2. Loss and recovery of property 2.1 Introduction. The subject of the loss and the subsequent recovery of property involves the incentives of original owners to prevent loss of their property and then, if property is lost, the incentives of original owners or of others to recover the property Both types of incentives are influenced by whether the law allows original owners to retain ownership in property that has been lost or instead accords ownership to finders 2.2 Socially optimal effort to prevent loss of property and to recover lost property. Our social welfare criterion will continue to be the expected value of property minus the costs of effort, but now effort will include steps taken to prevent loss as well as the expected effort expended to recover lost property. It will be convenient to consider first socially optimal recovery effort and second, socially optimal effort to prevent loss Observe that once property is lost, the social welfare criterion reduces to just the expected value of property minus the cost of recovery effort, so that it is socially optimal to devote effort to recovery if and only if its cost is less than the expected return. Thus, the description of socially optimal recovery effort is identical to that of socially optimal search effort for unowned property, as discussed above in section 1 Now consider socially optimal effort to prevent loss in the first place. This level of effort will reflect the point that, should a loss occur, there may be a subsequent recovery and hence no social loss ultimately suffered. Suppose that a stray cow worth 1,000 would, after recovery effort of 10, be found with probability 40 per cent, and in that case no social loss would be suffered. t Then the expected social loss from the straying of a cow would equal only 60%x 1,000 or 600, not 1,000; and adding this to the cost 10 of recovery effort, we obtain 610 as the expected social costs associated with a stray Thus, fencing in a cow to prevent it from straying will be socially desirable if and only if fencing costs less than 610. Fencing would not be worthwhile if it costs, say, 800, even though that is less than the 1,000 value of the cow a cost of 800 would be worth bearing only if a stray cow would definitely be lost, not if it would be found with probability 40 er cent. As in this illustration, the socially relevant consequence of an initial loss of property is not the entire value of the property, but rather a smaller adjusted loss--equal to the probability of failure of someone to recover the property multiplied by its value, plus the cost of (optimal)recovery effort. Therefore, effort to prevent loss will be socially justified only to the extent that it reduces the chance of this adjusted loss, and thus will be desirable less often when there is a chance to recover lost property than when there is no such chance 'I assume for simplicity that lost cattle would be worth amount to any person who finds them In general, however, a lost thing might be worth a different amount(often a lesser amount)to a finder than to the original owner. The effects of this consideration will be obvious to the reader eTo express what has been said in this section formally, suppose that y is effort to prevent loss, gu)is the probability of loss, where qv)<0 and q"()>0, x is recovery effort, p(x) is the probability of success in recovery, where p(x)>0 and p(x)<0, and v is the value of the property. The social object is to maximize the expected value of property minus expected effort, or equivalently, to minimize expected effort plus loss of value, namely, to minimize y+ g)[x+(1-p(x)v]. The optimal x clearly minimizes the term in brackets, so satisfies p(x)v= 1, assuming as I shall that the optimal x, denoted x', is positive. The optimal y, denoted y*, satisfies-g'v+(1-p(x)v]=l, the marginal reduction in the expected adjusted loss equals the marginal cost of prevention effort, 1. The optimal adjusted loss x*+(1- p(r"))v is less than v, for as x*minimizes x+(1-p(x)v over x, we know that x*+(1-p(x"))v<0+(1-P(O))vsl Chapter 9- Page 5
2. Loss and Recovery of Property 2.1 Introduction. The subject of the loss and the subsequent recovery of property involves the incentives of original owners to prevent loss of their property and then, if property is lost, the incentives of original owners or of others to recover the property. Both types of incentives are influenced by whether the law allows original owners to retain ownership in property that has been lost or instead accords ownership to finders. 2.2 Socially optimal effort to prevent loss of property and to recover lost property. Our social welfare criterion will continue to be the expected value of property minus the costs of effort, but now effort will include steps taken to prevent loss as well as the expected effort expended to recover lost property. It will be convenient to consider first socially optimal recovery effort and second, socially optimal effort to prevent loss. Observe that once property is lost, the social welfare criterion reduces to just the expected value of property minus the cost of recovery effort, so that it is socially optimal to devote effort to recovery if and only if its cost is less than the expected return. Thus, the description of socially optimal recovery effort is identical to that of socially optimal search