General Average and Takings

One of the maritime doctrines that I enjoy teaching is the general average.  This principle applies when cargo is voluntarily sacrificed by the crew in a successful effort to save a ship in distress (or when a ship makes a similar sacrifice to save the cargo).  Let’s say the master decides that he needs to throw cargo overboard to lighten the vessel and prevent it from sinking.  If this works, then the cargo owner who suffers a loss must be compensated by the vessel and the other cargo owners.  The compensation is calculated on a proportional basis depending on the respective values of the cargo and the vessel, with each party paying something and with the cargo owner who was affected also paying a share.  (In other words, the party who suffers a loss is not fully compensated.)

There is a fruitful analogy here to takings law.  The general average, like a taking, involves payment when property is used for the common good.  (Of course, the general average involves private owners rather than an acquisition by the state.)  There is an interesting paper that could be written comparing how these sea and land doctrines are applied.  Here’s an example.  In cases where property is taken in an emergency and successfully halts the danger, the property owner typically gets zero.  Why?  Because the thought is that the property would have been destroyed anyway (say by a giant fire or a disease).  In the maritime context, we say that the property owner who sacrificed should just not be compensated fully, but should get something.

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1 Response

  1. Ben Barros says:

    Gerard, this is a really interesting comparison. I wonder how much of this doctrinal difference can be explained by the practicalities of compensation. In the maritime context, getting a bunch of commercial actors to pay up seems achievable. In other property contexts, compensation might be less practical. The most important necessity cases involved fires. Compensation would have had to come from the neighbors or the other residents of the town. From my rudimentary understanding of nineteenth century municipal finance, towns typically didn’t have the tax base to make large compensation payments. There also would be a difficult line drawing issue as to who, exactly, would contribute to compensation – just the people nearby, or everyone in the town? On a ship, this line-drawing issue is easy to solve.