Optimal Standardization in the Law of Property: The Numerus Clausus Principle

A central difference between contract and property concerns the freedom to "customize" legally enforceable interests. The law of contract recognizes no inherent limitations on the nature or the duration of the interests that can be the subject of a legally binding contract. Certain types of promises – such as promises to commit a crime – are declared unenforceable as a matter of public policy. But outside these relatively narrow areas of proscription and requirements such as definiteness and (maybe) consideration, there is a potentially infinite range of promises that the law will honor. The parties to a contract are free to be as whimsical or fanciful as they like in describing the promise to be performed, the consideration to be given in return for the promise, and the duration of the agreement.\nThe law of property is very different in this respect. Generally speaking, the law will enforce as property only those interests that conform to a limited number of standard forms. As it is stated in a leading English case, "incidents of a novel kind" cannot "be devised and attached to property at the fancy or caprice of any owner." With respect to interests in land, for example, the basic forms are the fee simple, the defeasible fee simple, the life estate, and the lease. When parties wish to transfer property in land, they must specify which legal form they are using – fee simple, lease, and so forth. If they fail to be clear about which legal interest they are conveying, or if they attempt to customize a new type of interest, the courts will generally recast the conveyance as creating one of the recognized forms. Of course, the law freely allows customization of the more physical, tangible dimensions of ownership rights. Property comes in all sorts of shapes and sizes. But with respect to the legal dimensions of property, the law generally insists on strict standardization.\nEvery common-law lawyer is schooled in the understanding that property rights exist in a fixed number of forms. The principle is acknowledged – at least by implication – in the "catalogue of estates" or "forms of ownership" familiar to anyone who has survived a first-year property course in an American law school. The principle, however, is by no means limited to estates in land and future interests; it is also reflected in other areas of property law, including landlord-tenant, easements and servitudes, and intellectual property. Nor is the principle confined to common-law countries; to the contrary, it appears to be a universal feature of all modem property systems. In the common law, the principle that property rights must conform to certain standardized forms has no name. In the civil law, which recognizes the doctrine explicitly, it is called the numerus clausus – the number is closed. We adopt this term for purposes of our discussion here, which focuses primarily on the common law.