01:220:395 Lecture 5: Tort Powerpoint Notes

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7 Nov 2018
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Professor
TORTS
A. Intro to Torts
a. Tort Law: situations where someone harms you without having made any
promises
b. Plaintiff is victim (person who was harmed), Defendant is injurer (person who
caused the harm)
c. Elements of Torts
i. Harm: for a tort to exist, victim needs to have been harmed
1. Perfect Compensation: restores victim to original level of well-
being, generally done through money damages
2. Tangible Harms: medical costs, lost income, damaged property
3. Intangible Harms: emotional harm, pain and suffering, loss of
companionship
4. Courts have been less willing to compensate for intangible harms
ii. Causation: for a tort to exist, injurer needs to have caused harm to the
victim
1. Cause-in-Fact: if the victim hadn’t done so and so, would have the
harmed occurred?
2. Proximate Cause: immediate cause, injurer’s action can’t be too
distant from the harm
iii. Breach of Duty: when someone breaches a duty he owes to the injurer,
and this leads to harm, the injurer is at fault, or negligent
1. Injurers owe victims the duty of due care
2. Negligence Rule
a. If I breach my duty of due care and injure you, I am liable
b. If i exercise the appropriate level of care but still injure you,
I’m not liable
3. Determining Standard of Care
a. Safety regulations, reasonable care (level of care a
reasonable person would have taken)
d. Strict Liability vs. Negligence
i. Strict Liability Rule: victim must prove harm and causation
ii. Negligence Rule: victim must prove harm, causation, and negligence
B. Economics of Torts
a. Precaution: anything either injurer or victim could do to reduce the likelihood of
an accident (or damage done), costly
b. Unilateral Harm: just one victim
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i. x: the amount of precaution that is taken
ii. w: the cost of each “unit” of precaution
iii. wx: the total cost of precaution
iv. p(x): probability of an accident, given precaution x (p is decreasing in x)
v. A: cost of accident (to victim)
vi. p(x)A: expected cost of accidents
vii. Efficient Level of Precaution
1. Graphically: the minimum of the graph of the Total Social Cost
(which is wx + p(x)A)
2. Mathematically: we take the derivative of wx + p(x)A and set that
equal to zero to find the minimum, resulting in w + p’(x)A =0 and
then we solve for x, we label w in the equation w = -p’(x)A as the
marginal social cost of precaution
viii. Economic goal of torts: reach an efficient level of precaution
c. Bilateral Precaution
i. xinjurer, xvictim
ii. Problem is minxi,xv { p(xi, xv)A + wixi + wvxv }
iii. Hold one party’s actions fixed and consider the other (“efficient given
what the other guy is doing”)
iv. minxi { p(xi, xv)A + + wixi + wvxv } given xv and wv
v. This has the same solution as minxi { p(xi, xv)A + + wixi }
d. No Liability Rule
i. Injurer’s private cost is just wx (minimized at x=0)
ii. Victim’s private cost is p(x)A + wx (minimized at efficient precaution level)
iii. No liability leads to efficient precaution by victims, no precaution by
injurers
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