Contract Costs and the Liability Structure for Stranger-Tenant Damages in Sierra Leone's Customary Land Law: An Economic Analysis

Extract

In the Sierra Leone Provinces, customary land law dictates that if an individual from another chiefdom or country wishes to rent land in a certain locality, he visits a landholder or head of an extended family and expresses a desire to be the landlord's stranger. If the landlord accepts the individual as his stranger, he becomes liable for any damages caused by the stranger to other natives' properties. This study applies some recent advances in welfare economics (see, for example, Coase, 1960; Demsetz, 1964, 1968) to pursue some interesting aspects of the landlord-stranger relationship. In particular, it is argued that within traditional society putting the liability for strangers' damages on the landlords' shoulders was efficient in a value-theoretic sense because landlords were more efficient than the government or the damaged parties in collecting damages from strangers and, therefore, that the magnitude of the collection cost would have been greater if the liability had been placed directly on the strangers. The paper also shows rigorously how and why it was that the higher the cost of collecting damages from tenants, the lower was the real income produced by the land. Therefore, if the government of the damaged parties should become lower-cost collectors, putting the liability directly on the strangers for any damage they cause would become the pareto-optimal arrangement.