The+Role+of+Private+Ordering+in+Family+Law+A+Law+and+Economics+Perspective

M.J. Trebilcock and R. Keshvani
 * The Role of Private Ordering in Family Law: A Law and Economics Perspective**

//Quick summary: this article looks at the role of private ordering in family law. In this context, private ordering basically means allowing two spouses to work out their own deals with respect to separation agreements, instead of relying on a state-imposed regime. This is based on the idea that both spouses are autonomous agents capable of freely entering such deals.//

//In general, there has been a shift towards this model, away from the traditional marriage model which saw marriage as a “partnership for life” and in which the court was more hesitant to give force to things like pre-nuptial agreements. Today, marriage is more seen to be a “joint economic venture” between freely-choosing agents (so pre-nuptial agreements are given much more force). The authors are in favour of a greater role for private ordering in family law.//

“//Private Ordering// is the process of setting up of social norms by parties involved in the regulated activity (in some manner), and not by the State. //Private Ordering// aims to achieve public goals, such as efficiency, enhancing the market, and protecting rights.”

The authors examine private ordering as it relates to separation agreements (both pre-nuptial agreements and agreements arrived at after the breakdown of a marriage). There are two “horns” to the “dilemma of difference,” of how big a role private ordering (as opposed to state regulation) should play in these situations: 1) The idea that men and women are sexually equal, and thus should be seen to be equally morally autonomous agents. There shouldn’t be legal rules that treat the two sexes differently. They have equal capacity to enter into prenuptial contracts, separation agreements and commercial surrogacy contracts. The same rules should apply to all.

Versus:

2) Equality is not synonymous with “sameness.” Many legal concepts and structures actually serve to preserve male-oriented visions of the world, and that the rules should be changed to promote equality, which may involve special and different legal norms for women.

E.g. of private ordering. Further reforms were called for to the 1968 Divorce Act: “The notion that an external third party, such as a court, was better placed to adjudicate upon marriage breakdown was seen as inconsistent with a growing recognition of the values of autonomy and self-determination in marital affairs.” They distinguish between the old model of marriage and the new model.

-From this, alimony was seen to be the provision of **lifetime** support when marriage broke down. We used to consider this to be an inalienable right, one which can’t be bartered away. The common law refused to enforce agreements between husband and wife (husband and wife were seen as one legal entity, and the court refused to believe that parties to a marital agreement intended it to have legal consequences).
 * Old model of marriage:** “a partnership for life.”

-Two equal partners, voluntarily contributing to a **joint** **economic** **venture** based on mutual agreement. -This view explains why the law in Ontario provides for equal division of property upon divorce. Both parties have contributed to this joint economic venture. Alimony’s purpose is to promote economic self-sufficiency; it’s not based on the “partnership for life” model. So the right to support exists only where need is established. “Clean break” theory of support obligations: financial responsibility for the other person should not continue on indefinitely. -Courts are more likely to not want to reopen the terms of a separation agreement (they give more force to the will of the parties and are more willing to enforce these agreements). But there’s still a big question: when should the courts intervene to fix inequities that stem from a separation agreement? -Generally need a “radical change in circumstances” that is causally connected to the marriage.
 * New basic underlying model of marriage:** “joint economic venture.”

**Advantages of private ordering in separation agreements:** 1) Parties can fashion an agreement that best suits their particular preferences and life plans (flexible instrument) 2) These agreements will be more durable, since the parties are less like to see themselves as “losers”, which can happen when a court imposes a solution. (They’re generally happier with the results.) 3) Transaction costs are lower. 4) Separation agreements provide finality to marriage breakdown, allowing people to move on.

But there are **disadvantages to private separation agreements**, which the authors have grouped into three categories: 1) //Inadequacy of background legal entitlements:// what is each party entitled to, and thus what are their bargaining chips? (E.g. custody and visitation rights or support obligations.) For example, when looking at the division of family assets, the law doesn’t satisfactorily address a general type of family asset: **human capital** (e.g. in a traditional marriage, if the husband has a degree and significant training at the expense of the wife’s opportunities, how much is that worth and how should that value be divided?). Support payments predicated on notions of equal autonomy in a traditional marriage ignore that the wife has specialized in household production while the husband has specialized in market production. Women disproportionately suffer at divorce as a result of this type of unanswered question. -They describe a few complicated economic ways of valuing the contribution of a stay-at-home wife (CP p.534) which could be used to calculate compensation for investment in household production 2) //Transaction-specific failures:// There may be problems of incapacity (e.g. emotional instability at the time of marriage breakup such that they can’t make rational assessments of the proposed separation agreement). There could also be “strategic behaviour” (i.e. lies). Another problem is externalities: mainly the existence of children. 3) //Post-agreement contingencies:// a problem arises that wasn’t thought of at the time they drafted the separation agreement. (In commercial contracts, this is addressed by the doctrine of frustration.)

-The authors (CP p.540) then go on to analyse //Pelech// according to a law and economics perspective (e.g. pointing out that background legal entitlements were not calculated properly, because the court didn’t consider at all Mrs. Pelech’s investment in household production).