $3. When the private law of either jurisdiction creates
potential gains of $3 in the aggregate, the private law of both jurisdictions
facilitates this economic activity as much as possible. From this angle of per-
spective, private law that is able to facilitate the said economic activity so as
to create potential gains of only $2 in the aggregate does not facilitate eco-
nomic activity as much as possible. Legal rules, however, do more than
simply facilitate economic activity. They also may affect the way contract-
ing parties divide potential gains from economic activity (in this case the
difference between $1 and $4) (see, e.g., Baird et al., 1994, p. 219; Kaplow and
Shavell, 2002, p. 156; Cooter and Ulen, 2003, p. 260). For example, the
appropriateness of an agreed price, as to which the contracting parties have
to reach agreement, depends in part on terms respecting transfer of prop-
erty, liability for breach, remedies for ...