Sufficientadoptionoftheaboveoffsettingcontractualrearrangements,independentlyorjointly,willrestoretheresourceallocationandinedistributionunderunregulatedtenancy.Thechangeintenurearrangementsissufficient,foritsoccurrencerequiresnootherformsofrevision.Ontheotherhand,pensatingpaymentsmayormaynotbesufficient.Notonlymaythethreeformsofpensatingpaymentstakeplacejointly,buttheymaytakeplacealongwithadjustmentsinproduction.Inaworldplicatedbytransactioncostsandrisks,thesecontractualrearrangementswillyieldlowervaluesforthecontractedresourcesthanpreviously.Thisissobecauseifthenewarrangementsinvolvelowertransactioncostsormorepreferableriskdistributions,theywouldhavebeenchosenbeforetherentalsharerestriction.TowhatextentthehighertransactioncostsorlesspreferableriskdistributionswillaffectresourceallocationisaquestionwhichIdonotpursuehere.
Itisclearthattheoccurrenceofeventsotherthanoffsettingcontractualrearrangements,namely,resourcereallocation,dependsupon(1)tenurerearrangementsnottakingplaceinallleasecontractswhichareaffectedbytherentalsharerestriction,and(2)pensatingpaymentsnottakingplaceinallcontractstotheextentofrestoringtheinitialequilibrium.Aftertheenforcementofauniform37.5percentmaximumrentalpercentageinTaiwanin1949,itisevidentthattheserearrangementsoccurred.Accordingtotheevidencepresentedinalatersection,however,theyoccurredonlyinasmallportionofthetenantcontracts.Thisisduetootherlegalrestrictions,andperhapsmoreimportant,asweshallseeinthenextchapter,duetoadjustmentsinresourceallocation.
[1].Itisnotclearwhethertheestimatedmeanof56.8percentisweighted.
B.LegalRestrictionsonOffsettingContractualRearrangements
RentalsharerestrictioninTaiwaninvolvedlegalprovisionssetatthreedifferentdates:theprereformlandlawbefore1949;theregulationofrentalpercentageof1949;andanewrentreductionactof1951.Someoftheprereformprovisionsgoverninglandleasehavealreadybeendiscussed,inchapter1.Thereductionoftherentalpercentagetoamaximum37.5percentoftheannualyield,uniformforalltenantcontracts,waspromulgatedandenforcedinTaiwanonApril14,1949.Theregulationsofthatdate,
togetherwiththeexistinglandlaw,limitthepossiblescopeoftheoffsettingcontractualrearrangementsdiscussedearlier.TheintentionofTaiwanofficialsandtheireffortstoenforcethe1949rentalreductionareevident.
However,the1949regulationsmustnotbeconfusedwiththeFarmRentReductionActpromulgatedonJune7,1951.Buttherulesforenforcingthenew1951actwerenotestablisheduntilFebruary2,1952,andafterthisdatethereexistslittleevidencethattheadditionalprovisionsinthenewactwerereallyenforced.[1]Itisinterestingtopointoutthatliteraturepublishedafter1951whichdiscussesthe1949farmrentreductionusuallyreferstotheactof1951asifitwerethe1949regulations.[2]
Inthepresentstudyweareprimarilyconcernedwiththeregulationsasof1949,whichincludethoseoftheprereformlandlawandtheregulationsof1949.Thechangesinregulationsmadeintheactof1951onlyinterestushereasindirectevidenceforhypothesistesting.Thusineveryinstancethespecificdateoftheregulationwillbeindicated.
RestrictionsonCompensatingPayments
Theregulationsestablishedpriortoandincluding1949restrictingpensatingpaymentsenpassthefollowing:
(1)Thelessoroffarmlandshallnotcollectfarmrentinadvance.…Securitydepositshallnotexceedone-fourthoftheannualrent…which(togetherwithinterest)shallbedeemedtobepartofthefarmrent[3][prereform].
(2)If,accordingtoarrangementsoriginallymade,thelessoristosupplythelesseewithdraftanimals,seeds,orotherimplementsofproduction,thelessorshall,aftertheenforcement[oftherentalpercentagereduction],continuetomakesuchsupply[4][1949].
In(1)above,paymentsintheformofsecuritydepositor"key"moneyareprohibited.In(2),paymentsexactedbyrequiringthetenanttopaythefullnonlandfarmingcost—intheeventthatthelandownerhadcontractedtosupplyapart—arerestricted.Buttheterm"otherimplementsofproduction"isambiguous.Soanappendedprovisionin1951statesthat:
Thefarmhouseofthelesseewhichhasbeenoriginallyprovidedunconditionallybythelessorshallcontinuetobeusedbythelessee…andthelessorshallnot…chargeanyfeetherefor.[5]
Andweshallseeinthenextsection,disputesalsoaroseastowhoshouldbearthewaterfeeincertaincases.Inspiteofthis,itisclearthatpensatingpaymentswererestrictedby(1)and(2).Thethirdpossibletypeofpensatingpayment,wherethelandownersharedinallcropsalikeininstanceswhencertain"cereals"wereoriginallycontractedtobeconsumedentirelybythetenant,was,asweshallseeinthenextchapter,onlyimplicitlyrestricted.Nonetheless,thepotentialextentofthisformofpensatingpaymentisverysmall,andinsignificantparedtothereductioninrentalpercentage.[6]
RestrictionsonTenureRearrangements
Thelandowner'srightofcancellingtheleaseandrepossessingthelandwasconditionallyrestricted:
Thelessorshallnotterminatetheleasecontractexceptinaccordancewiththeprovisionsof…the(pre-reform)LandLaw.[7][1949]
Andintheprereformlandlaw,wefind:[8]
Art.109:Anyfarmleasecontractforadefiniteperiodshall,unlessthelessortakesbackthelandforhisowncultivationontheexpirationofthecontractualperiod,bedeemedtohavebeenrenewed.
and
Art.114:Anyfarmleasecontractforanindefiniteperiodmaybeterminated…wherethelessortakesbackthefarmforhisowncultivation.