Everybody knows that if you ever have an idea about something that would be really cool to try out, the first thing you have to do is hire a lawyer to give you advice on how to achieve your dreams. Conventional wisdom is that it would be too risky to try and achieve anything without legal advice, and absolutely foolhardy even to attempt anything when your lawyer has told you that you're probably going to fail because <legal this legal that>. I would like to disclose a truth well understood by anyone with even the slightest insight into the functioning of legal systems: law is trivial, my friends, and of all the things you need to consider when planning a business venture the law should be the least of your concerns. I refer, of course, to the private law that regulates private transactions between consenting adults. [Editor: 'private' in this context has no salacious connotations; it means transactions not involving the state or government].
Lawyers are considered to be very useful because they are trained to find the potential flaws in every possible plan that human beings could ever come up with. After three expensive years of legal training, you can bet that they will do their best to think up all the spectacular ways in which your plan could possibly fail, and then charge you £££ to point out to you a few nightmare scenarios that you never even thought of! Good times. Of course, you will pay up and be extremely grateful. 'You have saved me from a great disaster', you will say, as you walk away from your dreams.
There are some entrepreneurs who don't follow that path, because they have a huge appetite for risk and they're not afraid of things going wrong. They come up with cool ideas, roll them out without bothering to check in with the lawyers, and ... nothing to report! Nothing goes wrong! Instead, it all works out exactly as planned! It's all very boring because the risky plan turned out to be a great idea, very solid and absolutely workable! What now?
Any well-trained lawyer will regard such situations as evidence of a brewing existential crisis that must be carefully managed. If left unchecked, then before you know it people will regularly set up pumpkin pie shops without bothering to take legal advice. It goes without saying that this would not be good for the legal profession. People might start asking awkward questions like 'what is law for?'
As it turns out, that is a really worthwhile question to ask. It ensures that law is tailored to the purposes for which it is needed, and that we don't have more rules and regulations than we actually need. This matters because, while you might think it is harmless to have a few extra rules and regulations resting quietly in the statute books even though they're not needed, their mere presence virtually guarantees that before long someone will try to enforce them against you.
Is law trivial?
In thinking about the costs and benefits of different types and functions of legal rules, it is helpful to draw some lessons from Black's 'triviality hypothesis', an idea which tests the importance of 'mandatory' corporate law in the US ('Is Corporate Law Trivial?: A Political and Economic Analysis (1990) Northwestern University Law Review 542). Mandatory rules are rules that do not allow the parties to opt out of their operation, as distinct from 'enabling' rules that merely specify the default rule that will apply if the parties do not choose to opt out. Enabling rules are designed to be helpful without being prescriptive, like the standard form contracts you can buy at WHSmith that will save you the time, effort and cost of drawing up your own contracts, but of course you are not forced to buy them much less use them if they don't work for you for whatever reason.
It won't surprise you to learn that lawyers generally prefer mandatory rules to enabling rules. It's not due to being power-hungry and wanting to force everyone to follow a bunch of mandatory rules (no, of course not) it's because of a genuine belief* that the rules are Very Good Rules and thus everyone should be forced to obey them for their own good. Yes, that's a bit paternalistic, but it's fine, because there's nothing wrong with paternalism if it's for the good of society (so the thinking goes). [*Genuine belief indicates that in this context people expect to be judged by the genuineness of their beliefs, not by the rationality of their ideas: Ed]. In the context of corporate law, with which Black is concerned, paternalistic laws can 'protect shareholders from their own folly or ignorance' for example by closely regulating directors' decisions in contexts where shareholders would otherwise let the directors get away with evil practices (like paying CEOs too much money). This example immediately shows us the triviality of such rules: forcing directors to present their remuneration policy to shareholders has done nothing to reduce levels of executive pay.