effort for unowned property, as discussed above in section 1. Now consider socially optimal effort to prevent loss in the first place. This level of effort will reflect the point that, should a loss occur, there may be a subsequent recovery and hence no social loss ultimately suffered. Suppose that a stray cow worth 1,000 would, after recovery effort of 10, be found with probability 40 per cent, and in that case no social loss would be suffered.45 Then the expected social loss from the straying of a cow would equal only 60% H 1,000 or 600, not 1,000; and adding this to the cost 10 of recovery effort, we obtain 610 as the expected social costs associated with a stray. Thus, fencing in a cow to prevent it from straying will be socially desirable if and only if fencing costs less than 610. Fencing would not be worthwhile if it costs, say, 800, even though that is less than the 1,000 value of the cow; a cost of 800 would be worth bearing only if a stray cow would definitely be lost, not if it would be found with probability 40 per cent. As in this illustration, the socially relevant consequence of an initial loss of property is not the entire value of the property, but rather a smaller adjusted loss -- equal to the probability of failure of someone to recover the property multiplied by its value, plus the cost of (optimal) recovery effort. Therefore, effort to prevent loss will be socially justified only to the extent that it reduces the chance of this adjusted loss, and thus will be desirable less often when there is a chance to recover lost property than when there is no such chance.46 45I assume for simplicity that lost cattle would be worth the same amount to any person who finds them. In general, however, a lost thing might be worth a different amount (often a lesser amount) to a finder than to the original owner. The effects of this consideration will be obvious to the reader. 46To express what has been said in this section formally, suppose that y is effort to prevent loss, q(y) is the probability of loss, where qN(y) < 0 and qO(y) > 0, x is recovery effort, p(x) is the probability of success in recovery, where pN(x) > 0 and pO(x) < 0, and v is the value of the property. The social object is to maximize the expected value of property minus expected effort, or equivalently, to minimize expected effort plus loss of value, namely, to minimize y + q(y)[x + (1 ! p(x))v]. The optimal x clearly minimizes the term in brackets, so satisfies pN(x)v = 1, assuming as I shall that the optimal x, denoted x*, is positive. The optimal y, denoted y*, satisfies !qN(y)[x* + (1 ! p(x*)v] = 1, the marginal reduction in the expected adjusted loss equals the marginal cost of prevention effort, 1. The optimal adjusted loss x* + (1 ! p(x*))v is less than v, for as x* minimizes x + (1 ! p(x))v over x, we know that x* + (1 ! p(x*))v < 0 + (1 ! p(0))v # v. Chapter 9 – Page 5
2.3 Situations in which original owners have the opportunity to exercise recovery effort or to hire others for that purpose In many circumstances, original owners have at least as good an opportunity as others to find property that they have lost or to engage other individuals to do so. Original owners will often have this opportunity because they will be aware of when and approximately where they lost their property (such as where a ship went down, or approximately where a watch was mislaid ) In such situations, let us consider the outcomes under the two legal regimes concerning ownership of recovered property Original ownership rule. It is evident that the outcome under the rule whereby original owners retain ownership in lost property will be socially desirable. Recovery effort will tend to be optimal because the original owner will retain ownership of what he finds. In particular, there will be no problem of excessive incentives to search, for no one will engage in search unless hired by the owner, and he will direct their efforts so that they are not working competitively and engaging in duplicative activities Also, effort to prevent loss from occurring will tend to be optimal; original accordingly, he will not invest socially excessively to preven sua caf g& owners will not invest excessively in preventing loss Because original owners will anticipate that they will retain ownership rights if they recover their lost prop will properly view a loss in adjusted terms and exercise the socially correct degree of effort to prevent loss. Because a cattle owner will know that he will retain property rights in found strays, he will treat straying as less serious than certain losses of cattle Finders-keepers rule. By contrast, the outcome under the finders-keepers rule is socially less desirable. Under this rule, original owners and other parties might invest excessively in search effort to be first to find lost property Furthermore, original owners will tend to exercise excessive effort to prevent loss because, if they lose their property and it is recovered by someone else, they will not retain ownership of it. That is, under the finders-keepers rule, the original owner will treat a recovery by another party as a full loss to himself, even though for society there will be no loss; he will thus see a loss as exceeding the socially relevant, lower, adjusted loss. If a stray would never be recovered by him but would be recovered by others