Laesio enormis

Laesio enormis (Latin: abnormal harm) is a legal doctrine that gives the ability of a contracting party to rescind an agreement if the price of exchange is less than a certain sum (for instance one half, or two thirds) of its actual value. The principle was developed as a way to ensure that people received a just price in exchange, and in opposition to the Imperial Roman view, found in the Corpus Juris Civilis,[1] that the parties to an exchange were entitled to try to outwit one another.

Modern law

The Louisiana Civil Code article 2589 permits "Rescission for lesion beyond moiety". It states that the seller may rescind the sale of an immovable when the price, or the property it is exchanged for, is less than one half of the fair market value. Special rules apply to exchanges that have one party exchanging immovable property for a mixture of immovable or movable property, and cash—the party exchanging the mixture of property has the right to rescind the exchange, not the party exchanging the immovable.

The Austrian Civil Code §934 allows the party to a contract may rescind it if it receives less than half of the fair value of the consideration. The other party may avert rescission by agreeing to pay the difference to full value. The laesio enormis has been criticized from a law and economics perspective for its inefficient incentives. In many cases it is impossible to profit from gathering information because profits above the mentioned threshold are prohibited by the law. [2]

Notes

  1. ↑ Code 4, 44, 2
  2. ↑ Grechenig, Kristoffel R., "The Economics of the Rule of Laesio Enormis (Die laesio enormis als enorme Laesion der sozialen Wohlfahrt?)", Journal für Rechtspolitik, No. 1, 2006.

References

This article is issued from Wikipedia - version of the Thursday, February 11, 2016. The text is available under the Creative Commons Attribution/Share Alike but additional terms may apply for the media files.