Common Law

Law consists of the rules and mechanisms through which disputes are resolved. Although either can be provided privately, most modern societies rely, at least in part, on state institutions to provide both. The term common law has several meanings in describing those institutions. Libertarian writers in particular use common law to contrast, on the one hand, the body of judge-​made legal rules developed through the resolution of disputes between private parties with, on the other hand, the statutes and regulations created by legislatures and enforced by state authorities. Many nonlibertarian legal scholars have expanded on this definition to include the legislative behavior of contemporary American courts. Common law also is frequently used to contrast legal systems with British heritage to those derived from French and Roman law, which are termed civil law or civilian systems.

Perhaps the most important meaning of the term common law is to describe the process of generating rules through judicial consideration of private disputes. Classical liberal and libertarian authors, including Bruno Leoni, Friedrich Hayek, and James C. Carter, have written about this aspect of the common law. More recently, authors like Bruce Yandle have shown common law to be a powerful means of addressing modern problems like pollution.

The common law process has several important characteristics. First, the common law relied on private parties to bring a dispute to a court. Relying on private actors substantially limits rent seeking by restricting the courts’ ability to choose the issues they address. Second, the common law evolved rules incrementally. Change was thus largely on the margins and based on the specific facts of a dispute. Third, the substance of the common law to a substantial degree rested on the intent of the parties. To an extent surprising to a modern reader, the early common law was the law of contract. When the common law specified a rule, it most often did so in the form of a default rule, leaving the parties free to alter the rule in future transactions if they so chose. Finally, the common law developed out of a competitive market for dispute resolution in England where, during much of the early development of the English legal system, different court systems competed for litigants’ business.

Statute law, by contrast, is the product of some legislative process subject to all the problems identified by public choice theory. Changes in statutes occur discontinuously. The passage of the federal Clean Air Act Amendments of 1970, for example, radically changed the rules governing air pollution. Statute rules are most often written as commands, rather than as suggestions, and so contracting around statutes is generally not permitted. Finally, statute law is typically the province of a state-​monopoly legal institution.

An example can clarify the difference between the common and statute laws. Consider the problem of consensual behavior that is alleged to cause harm to third parties. A legislature is able to pass a statute making the activity the subject of severe penalties, as state and federal legislatures have at one time done with regard to everything from sodomy to interracial marriage. The legislature might hold hearings to gather information or might rely solely on its members’ beliefs about the appropriateness of the conduct. If hearings were held, respected experts or Hollywood stars might be the witnesses. Questions, if any, would be asked by politicians and legislative staff, not by interested parties. A vote of the legislature, likely cast with an eye toward how the issue would play out in the next election, would decide the issue.

How would the common law address a claim of harm from consensual third party behavior? First, a specific individual would have to allege and prove the claim of harm in court. Procedural safeguards like cross-​examination would be available to weed out frivolous claims. Both sides would have an actual interest in the subject matter of the dispute, ensuring vigorous analysis of the strength of the claim. Second, even if a third party could prove harm from the behavior with respect to one individual, that precedent would be subject to further testing in future lawsuits if an attempt were made to extend it. Thus, for example, if an individual claimed and proved harm from his next-​door neighbor’s conduct, applying the precedent against someone living in the next town would be difficult. Finally, the issue would be determined by a neutral decision maker.

Most state courts in the United States, as well as government courts in many other English-​speaking countries, continue to render decisions applying what they term common law. The modern understanding of the term differs significantly from the institution described earlier. Courts today tend to view a common law rule merely as a rule that the courts are free to alter at will. The development of legal theories under which gun manufacturers are sued by cities alleging the manufacturers’ responsibility for illegal weapons sales, employers sued by employees alleging violations of an “implied covenant of good faith and fair dealing” in discharge, or McDonald’s sued for serving coffee too hot are all examples of modern common law reasoning. In sharp contrast, courts applying the common law in the 19th and early 20th centuries felt constrained by not only their own prior decisions, but by the structure of the rules laid out in cases across jurisdictions. Recognizing that their function was primarily to ensure that the expectations of the parties were met, those courts rarely abandoned earlier precedent, but restricted legal remedies to cases of actual harm and demanded a causal link between the defendant’s conduct and the alleged injury.

The world’s legal systems are traditionally divided into two families: common law and civil law. The civil law system, derived in part from Roman law, is dominant in Latin America, continental Europe, and the former colonies of continental European powers. Civil law differs from common law in several important respects. Rather than relying on judicial opinions, civilian jurisdictions are centered on comprehensive codes of written laws. Unlike the collections of statutes Americans call codes, civilian codes are intended to be consistent, complete, and written at the highest possible level of generality. Definitions, for example, are (at least in theory) consistent across areas of the law. Instead of relying on court opinions as guidance, civilian lawyers rely more on commentators’ analyses of the code and logical arguments based on code structure. Mexican court opinions, for example, become authoritative only when the court in question has made five identical rulings on the point at issue.

Neither system is inherently more libertarian in implementation. Supporters of civil law point to the constraints on judicial and legislative activism provided by the logical structure of the code (while lamenting the recent trend of legislatures to create exceptions to the code for favored groups). Common law advocates argue that the increased flexibility of legal rules and reduced opportunity for legislative tinkering make the common law superior. Despite that neither system of law is intrinsically more libertarian, it seems clear that the common law served as one of the pillars on which British liberty rested and played a crucial role in shaping a free society.

Further Readings

Berman, Harold Joseph. Law and Revolution: The Formation of the Western Legal Tradition. Cambridge, MA: Harvard University Press, 1983.

Hayek, Friedrich A. von. Law, Legislation and Liberty. Chicago: University of Chicago Press, 1973–1979.

Leoni, Bruno. Freedom and the Law. 3rd ed. Indianapolis, IN: Liberty Fund, 1991.

Morriss, Andrew P. “Codification and Right Answers.” Chicago-​Kent Law Review 74 (1999): 355–391.

Rubin, Paul H. “Growing a Legal System in the Post-​Communist Economies.” Cornell International Law Journal 27 (1994): 1–47.

Yandle, Bruce. Common Sense and Common Law for the Environment: Creating Wealth in Hummingbird Economies. Lanham, MD: Rowman & Littlefield, 1997.