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Chapter 07 - The Property System
7-9
promote the common good.
Duration Limitations on Property
Emphasize:
The rule against perpetuities limits all exercise of property over resources to a
duration of “lives in being plus twenty-one years.”
The rule against perpetuities prevents an owner from controlling resources through
many future generations by setting up trust arrangements, under which trustees are
legally required to carry out the wishes of the owner for extended duration.
D. Taxation
Emphasize:
That federal taxation is a specified power of Congress, contained in Article 1, Section 8
of the Constitution.
That taxation is a limitation on property and is used to promote the general welfare
(common good).
The controversial nature of progressive income taxation and that the top 1% of federal
income tax payers pay more dollars tax than the bottom 60% do, according to the
Congressional Budget Office.
Whether or not the benefits of individuals having the property system justify unequal
taxation when some individuals end up with much greater resources than others.
E. Property: A Conclusion and Comment
Emphasize:
How property law founds the private marketplace in the modern nation by establishing
an essential framework for the voluntary and certain exchange of identifiable resources.
That business students need to appreciate the fundamental role of law in business even
if they oppose specific rules or regulations.
James Madison’s concern about an excessively unequal distribution of resources.
Answers to Review Questions and Problems
The Property System
1. The Problem of Limited Resources
The former Soviet Union expected and when necessary it required citizens to contribute the
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© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
fruits of their efforts to society and to share accordingly. People contributed and benefitted
at different levels, so incentive to excel was not a factor.
2. Property and Prosperity
a. Property provides greater incentive to develop resources.
b. When resources are visible and attainable, the incentive to work toward obtaining
resources allows for the nation to benefit from their accumulation through trade and
taxes.
Defining Property in the Legal System
3. Two Basic Divisions of Property
a. Real property is land and the interests in land. Personal property is essentially anything
other than real property.
b. A chandelier is a piece of personal property that has become attached to the real
property and as a fixture, it becomes part of the real property. One must look to the
sales contract to determine whether it is permissible for Martin to remove the fixture.
Property Boundaries in the Physical World
4. Defining Land
a. Students’ answers will vary. With the advent of aircraft as well as subsurface drilling
for minerals, oil, gas, and water, it has become necessary to place reasonable limits on
5. Types of Ownership
a. The fee simple defeasible has a condition attached to its conveyance. If the condition
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© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
reversion interest in the land. If the land goes to someone other than the grantor upon
one’s death, that person has a remainder interest.
c. If either Arla or Jack dies, the surviving party becomes the sole owner of the house.
Specialty Applications of Property
6. Easements
a. An easement is a property fence because it protects easement owners from the world’s
7. Bailments
a. The lease of a mowing tractor is a bailment because it fits the definition of someone
314, the warehouse might not have been liable if it was using reasonable care, the duty
owed by mutual benefit bailee. To prevent this kind of problem, the parties to a
bailment often insure the goods.
c. Common carriers are usually strictly liable except in limited circumstances for goods
that are destroyed in the possession of the common carrier. It is important to note that
common carriers often contract away much of their liability.
Acquiring Resources in a Property System
8. Acquiring Resources through Exchange
9. Acquiring Resources through Possession
a. The finder of lost property becomes the owner of the property after a statutory period
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© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
original owner will have the ring returned.
b. If the building has existed for the state statutory period and all adverse possession
requirements have been met, the six inches will be owned by Downtown. If the
statutory period is not yet run, there may be a suit to have Downtown Condos torn
down. Most likely, Downtown may perhaps purchase the six inches of land or the two
owners will be urged to come to some sort of easement or licensing agreement.
10. Acquiring Resources through Confusion
a. Fungible goods are goods sold by weight or measure that when combined with
11. Acquiring Resources through Accession
a. Accession occurs when value is added to personal property. If the original property
12. Acquiring Resources through Gift
a. Typically delivery must include that the gift be intended and actually physically
13. Title and Property Registration
Chapter 07 - The Property System
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makes no guarantees but says that the grantor transfers any rights he or she has to the
property to the grantee.
b. Recording or registration of the deed evidences ownership and title putting ones rights
on public notice.
Property and Security Interests
14. Security Interests in Land
a. The three types of security interests in land are deeds of trust, mortgages, and land
15. Secured Transactions
a. The secured party must give value, the debtor must own the collateral, and a security
16. Priority Problems
Yes, the perfected security interest would be applicable because he is a buyer in the normal
course of business.
Limitations on Property and the Common Good
17. Property, the Use of Resources, and the Equal Right of Others
18. Nuisance and Zoning
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© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
land. Nuisance law basically says that one’s legal uses, and thus the boundary of the
property fence, do not extend to harming the public interest or to “unreasonably”
crossing the proper fences of one’s neighbors. Saying that one can only use something
in a “reasonable” way is similar to saying one cannot use it in ways that harm the
common good.
b. Students’ answers will vary.
19. Property Limitations and the Common Good
The rule against perpetuities limits the rights over property after an owner’s death. This in
20. Taxation
21. Property: A Conclusion and Comment
a. Madison thinks that the private property system can lead to unequal possession of
resources and jealousy, which in a democracy may lead to confiscatory taxation that
may kill the incentive that leads to the productive wealth justifying the system in the
first instance.
b. The original statement infers actual parcels of land and items of personal property. In
other words, it refers to things that are owned. The second statement refers to the
rights to ownership and the right to exclude others from one’s resources and
possessions.
Business Discussion #1
1. What do you say to this person in light of what you have read in this chapter?
2. What strategy might you suggest regarding getting more private land into the hands of the
Chapter 07 - The Property System
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poor in that country?
Business Discussion #2
1. What does he mean by this statement? Discuss.
2. Explain what it means to say that property is the central concept in our legal system.
It means that almost all of the U.S. laws can be expressed in terms of legal fences. Contract
