A reputation system to replace courts? I highly dislike this idea because the point of courts is to judge people based on evidence and objectivity and to specificly ignore subjective factors such as reputation. Someone's reputation can be strongly affected by hearsay, gossip, superstition, moral panics, prejudice, hysterical media, and the like. That would be a world in which, de facto, a popular kid would have more rights than an unpopular kid. The thought makes me shudder.
I don't think it's anyone's "right" to be an asshole and force others to still buy from him or be his friend. I think everyone should be free to choose who they associate or don't associate with, by whatever criteria they might have.
Reputation systems have always ruled, because they're very useful. Long ago hearsay and gossip were the only channels to spread reputation, but the Internet opens us whole new possibilities that give us much more accurate information about things. People already check the reputation of shops and their products, or the employees they hire, from the Internet. I'm just speaking for a more refined version of the currently used systems. Instead of a million product review sites there would be one decentralized and well-adjusted system. It would also make things better for the reviewee, who could respond to all criticism targeted at him.