with a rather than only when the cost is less than 610 x an/ a stray as a certain loss. Hence, he probability of 40 per cent, then the owner will regard will invest in fencing whenever the cost is less tha 00. such as when its cost is 800 Comparison of rules. In the situations in which original owners have a good opportunity to engage in recovery effort, allowing original owners to retain ownershi rights to property that they have lost is the better rule. Under the original ownership rule, there is no problem of a wasteful race to find property once it is lost, and there also is no problem of original owners investing excessively to prevent loss in the first place In terms of the analysis in the preceding note, the original owner will himself seek to minimize+ q0+(1-p(x))vl, so will choose x' and y* To amplify, assume for simplicity that the original owner will never be the one to recover his lost property. Then the owner will choose y to minimize y+ ql)v, so his choice of y will be determined by condition-q)v=1; let this y be denoted y**. Because v>x*+(1-p(r")v, as explained in note 18 Chapter 9-Page 6
2.3 Situations in which original owners have the opportunity to exercise recovery effort or to hire others for that purpose. In many circumstances, original owners have at least as good an opportunity as others to find property that they have lost or to engage other individuals to do so. Original owners will often have this opportunity because they will be aware of when and approximately where they lost their property (such as where a ship went down, or approximately where a watch was mislaid). In such situations, let us consider the outcomes under the two legal regimes concerning ownership of recovered property. Original ownership rule. It is evident that the outcome under the rule whereby original owners retain ownership in lost property will be socially desirable. Recovery effort will tend to be optimal because the original owner will retain ownership of what he finds. In particular, there will be no problem of excessive incentives to search, for no one will engage in search unless hired by the owner, and he will direct their efforts so that they are not working competitively and engaging in duplicative activities. Also, effort to prevent loss from occurring will tend to be optimal; original owners will not invest excessively in preventing loss. Because original owners will anticipate that they will retain ownership rights if they recover their lost property, they will properly view a loss in adjusted terms and exercise the socially correct degree of effort to prevent loss. Because a cattle owner will know that he will retain property rights in found strays, he will treat straying as less serious than certain losses of cattle; accordingly, he will not invest socially excessively to prevent straying.47 Finders-keepers rule. By contrast, the outcome under the finders-keepers rule is socially less desirable. Under this rule, original owners and other parties might invest excessively in search effort to be first to find lost property. Furthermore, original owners will tend to exercise excessive effort to prevent loss because, if they lose their property and it is recovered by someone else, they will not retain ownership of it. That is, under the finders-keepers rule, the original owner will treat a recovery by another party as a full loss to himself, even though for society there will be no loss; he will thus see a loss as exceeding the socially relevant, lower, adjusted loss. If a stray would never be recovered by him but would be recovered by others with a probability of 40 per cent, then the owner will regard a stray as a certain loss. Hence, he will invest in fencing whenever the cost is less than 1,000, such as when its cost is 800, rather than only when the cost is less than 610.48 Comparison of rules. In the situations in which original owners have a good opportunity to engage in recovery effort, allowing original owners to retain ownership rights to property that they have lost is the better rule. Under the original ownership rule, there is no problem of a wasteful race to find property once it is lost, and there also is no problem of original owners investing excessively to prevent loss in the first place. 47In terms of the analysis in the preceding note, the original owner will himself seek to minimize y + q(y)[x + (1 ! p(x))v], so will choose x* and y*. 48To amplify, assume for simplicity that the original owner will never be the one to recover his lost property. Then the owner will choose y to minimize y + q(y)v, so his choice of y will be determined by the condition !q'(y)v = 1; let this y be denoted y**. Because v > x* + (1 ! p(x*))v, as explained in note 18, we have y** > y*. Chapter 9 – Page 6
