Private Law Theory

ABSTRACT
This paper is concerned with the efficiency implications of courts using more than one liability rule in tort cases. A liability rule apportions the accident loss between the victim and the injurer on the basis of negligence and its extent or otherwise of the two parties. A subclass of liability rules is that of simple liability rules. A simple liability rule apportions the accident loss between the victim and the injurer on the basis of negligence or otherwise of the two parties; the extent of negligence is not taken into account. A liability rule is efficient if it has the property of invariably inducing both the victim and the injurer to behave in ways that result in the minimization of total social costs of interaction. If negligence is defined as shortfall from a specified care level, called the due care level, and the due care levels for the two parties are chosen appropriately from the perspective of social cost minimization then efficient liability rules are characterized by the condition of negligence liability. Condition of negligence liability requires that if one of the two parties, the victim and the injurer, is negligent and the other nonnegligent then the negligent party must bear the entire loss in case of an accident. Most of the rules that are used by the courts are efficient. These include, among others, the rules of negligence, negligence with the defense of contributory negligence, the strict liability with the defense of contributory negligence, and comparative negligence. Excepting comparative negligence, all other rules are simple liability rules.

Jain, Satish Kumar, On the Efficiency Implications of Courts Using Multiple Liability Rules (February 21, 2024).