Formalizing gratuitous and contractual transfers: a situational theory.

Author:Hirsch, Adam J.
Position::Abstract through III. Anticipatory Transfers A. Wlls, p. 797-830


By tradition, gifts, wills, and contracts are formalized according to protocols established within each legal category. This Article examines the policies that underlie these "formalizing rules " and concludes that the utility of those rules depends fundamentally on the background conditions under which a gift, will, or contract occurs. Those background conditions, rather than the category into which the transfer falls, dictate the optimal formalizing rule for a transfer. In light of this observation, this Article proposes an integrated approach to formalizing rules that varies the required formalities for a transfer on the basis of situational criteria rather than the prevailing categorical ones.


An owner who intends to transfer property into the hands of another must employ a legal vehicle suitable to the occasion. When a transfer occurs during the owner's lifetime, and is made without material compensation, the transfer takes the form of a gift. The same gratuitous transfer, when planned to take effect at death, instead comes about via a will. Finally, a transfer of ownership made in exchange for ownership of different property occurs by virtue of a contract. These represent the three voluntary carriages of property. (1) And each is formalized--that is to say, rendered legally operative--according to its own, unique requirements: gifts are formalized classically by delivery of the gift corpus; wills, by a writing and an execution ceremony, conducted in the presence of witnesses; contracts, in many instances, by a mere parol agreement

between the parties. (2) Considered structurally, the "formalizing rules" for transfers, as we shall call them, thus vary by legal category. (3) In theory, those categories have defined boundaries and cover mutually exclusive sets of transfers.

This Article proposes a different organizing principle for formalizing rules. It assays prior discussions of the jurisprudence of legal formalities and distills from them various situational criteria that dictate the need, vel non, for particular aspects of formality in any given instance. As we shall see, those situational variations cut across the traditional categorical lines. My thesis is that formalizing rules for transfers would better serve their purposes if lawmakers broke down the rules not by legal category, but by other characteristics of the transfers in question. Transfers that share the same situational characteristics should be treated alike from the standpoint of formalizing rules, irrespective of whether those transfers fall under the rubric of gifts, wills, or contracts. In the process, we could unify the three categories of transfer, at least insofar as formalizing rules are concerned. (4)

We may rate this reorientation as particularly useful in those instances where categories of transfer have become distorted. Lawmakers have seen fit to permit certain types of transfers to masquerade as different ones--allowing these transfers to operate, so to say, under assumed names. Formalizing rules divided by legal category may be suboptimal in general; those tied to nominal classifications become arbitrary and dysfunctional in particular. A new framework for formalizing rules based upon a transfer's objective characteristics would avoid such arbitrariness, a considerable fringe benefit when categories of transfer have become corrupted by fiction.

As usual, the analysis shall progress in stages. In Part I, we lay our theoretical foundation by rehearsing and examining the accepted (and not-so-well accepted) visions of the functions of formalizing rules. The next three parts explore how formalizing rules operate in a variety of settings that might affect the benefits that various modes of formalization bring to the table. Part II looks at transfers that occur hard on the decision to make them. Part III addresses transfers that take place, by contrast, only after an interval of time has passed. Part IV completes the trio by considering transfers that again unfold rapidly, but near the death of the transferor. Finally, in Part V, we turn to the special problem of formalizing transfers that are not what they seem--transfers whose properties belie the legal category to which they are conventionally assigned.


    1. The Progenitors

      The problem of formalizing rules has attracted a modicum of scholarly attention over the years and inspired two articles widely recognized as classics in their respective fields. Both appeared, coincidentally, in the same year--1941--and as a consequence neither cites to the other. These are Dean Ashbel Gulliver and Catherine Tilson's Classification of Gratuitous Transfers, focusing on wills, (5) and Professor Lon Fuller's Consideration and Form, focusing on contracts. (6) A comparative reading reveals that these two sets of scholars, working independently, had been thinking along similar, if not quite parallel, lines--and in one instance even lighted on the same nomenclature.