take excessive care to prevent loss under the finders-keepers rule is of substantial ced to It should be observed that the possibility that original owners would be indi importance in many settings, for the likelihood of recovery by others might be significant. The example of straying animals fits in this regard, for the odds of someone other than the owner finding a stray would often be high. Thus, were property rights not to remain with the owners of strays, owners might invest significantly in fencing where that would not be socially justified. Or, imagine that if a person leaves a personal article, such as a watch, someplace and another individual finds it, that the finder automatically becomes the owner of it. Then people would arguably be led to take excessive care not to leave personal articles about, even temporarily 2. 4 Situations in which original owners do not have good opportunities to exercise recovery effort. Let us now consider the many situations in which original owners do not have the best, or any practical, opportunity to exercise recovery effort let us assume that the original owners have no opportunity to recover properf ?lost These include cases in which original owners have essentially no idea where they lost their property, so they would not know where to search for it. For expositional purposes, themselves, and that others will have such opportunit ownership rule leaves no incentive for other parties to recover lost property. Thug'nal Original ownership rule Given our assumptions, the outcome under the ori property that is lost will not be recovered. Also, the owner's effort to prevent loss will be excessive because a loss for him will be a loss for sure Finders-keepers rule. If those who find lost property can keep it, then they will have an incentive to recover it; a single individual will have optimal incentives, and multiple parties will have excessive incentives. An owner's effort to prevent loss will be excessive because, for him the chance of recovery will be zero Comparison of rules. The finders-keepers rule is superior. Under this rule, unlike under the original ownership rule, there is some recovery of lost property. Under both rules, original owners have identical (and excessive) incentives to prevent loss. Thus, the difference between the rules is that some lost property is recovered under the finders- kee Although the finders-keepers rule is superior, as just noted, it suffers from the problem that original owners have excessive incentives to prevent loss. a type of rule that is superior to a finders-keepers rule and also to the original ownership rule is an original ownership rule combined with a mandatory reward paid by the owner to the finder. This hybrid rule has the attractive feature that it furnishes incentives to nonowners to recover lost property -because they receive rewards--and it also mitigates the problem of excessive loss prevention efforts by owners -- because they retain ownership in lost property. The precise way in which such a rule would influence behavior would depend on the formula for the reward However, some individuals may be altruistic, especially in a rescue situation, and make a recovery effort for that reason. Another reason that individuals might make a recovery effort in the presence of the ginal ownership rule is that there may be a chance that they will obtain ownership of what they find if the owners cannot be identified( see below)or if the things they find have been abandoned if the reward is a simple fraction of the value of the recovered thing, the higher the reward fraction,the greater the incentive for recovery, which is desirable, but the more excessive is the incentive of original Chapter 9- Page 7
It should be observed that the possibility that original owners would be induced to take excessive care to prevent loss under the finders-keepers rule is of substantial importance in many settings, for the likelihood of recovery by others might be significant. The example of straying animals fits in this regard, for the odds of someone other than the owner finding a stray would often be high. Thus, were property rights not to remain with the owners of strays, owners might invest significantly in fencing where that would not be socially justified. Or, imagine that if a person leaves a personal article, such as a watch, someplace and another individual finds it, that the finder automatically becomes the owner of it. Then people would arguably be led to take excessive care not to leave personal articles about, even temporarily. 2.4 Situations in which original owners do not have good opportunities to exercise recovery effort. Let us now consider the many situations in which original owners do not have the best, or any practical, opportunity to exercise recovery effort. These include cases in which original owners have essentially no idea where they lost their property, so they would not know where to search for it. For expositional purposes, let us assume that the original owners have no opportunity to recover property themselves, and that others will have such opportunity. Original ownership rule. Given our assumptions, the outcome under the original ownership rule leaves no incentive for other parties to recover lost property.49 Thus, property that is lost will not be recovered. Also, the owner=s effort to prevent loss will be excessive because a loss for him will be a loss for sure. Finders-keepers rule. If those who find lost property can keep it, then they will have an incentive to recover it; a single individual will have optimal incentives, and multiple parties will have excessive incentives. An owner=s effort to prevent loss will be excessive because, for him, the chance of recovery will be zero. Comparison of rules. The finders-keepers rule is superior. Under this rule, unlike under the original ownership rule, there is some recovery of lost property. Under both