The triviality hypothesis implies that in the general context of private law, the mere fact that a law is framed formally as 'mandatory' in its operation does not necessarily mean that it is important or effective in its operation. In real world conditions, a rule that is mandatory in form may operate in practice as a mere suggestion. The triviality thesis has four main components that are adapted here to shed light on the function of law generally:
1. Market mimicking rules: these are legal rules which, as it says on the can, mimick the rules that people would in any case choose voluntarily to abide by in free market transactions. The fact that the law requires you to do something is quite irrelevant if you were going to do that thing anyway and the rule represents something you'd always want to do and thus choose to do. As Black puts it, such rules 'are mandatory, but the mandate has no bite.' A general example would be legal rules that require parents to look after the welfare of their children. Rarely, if ever, would you find a parent who does this purely out of a sense of legal duty. The same thing is seen in employment law: the rational employer will let you take rest breaks because he has no desire to be a slave driver (also because you won't be much use, keeling over with tiredness), and not because of your plastic legal rights emanating from the Working Time Directive that entitle you to a rest break.
2. Avoidable rules: these are legal rules that you can avoid simply by organising your affairs carefully to get around them. If your tax liability will depend on the number of windows in your house, just construct fewer windows (or fill in some of the ones you already have). To avoid the rules that require companies to publicise their internal affairs, simply structure your business as a private partnership. Another example, if you are Uber, would be to enter arms' length agreements with 'driver partners' instead of hiring employees to drive your taxis. Although maybe that's not the best example as Uber is still fighting that litigation, and as many people who are engaged in battle with the taxman will attest, 'avoiding' things may be perfectly lawful but not always as easy to achieve in practice as you'd think because avoidance strategies often tie you down in litigation for many years, and then you might lose.
3. Changeable rules: these are rules that are going to change any day now because they're making some powerful people very cross. A contemporary example might be rules about what jokes you are allowed to tell or what jokes you are permitted to consider amusing or rules about what language is acceptable to use in civilised society. We can all see these rules morphing daily before our very eyes. Most sensible people respond by doing their best never to tell any jokes, recount any titillating stories, or do anything that might provoke anxiety and upset in others, such as: being happy, laughing, being richer than your neighbours, or in any way appearing to be content with yourself and your life when we all know that given all the oppression and exploitation there is in this world it is quite unacceptable for anyone to be caught in a state of happiness. Any activities historically associated with happiness and good cheer are now too risky, as the law is changing all the time and you could well find that you have inadvertently committed an illegal act through the exercise of what used to be known as a GSOH [Editor: good sense of humour]. Luckily, if you just keep calm and wait long enough, sanity and stability should soon return as the political focus turns to the next fashionable cause.
4. Unimportant rules: these rules are unimportant because they cover situations that literally never arise in the course of most people's lives or, if they were ever to arise, they'd be quite happy to comply with the rule and it costs them nothing to do so. A good example is the rule that, should you encounter the Queen as you are strolling around the palace grounds on your daily evening walk, you should curtsey. A few people do wring their hands in despair at the thought of one human being showing deference to another in that way, but nobody cares enough about this rule to riot about it in the streets.
The point is that many legal rules are trivial in one or more of these ways. All of these ideas are unsettling to anybody who has devoted their life to the service of the law, because no lawyer wants to imagine that he might be devoting his energies to a trivial pursuit. It is certainly true, as the examples above show, that there is sufficient ambiguity around even the most trivial of rules to supply a good line of work for the enterprising lawyer for many generations to come. Yet it is perhaps still surprising that when we teach students about mandatory legal rules, we don't point out that in the real world out there, these rules often lack bite. As Black puts it in the context of corporate law, this suggests the need to reorder the way we teach law, focusing not on what the law prescribes, but how the parties tend to structure their transactions and why:
In employment law, this approach would catapult the employment practices of gig economy firms like Uber, in which companies do everything possible to avoid being classified as employers, right to the top of the instructional syllabus. We tend at present to see these firms as examples of companies trying to avoid (evade?) their legal and moral duties (owing presumably to what Dirty Capitalists they are, motivated by profit making! Shocking). So we devote zero time to asking how and why they choose to structure their work relationships the way they do, and how law can help facilitate that. This would be a much more exciting way to think about how law operates in the real world inhabited by real people, as opposed to the stylised world we construct in our text books.
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