Today's saying: the double-edged nature of the law

The 19th century may have been a very important century for Westerners. In those 100 years, the law was painstakingly developed in order to achieve rapid economic growth. Opening the legal history books, you can find everywhere that under the influence of the two concepts of "market" and "contract", all kinds of systems are "surging" promissory notes, bills of exchange bill of lading brokerage, insurance, agency... These legal settings all stimulate transaction inflation. Perhaps the most praiseworthy is the limited liability company system. It has effectively facilitated the scale of fundraising that economies of scale desperately need. In the eyes of people at the time, the magic of this system was that only a part of the money could be invested in several times the amount of big business, and after the debt was owed, only the part of the money that was originally invested was paid off.

However, although systems such as limited liability companies release people's investment energy, on the other hand, they have attracted more economic defaults and insolvency. In order to cope with this situation, Westerners have taken up the traditional legal weapon of "compensation for breach of contract" on the one hand, and created a modern legal weapon of "baby value clearance" on the other hand. They initially believed that the existence of these two weapons would be sufficient to put the creditors' rights to rest. In 1874, two small limited liability companies in Britain engaged in an aluminium business. One of them specializes in the wholesale of aluminum products, and the other is very similar to what we call "inverted valley" At that time, aluminum products were particularly in short supply, and the "upside down" was ready to buy aluminum products from the wholesale company and then poured them out, so he signed a sales contract. However, within two days, the wholesale company blatantly breached the contract because it had other profits to be made, refused to ship the goods to the "upside down" company, and expressed its willingness to compensate for the losses as agreed in the contract. Originally, the "upside down" company took advantage of this pour, it could make a profit, and now it was only in vain, and the compensation was also pitiful. The company had to sue the court for damages suffered due to the failure to export the goods.

But the judge said that it is difficult to calculate the loss, because after all, the company has not signed a contract with others, this loss is only a "possible" loss, and if the "possible" loss is constantly calculated, the compensation will be endless. Even though many other companies have made it clear that they want to buy the aluminum products of the fallen master, the court has only decided accordingly.

A few years later, a limited liability company was declared bankrupt by a court due to insolvency. Before bankruptcy, the company was embarrassed to make money. Within months, however, it was in huge debt to more than 20 companies. Even more jaw-dropping is that after bankruptcy, several of the original investors started new companies, and several at the same time.

It didn't take long for some Westerners to finally discover that these two small cases showed that not only was the limited liability company system double-edged, that is, it harmed the interests of creditors while promoting investments of scale, but the law of liquidated damages and bankruptcy liquidation was also double-edged: it sometimes protected the interests of creditors, and sometimes encouraged risk-taking venture capital by risk-takers, so that those hateful debtors could be transformed and then do "happy" business, thereby harming the interests of creditors. Therefore, these Westerners sometimes say that we must be wary of the "double-edged" nature of the law.

Because this "double-edged" nature seems to tell people that the contradiction between efficiency and fairness in the economic field is an eternal theme that the law must solve but is difficult to solve.