rules, original owners have identical (and excessive) incentives to prevent loss. Thus, the difference between the rules is that some lost property is recovered under the finderskeepers rule. Although the finders-keepers rule is superior, as just noted, it suffers from the problem that original owners have excessive incentives to prevent loss. A type of rule that is superior to a finders-keepers rule and also to the original ownership rule is an original ownership rule combined with a mandatory reward paid by the owner to the finder. This hybrid rule has the attractive feature that it furnishes incentives to nonowners to recover lost property -- because they receive rewards -- and it also mitigates the problem of excessive loss prevention efforts by owners -- because they retain ownership in lost property. The precise way in which such a rule would influence behavior would depend on the formula for the reward.50 49However, some individuals may be altruistic, especially in a rescue situation, and make a recovery effort for that reason. Another reason that individuals might make a recovery effort in the presence of the original ownership rule is that there may be a chance that they will obtain ownership of what they find if the owners cannot be identified (see below) or if the things they find have been abandoned. 50If the reward is a simple fraction of the value of the recovered thing, the higher the reward fraction, the greater the incentive for recovery, which is desirable, but the more excessive is the incentive of original Chapter 9 – Page 7
2.5 Comments. To round out our discussion let us consider several other relevant Issues a)Abandoned property. The finders-keepers rule has appeal in regard to when original owners are not able to accomplish recovery( the situation in section 2 4a abandoned property, given the above analysis, assuming that abandonment tends to occ Moreover, abandonment may signal that the owner attaches relatively low value to the property, which also argues in favor of the finders-keepers rule (b)Adventitiously discovered property. Things that are found in the normal course of individuals' activities(such as a watch that a person finds lying on his seat on a bus) are things that would be found regardless of the legal rule concerning lost things. Thus, there is no need to create incentives to find such things(the watch is going to be found on the bus seat whatever the legal rule). Consequently, there is no need for the finders- keepers rule to be employed, and it is best for original owners to retain property rights adventitiously found things, in order that they do not invest excessively in prevention effort (c)Identification oforiginal owners of property. It has been implicitly assumed that when the best rule favors original owners, they can be identified but often, of course they cannot. In this regard, a desirable rule is one that requires finders to make reasonable efforts to determine the identity of original owners(such as by reporting finds to the police)and that gives title to finders if the owners cannot be located after a stipulated eriod. This rule also has the virtue that it stimulates original owners to mark their property as their own. Furthermore, it provides finders with some incentive to search for and/or bring into their possession things that it would be wasteful for no one to use d) Care ofproperty. Some types of lost property must be cared for in order to be preserved, a notable example being stray livestock. In such cases, it is desirable for finders who take possession of things to make reasonable efforts to maintain the things Finders will be inclined to do this, or not disinclined, if they are compensated appropriately by the original owners if they are identified, so that a rule mandating such compensation is desirable (e) Enforceability oforiginal owners'rights. Athough it has been supposed that here is no difficulty in enforcing legal rules, there is obviously a problem in enforcing and can be used by finders without their being discovered. To the degree that this is sy original owners'rights, for things will sometimes be found when no witnesses are preser the de facto rule is the finders-keepers rule 2.6 Law concerning property rights in lost, mislaid, and abandoned property. I matter of retain rights in things that they have lo mislaid. Finders of such property are not usually entitled to a reward but are due imbursement for reasonable expenses of securing and caring for found property. 2 owners to prevent loss. If the reward depends on the optimal recovery effort, it can be shown to lead optimal behavior for both types of party, and likewise if the reward is paid by the state to the finder See brown 1975. sections 3. 1.3.4. and 3.5 "For example, those who find strays are allowed reimbursement for the expenses incurred in keeping them(if they can find the animals'owners); see St Julian 1995, section 56. On the duty to reimburse Chapter 9- Page 8
