The problem of simple testimonial evidence takes the following form:

U = utterance
A = fact
The utterance U is a basis for the possible inference of fact A.
In the case of simple testimonial evidence, the question is how one moves from utterance U to fact A, the question is what legitimates the inference A from evidence U.
The law of evidence takes the view that judgments about the validity and strength of inferences from testimonial evidence – i.e., judgments about the credibility of witnesses – depend on judgments about the following testimonial qualities or attributes include (which are listed in no particular order):
• veracity {sincerity; truthfulness}
• memory
• objectivity {contra: bias, interest}
• ability to communicate {narrate}
• ability to perceive
There are several ways to portray the role of these testimonial qualities. One way of picturing them is the following diagram (adds one attribute -- memory -- to the assessment of testimonial evidence):

As complicated as the above diagram is, it depicts only simple testimonial evidence. It does not depict hearsay evidence.
Hearsay is a distinctive form of testimonial evidence. Hearsay is distinctive because it involves a testimonial statement about a testimonial statement; it is an utterance about an utterance.
Hence, instead of involving (merely) an inference from an utterance to some event, hearsay involves
an inference from an utterance ---> to another utterance --> to some event
This two-stage process can be portrayed in the following way:
When testimonial evidence takes the form of hearsay (as depicted in the above diagram), two* sets of testimonial attributes** are implicated in judgments about the thrust and probative value of testimonial evidence.
This is because hearsay involves*** two testimonial reports**** and, because of this, two***** sets of testimonial attributes associated with those two****** reports must be evaluated.
So, when hearsay appears, reasoning about testimonial evidence takes the following more complex form:

A = sensory accuracy
O = objectivity
V = veracity
N = ability to narrate
[M = memory, but memory is absent in the above diagram; in the above diagram memory M is viewed as an aspect of O, as an aspect of the quality of objectivity]
The above depiction of the nature of hearsay perhaps suggests that hearsay is excluded because of its low probative value. The conclusion that the weakness of hearsay is the reason for its inadmissibility may be suggested because my account (which I have illustrated with some diagrams) emphasizes that hearsay involves a chain of inferences that is at least twice as long as the chain of inferences that one confronts when one deals with just simple testimonial evidence, just one testimonial report, testimonial evidence that does not involve a report of another testimonial report.
In sum, perhaps hearsay evidence is inadmissible because it has less probative value than simple or ordinary testimonial evidence has.
But this is probably not the true explanation for the inadmissibility of hearsay.
The weak-probative-force rationale for the hearsay rule confronts a problem of doctrinal consistency.
First, FRE 401 and 402 purport to authorize the admission of testimonial evidence that has only very slight probative force.
Second, even “simple,” or ordinary, testimonial evidence can be extraordinarily weak. But standard black letter doctrine holds that the frailty of simple testimonial evidence (because of doubts about matters such as veracity) – the frailty of testimonial evidence does not alone render testimonial evidence – even very weak simple testimonial evidence – inadmissible. (Remember the maxim: “The credibility of a witness is exclusively question for the jury!”)
The orthodox explanation for the inadmissibility of hearsay – which is the explanation first propounded by Wigmore – focuses on the role of cross-examination and demeanor evidence for the pursuit of the truth about facts (rather than on the evidential frailty of hearsay). The orthodox theory is that hearsay is inadmissible, not because it is weak, but because
the absence of the out-of-court source of the hearsay – the absence of the declarant – makes it impossible for an adversary to cross-examine that absent witness (that missing source, that declarant) in the presence of the trier of fact (e.g., the jury) and therefore makes it impossible for the trier of fact (e.g., the jury) to observe the demeanor of the (absent) witness while under cross-examination.
The thesis, therefore, is not that hearsay evidence is inadmissible because it is weak, but that hearsay is inadmissible because the nature of hearsay is such that it deprives the trier of fact of an important source of information: The use of hearsay deprives the trier of important information about the testimonial qualities of the (absent) witness, the declarant.
The orthodox explanation thus puts great emphasis on the importance of viva voce testimony (live testimony) and demeanor evidence. A closely-related ancillary proposition is that adversarial interrogation – cross-examination – is likely to elicit important “behaviors” -- demeanor – from a witness, a witness who is put in the crucible of cross-examination.
That’s the standard rationale for the hearsay rule. As we march through the hearsay rule, its parts, and its exceptions, your job is consider how well (if at all) this orthodox rationale for the hearsay rule works.
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Now focus more on black-letter law. Federal Rule of Evidence 801(c) defines “hearsay.” FRE 801(c) is a codification of the common law definition of hearsay:
"Hearsay" is a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted.
Consider the following paraphrase of this basic definition of hearsay:
Hearsay: The Black Letter Definition
A statement is hearsay if and
only if (a) it is made other than at the trial at which it is offered
and (b)(1) it is offered (by a party) to show (2) the truth of the
matter asserted (by the declarant).
I.e., a statement is hearsay
iff ("if and only if"):
S = OCS and PURPOSE = T of MA
"S" signifies
"statement"
"OCS" signifies an
"out-of-court statement," or a statement made at a time and
occasion other than the trial at which it is offered
"PURPOSE" signifies the
purpose for which the offeror is offering the statement
"T" & "MA" signify
respectively "truth" and "matter asserted"
"MA" -- or
the "matter asserted" -- refers to the matter (if any) that the
DECLARANT intended to assert.
The declarant is the person who made the
out-of-court statement that is now being offered in
evidence.
"PURPOSE" refers to the intentions or
purposes of a PARTY in the lawsuit, the party offering the
statement.
To make a statement hearsay a party must want to use the statement
to prove that the matter asserted in the statement is true. If a
party offers a statement to show something else -- anything else --,
the statement is not hearsay.
E.g.: Albert Accused, a defendant in a murder case,
offers to show that Valiant Victim, the alleged victim of the
murder, made the statement, "Albert Accused, you are a devil." The
statement is not hearsay. Valiant Victim is the declarant. He
asserts that Albert Accused is the a devil. Hence, the "matter
asserted" is that Albert is a devil. This is not what Albert wants
to show with the statement; he does not want to show that the
matter asserted by the declarant Valiant is true. Hence, Albert is
not offering the statement to show the truth of the matter
asserted. (Albert wants to show that he had reason to fear an
attack by Victim or that Victim hated Albert and therefore later
attacked Albert.)
There is a movement afoot to "restyle" the Federal Rules of Evidence -- to rewrite them -- without chand the substance of the Rules. Restyled Rule 801(c) would read as follows:
(c) Hearsay. "Hearsay" means a prior statement -- one the declarant does not make while testifying at the current trial or hearing -- that a party offers in evidence to prove the truth of the matter asserted by the declarant.
The restyled Rule is much clearer than the current version of the Rule.
Now please consider this diagram:
Sometimes students argue that an in-court report – testimony given by a witness in court – is not hearsay because the in-court witness is simply reporting his or her first-hand observations.
(ii) hearsay almost always also involves an in-court witness and in-court testimony.