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Chapter 07 - The Property System
7-1
Chapter 7
The Property System
Learning Objectives
The objective of this chapter is to instill an appreciation for the institution of property and its role
in encouraging the maximum production of what people want and need. It reaffirms the assertion
in Chapter 1 that property—the state’s recognition of a private individual’s right to exclude
others from legitimately acquired resources—is fundamental to the modern private market and is
conceptually intertwined with the idea of liberty. The chapter describes the basic divisions of
property, the topics of bailment, security interests, and nuisance.
References
Bernhardt, Roger, Real Property in a Nutshell, 3d ed. West (1993).
Burke, Barlow, Personal Property in a Nutshell, 2d ed. West (1993).
De Soto, Hernando, The Mystery of Capital. (2000).
Epstein, Richard A., Takings. Harvard (1985).
Johnston, David, et al, Cyber Law. Stoddart (1997).
Merrill, Thomas W., “Property and the Right to Exclude,” 77 Neb.L.Rev. 730 (1998).
Singer, Joseph William, Property Law: Rules, Policies, and Practices Aspen Pub. (2006).
Teaching Outline
I. Introduction to the Property-Based Legal System (LO 7-1)
Emphasize:
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That as long as people need or want more resources than they have available to them,
society will order how people relate to each other in acquiring and possessing these
That there are two basic legal frameworks and the state responds to the problem through
state planning at one end and private property (property) at the other.
That for the property system to function most effectively in promoting prosperity, it
should be applied according to the rule of law, which means it should be applied
generally and equally to everyone.
Merrill wrote (see References), “Give someone the right to exclude others from valued
resources… and you give them property. Deny someone the exclusion right and they do
not have property.”
Point out that the term “property” comes from the Latin proprius, referring to that
which is appropriate or proper to one. In an abstract sense, property is a legal sphere
That private property establishes maximum conditions for wealth creation through
promoting incentive.
How property helps establish the conditions necessary for capital formation, which
refers to that quality of resources that produces new or different resources, e.g., turning
a business idea of physical assets into money through incorporation or a mortgage loan.
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Additional Matters for Discussion:
Since the institution of property promotes individual prosperity and permits unequal
incentive in the absence of property.
Tom Bethell’s The Noblest Triumph (1999) is an excellent book to recommend to
students on the importance of property.
Discuss Sidebar 7.3, regarding the mystery of capital.
Observe that property need not be viewed as a normative good in order for it to be
The difference between real and personal property.
That all property that is not realty is personality and that the possible range of types of
resources in which an owner can have personality is infinite.
How tangible personal property can become a fixture.
What intangible personal property is.
Defining Land
Emphasize:
That it is important to understand that land ownership consists of more than the
surface of the property.
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Air Rights
2008).
Fixtures on Land
Emphasize:
What a fixture is.
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That an easement places a particular use of land behind the exclusive legal fence, which
usually involves the right of passage across the land.
possession of another person with the understanding that the other person must return
the object at some point or otherwise dispose of it.
The three categories that bailments fall into.
Sidebar 7.5—“Follow Instructions or Else”
Case 7.2: Semoon v. The Wooster School Corp., 2010 Conn. Super. LEXIS 1816
The rules under which people voluntarily exchange resources in a property system are
called the rules of contract. (Reference Chapter 8.)
That a nation’s capacity to observe legally enforceable contracts is considered the single
most significant indicator that the nation’s economy is ready for international trade.
B. Acquiring Resources through Possession
the formation of the U.S. property system. The importance of the Homestead Act aside,
de Soto asserts that much land in the New World that had been granted to favorites by
the British king was in fact possessed by squatters who eventually were granted formal
ownership—or property—in their possession.
Have the class discuss Sidebar 7.6 regarding the Barry Bonds’ home-run ball.
Chapter 07 - The Property System
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Lost Items
Emphasize:
The concept of adverse possession.
How the famous Homestead Act of 1862 illustrates how ownership can be acquired
through adverse possession.
Sidebar 7.7—“Curing Blight through Adverse Possession?”
C. Acquiring Resources through Confusion
Emphasize:
That accession refers to something “added.”
The implication of wrongful accession.
That much of the property foundation of the modern private market depends on the right
to exclude others legally from what one owns what one adds to that.
What testamentary gifts are.
F. Title and Property Registration
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Emphasize:
That ownership is frequently referred to by the term title.
Emphasize:
That the two principal types of security interests are mortgages and secured transactions
under Article 9 of the Uniform Commercial Code.
A. Security Interests in Land
Emphasize:
The similarities and differences among mortgages, land sales contracts, and deeds of
trust.
Recording Statutes
Emphasize:
The importance of registration (recording) of the security interests.
The legal perils of the mortgagee failing to record the mortgage.
Foreclosure, Deficiency, and Redemption
Emphasize:
The meaning of foreclosure, deficiency, and right of redemption.
Sidebar 7.8—“Financial Collapse and Recession”
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Perfection give a creditor a secured interest in the collateral.
The meaning of financing statements and purchase money security interest.
C. Priority Problems and Examples
Emphasize:
The nine priority problems and, especially, the significance of a buyer in the ordinary
course of business.
How artisan’s and mechanic’s liens arise and their priority significance as security
interests. Refer to Sidebar 7.9.
VIII. Limitations on Property and the Common Good (LO 7-5)
A. Property, the Use of Resources, and the Equal Right of Others
Emphasize:
That in law, property is not a thing. It is an owner’s right to exclude others from
B. Nuisance and Zoning
Emphasize:
That a public nuisance arises from some use of land that causes inconvenience or
damage to the public.
That a private nuisance is any unreasonable use of what belongs to one, usually land, so
Case 7.3: Cook v. Sullivan, 829 A.2d 1059 (N.H. Sup. Ct. 2003).
C. Property Limitations and the Common Good
Emphasize:
The variety of limitations on property illustrate that the purpose of property is to