2.5 Comments. To round out our discussion, let us consider several other relevant issues. (a) Abandoned property. The finders-keepers rule has appeal in regard to abandoned property, given the above analysis, assuming that abandonment tends to occur when original owners are not able to accomplish recovery (the situation in section 2.4). Moreover, abandonment may signal that the owner attaches relatively low value to the property, which also argues in favor of the finders-keepers rule. (b) Adventitiously discovered property. Things that are found in the normal course of individuals= activities (such as a watch that a person finds lying on his seat on a bus) are things that would be found regardless of the legal rule concerning lost things. Thus, there is no need to create incentives to find such things (the watch is going to be found on the bus seat whatever the legal rule). Consequently, there is no need for the finderskeepers rule to be employed, and it is best for original owners to retain property rights in adventitiously found things, in order that they do not invest excessively in prevention effort. (c) Identification of original owners of property. It has been implicitly assumed that when the best rule favors original owners, they can be identified, but often, of course, they cannot. In this regard, a desirable rule is one that requires finders to make reasonable efforts to determine the identity of original owners (such as by reporting finds to the police) and that gives title to finders if the owners cannot be located after a stipulated period. This rule also has the virtue that it stimulates original owners to mark their property as their own. Furthermore, it provides finders with some incentive to search for and/or bring into their possession things that it would be wasteful for no one to use. (d) Care of property. Some types of lost property must be cared for in order to be preserved, a notable example being stray livestock. In such cases, it is desirable for finders who take possession of things to make reasonable efforts to maintain the things. Finders will be inclined to do this, or not disinclined, if they are compensated appropriately by the original owners if they are identified, so that a rule mandating such compensation is desirable. (e) Enforceability of original owners’ rights. Athough it has been supposed that there is no difficulty in enforcing legal rules, there is obviously a problem in enforcing original owners= rights, for things will sometimes be found when no witnesses are present and can be used by finders without their being discovered. To the degree that this is so, the de facto rule is the finders-keepers rule. 2.6 Law concerning property rights in lost, mislaid, and abandoned property. As a general matter, owners of property retain rights in things that they have lost or mislaid. 51 Finders of such property are not usually entitled to a reward but are due reimbursement for reasonable expenses of securing and caring for found property.52 owners to prevent loss. If the reward depends on the optimal recovery effort, it can be shown to lead to optimal behavior for both types of party, and likewise if the reward is paid by the state to the finder. 51See Brown 1975, sections 3.1, 3.4, and 3.5. 52For example, those who find strays are allowed reimbursement for the expenses incurred in keeping them (if they can find the animals= owners); see St. Julian 1995, section 56. On the duty to reimburse Chapter 9 – Page 8
However finders are entitled to rewards based on value under maritime law and often as well according to the codes in civil law countries. When a finder does not know the identity of the original owner, many jurisdictions provide for finders to follow procedures allowing original owners to come forward to claim their property within a time limit, after which finders gain title to discovered property. (Complications about who gains ownership may arise, though, where the thing is found on the property of a third party Rights to treasure trove, that is, secreted money gold, and silver whose owner is ancient or unknown, is ordinarily granted to the finder Abandoned things generally become the property of finders(complications may arise, again, where abandoned things are found on the property of third parties). This includes shipwrecks abandoned at sea; according to maritime law, they become the property of finders. But title to abandoned shipwrecks embedded in territorial waters sometimes goes to the state in which they are discovered 3. Sale of Property-- In general 3. 1 Reasons for sale. Let us now turn to the most common way in which a party acquires title to property: through its sale. At various times, it will be desirable for property to be sold, for two basic reasons. First, efficient production requires that firms 3.5. It should be added that statutes sometimes provide for rewards also to be paid, as Brown noles section finders for reasonable expenses of securing and keeping found property, see generally Brown 1975 Under maritime law, anyone who takes into his possession a ship lost at sea or its cargo is entitled to a reward that lies within the equitable powers of the courts, with the amount not exceeding the benefit to the owner; see generally Dietz 2000, sections 66-69. On rewards in civil law countries, see, for example, the description of the German situation in Dukeminier and Krier 1998, 115 See Brown 1975. section 3. 