This Article explores the distinction between in personam contract rights and in rem property rights. It presents a functional explanation for why the legal system utilizes these two modalities of rights, grounded in the pattern of information costs associated with each modality. To test this theory, the Article examines four legal institutions that fall along the property/contract interface – bailments, landlord-tenant law, security interests, and trusts – in order to determine how the legal doctrine varies as the underlying situation shifts from in personam, to in rem, to certain relations intermediate between these poles. With respect to each institution, we generally find that in personam relations are governed by flexible default rules; in rem relations are governed by bright-line rules that impose immutable and standardized obligations; intermediate relations, as befits their intermediate level of information costs, feature a type and degree of standardization beyond pure contract but short of pure property.
Thomas W. Merrill & Henry E. Smith,
The Property/Contract Interface,
Colum. L. Rev.
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