A couple bought a new home from a Phoenix builder. It was in a nice development, a new and conveniently located community, so attractive that it is not surprising that it was almost sold out.
They sold their old home with a future closing date and made all the other arrangements to move into their new home at the scheduled construction completion date.
When suddenly…
When suddenly the builder rescinded that sale. It turned out that, thanks to the relocation of a major corporate employer, the builder had a chance to sell a large, unspecified number of new homes at once for relocating executives of the employer and it needed the additional house the Phoenix buyers had purchased to complete the big package deal.
It should have been unthinkable, except for that fact that in the voluminous paperwork required in a real estate purchase today – paperwork swollen to indigestible proportions by bureaucrats trying to compensate with regulatory minutiae for all the things that went wrong in the housing bust ten years earlier — there was a term called “involuntary denied occupancy” that allowed the builder “for reasons of compelling economic necessity” to rescind the sale. Since it was tucked into the contract next to the force majeure clause that would have relieved the builder of performance in the (increasingly likely) event of a nuclear war, the buyers didn’t pay it any particular attention.
Our would-be home buyers probably didn’t break their agreement down into its constituent elements. They simply thought in terms of the common law that we are all accustomed to. They thought they had a deal: offer and acceptance and all the rest.
But their reasonable expectation that they had purchased a new home was wrong. They hadn’t. The contract ruled and they were out of luck. And out of a home.
Sound crazy? Of course it is. This entire scenario is so utterly outrageous that by now I’m sure you know that I made the whole thing up, and that it is clear that I am only attempting to offer an imperfect analogy to the forced deplaning of that United Airlines passenger.
I have been both surprised and disappointed to discover that so many of the people I esteem as great defenders of free people and free markets have written to defend United’s right to deny a seat to the holder of a paid ticket. The “involuntary denied boarding” clause is in the contract, they say, and it rules. It is in there fair and square, they say, and the passenger should have known it.
Nobody books a flight and pays for it and is then told by the airline that it will honor the ticket only when it deems it convenient. But that is the practical effect of the “contract of carriage” fine print.
Most of the commentary reasonably objects to the bloody treatment of the passenger, but otherwise it too often defends the airline’s right — not its judgment in doing so, but its right – to unilaterally rescind the purchase and bump its passenger. Some explain in needless detail all the reasons that airlines overbook flights. Those reasons are compelling for airlines, but they are a needless and irrelevant sidebar. Whatever their reasons, however much they value their practice of overbooking flights, airlines should be required to pay the price for it. They should assume its costs in their business practices. The economic efficiency of overbooking and bumping passengers can only be known for certain by discovering the real price of getting a passenger to relinquish his seat voluntarily. The price United offered in Chicago wasn’t the real price. That’s why United resorted to coercion. It made the passenger “an offer he couldn’t refuse.”
Delta, wishing to avoid an incident like United’s, has decided to offer almost $10,000 to induce passengers to relinquish seats on overbooked flights. I doubt the bidding will often go that high, but who knows? It’s still cheap to avoid United’s public relations disaster.
Some of the free market champions commenting on the story take solace at the public outcry against the airline, and trust that with either a lower share price or reduced bookings the airline will pay in the marketplace for yanking the traveler off the plane. I agree with them that it is great to see that the market is forcing United and other airlines to review their practices.
My fellow free-marketeers are correct that United Airlines only hurt itself by its thuggish behavior. But these outrages have been going on for a long time; the only reason United has been caught is that the incident was captured on a cell-phone cameras. How have these airline eviction practices endured? It is evident from the outcry over the now-viral Chicago video that people are affronted by the airlines’ bumping passengers who are booked on flights. If the practice is so repugnant, why didn’t competitive forces bring it to a halt years ago?
Let me put it a different way.
How do the airlines get away with it?
The answer is that the State protects them from competition. Commercial air travel today is not a free-market industry. Disagree? Try starting an airline. In an LA Times Op-Ed, Let Richard Branson Kill United Airlines, Matt Welch details some of ways the airlines are protected.
In protecting the crony airlines from competition the State allows them to get away with the intolerable. And it forces us to tolerate the intolerable.
But the issue that goes mostly unaddressed in the many defenses of United’s contractual rights is one of casuistry: the clever use of lawyerly reasoning or the exceedingly fine print of legal language and contractual minutiae to subvert the plain meaning of the purchase of a seat on an airline, a new home, or anything else.
Nobody here is arguing against a close reading of terms and contracts in complex business deals and agreements. But must we go through the principal activities of our daily lives — shopping, traveling, and all the rest – needing to have a lawyer on speed dial or Black’s Law Dictionary in our hip pockets? Have you read the fine print that goes with your brokerage account? Have your assets – which you plainly think are yours – actually been pledged, repledged, hypothecated, or re-hypothecated by the brokerage house? When you clicked “Yes” in the box to download a piece of software, were you really agreeing to be Bill Gate’s towel boy?
Here’s an entry on casuistry from the Oxford English Dictionary: “Casuistry destroys by distinctions and exceptions, all morality, and effaces the essential difference between right and wrong.”
In the spirit of the Easter season I prefer the words of a higher authority who said of such casuistry that it ladens men “with burdens grievous to be borne.”
No matter what they slip into the fine print.
8:35 pm on April 15, 2017