5. and Dukeminier and Krier 1998.116 SThe owner of land on which a thing is found is often called the owner of the locus in quo or simply the locus owner. If the finder was trespassing, he is generally denied title as against the locus owner, but when the finder is an invitee or licensee of the locus owner the authorities are divided as to who obtains title Additionally, importance may be attached to the legal distinction between lost property-that which is nadvertently parted with, through negligence or oversight-and mislaid property -that which has been ntentionally set aside or hidden, and then forgotten. When property is mislaid, rights to it are more often granted to the locus owner than when property is lost. See Brown 1975, sections 3.2 and 3. 4. Also, when things found are embedded in or attached to the soil, title is generally given to the locus owner; see Corpus Juris Secundum 1961.36A: 421-24 The finder usually obtains title against the owner of the locus in quo(sometimes even if the finder was trespassing). Historically, however, treasure trove reverted to the Crown, and in most foreign countries, rights to treasure trove are divided between the finder and the locus owner. See dukeminier and Krier 1998,112-13, and lzuel 1991,1665-75 S The state also enjoys the power to claim apparently abandoned property under certain circumstances On abandonment, see for example, Gabel 1994 In the Abandoned Shipwreck Act of 1987, 43 U.S.C. sections 2101-2106(1988), the United States effectively grants title to a shipwreck to the state in whose waters the shipwreck is located. Most states following the passage of the Act claimed title to embedded shipwrecks but failed to develop adequate regulatory schemes, leading to incidents of vandalism and misuse. See Stevens 1992 and Foster 2000 Chapter 9- Page 9
However, finders are entitled to rewards based on value under maritime law, and often as well according to the codes in civil law countries.53 When a finder does not know the identity of the original owner, many jurisdictions provide for finders to follow procedures allowing original owners to come forward to claim their property within a time limit, after which finders gain title to discovered property.54 (Complications about who gains ownership may arise, though, where the thing is found on the property of a third party.55) Rights to treasure trove, that is, secreted money, gold, and silver whose owner is ancient or unknown, is ordinarily granted to the finder.56 Abandoned things generally become the property of finders (complications may arise, again, where abandoned things are found on the property of third parties).57 This includes shipwrecks abandoned at sea; according to maritime law, they become the property of finders. But title to abandoned shipwrecks embedded in territorial waters sometimes goes to the state in which they are discovered.58 3. Sale of Property -- In General 3.1 Reasons for sale. Let us now turn to the most common way in which a party acquires title to property: through its sale. At various times, it will be desirable for property to be sold, for two basic reasons. First, efficient production requires that firms finders for reasonable expenses of securing and keeping found property, see generally Brown 1975, section 3.5. It should be added that statutes sometimes provide for rewards also to be paid, as Brown notes. 53Under maritime law, anyone who takes into his possession a ship lost at sea or its cargo is entitled to a reward that lies within the equitable powers of the courts, with the amount not exceeding the benefit to the owner; see generally Dietz 2000, sections 66-69. On rewards in civil law countries, see, for example, the description of the German situation in Dukeminier and Krier 1998, 115. 54See Brown 1975, section 3.5, and Dukeminier and Krier 1998, 116. 55The owner of land on which a thing is found is often called the owner of the locus in quo or simply the locus owner. If the finder was trespassing, he is generally denied title as against the locus owner, but when the finder is an invitee or licensee of the locus owner, the authorities are divided as to who obtains title. Additionally, importance may be attached to the legal distinction between lost property -- that which is inadvertently parted with, through negligence or oversight -- and mislaid property -- that which has been intentionally set aside or hidden, and then forgotten. When property is mislaid, rights to it are more often granted to the locus owner than when property is lost. See Brown 1975, sections 3.2 and 3.4. Also, when things found are embedded in or attached to the soil, title is generally given to the locus owner; see Corpus Juris Secundum 1961, 36A: 421-24. 56The finder usually obtains title against the owner of the locus in quo (sometimes even if the finder was trespassing). Historically, however, treasure trove reverted to the Crown, and in most foreign countries, rights to treasure trove are divided between the finder and the locus owner. See Dukeminier and Krier 1998, 112-13, and Izuel 1991, 1665-75. 57The state also enjoys the power to claim apparently abandoned property under certain circumstances. On abandonment, see for example, Gabel 1994. 58In the Abandoned Shipwreck Act of 1987, 43 U.S.C. sections 2101-2106 (1988), the United States effectively grants title to a shipwreck to the state in whose waters the shipwreck is located. Most states following the passage of the Act claimed title to embedded shipwrecks but failed to develop adequate regulatory schemes, leading to incidents of vandalism and misuse. See Stevens 1992 and Foster 2000. Chapter 9 – Page 9