      As Gulliver and Tilson emphasized from the outset--and Fuller surely agreed--formalities "should not be revered as ends in themselves." (7) Because a failure to meet formalities can invalidate transfers and hence frustrate intent, they require substantive justification. Gulliver and Tilson identified, first of all, what they called the "ritual function" of formality. (8) "Casual language, whether oral or written, is not intended to be legally operative," and lawmakers would thwart intent if they gave language merely contemplating a transfer greater effect. (9) By requiring transferors to engage in "some ceremonial" in order to render a transfer effective, lawmakers help to clarify transferors' "finality of intention." (10) Calling this instead the "channeling function," Fuller elaborated the point: Formality both "signalize[s]" and "canalize[s]" intent to render a transfer enforceable, furnishing "a simple and external test of enforceability," as well as an indication of the kind of transfer intended. (11) Formalities serve not only to clarify intent to a court, Fuller pointed out, but also afford parties a simple means of making their intentions known to each other, thereby facilitating agreements "out of court," without the need for a state proceeding to ratify transfers. (12) Translated into economic jargon, formality reduces error costs in the understanding and adjudication of what sort of transfer, if any, the transferor sought to make, while simultaneously offering him or her an efficient means of clarifying intention.

      The other principal purpose of formality is to provide reliable proof of a transfer's authenticity and substantive terms, thereby again conducing to adjudicative accuracy when a court sets about reconstructing those terms. Both Gulliver and Tilson, and Fuller dubbed this purpose the "evidentiary function" of formality, and both in common acknowledged its centrality. (13)

      Beyond that, the authors parted company. Gulliver and Tilson identified what they called the protective function of formality--that is, protecting a party from undue influence or duress by ensuring that other persons witness the transfer. (14) Gulliver and Tilson deemed this function significant only for dying transferors, whose "normal judgment and ... resistance to improper influences may be seriously affected by a decrepit physical condition, [or] a weakened mentality." (15) Others subjected to momentary influence or duress retain the power to challenge (or, in the case of wills, simply to revoke) the transfer ex post facto. (16)

      Undue influence and duress likewise constitute grounds for overturning a contract. (17) Nevertheless, Fuller ignored the protective function altogether. Instead, he brought up another purpose of formality that, for their part, Gulliver and Tilson had failed to identify. By infusing transfers with symbols of "weightiness," formalities cause transferors to take heed and thereby "act[] as a check against inconsiderate action." (18) Fuller termed this the "cautionary function" of formality, serving to produce the degree of "circumspecti[on] ... appropriate in one pledging his future." (19) Again translated into modern jargon, Fuller here accepted that formalities can serve paternalistic ends, protecting a transferor against the hazards of subsequent regret. Fuller did not, however, take the occasion to advocate any mandatory regulation of the behavior of transferors. Formalizing rules operate, in Fuller's conception, simply to cause transferors to think twice. In this connection, he became an early advocate of what we would today call libertarian paternalism. (20)

    2. The Successors

      These two treatments of the problem of formalities appeared over seventy years ago. Nothing lasts forever, of course, but some intellectual fashions wear better than others. Both Gulliver and Tilson's, and Fuller's studies remain widely cited to this day. (21) Nevertheless, a number of subsequent scholars have expanded on, or reacted to, these works, offering up an assortment of analyses that merit consideration.

      In unison, Professors Lawrence Friedman, John Langbein, and Bruce Mann, all focusing on wills, identify another virtue of formalizing rules in their potential to promote standardization: "Compliance with the Wills Act formalities for executing witnessed wills results in considerable uniformity in the organization, language, and content of most wills." (22) On first sight, the suggestion seems surprising; after all, the manner in which a transfer is executed has no direct bearing on its content. In theory, uniformity of execution could be accompanied by a cacophony of expression. But in practice, laypersons often recognize...

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