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LAW 122 (625)
Stan Benda (71)
Chapter 3


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Law and Business
LAW 122
Stan Benda

LAW 122 - Chapter 3 • A tort generally consists of a failure to fulfill a private obligation that was imposed by law. Torts and Crimes • An obligation in tort law is owed to a person. For instance, I owe an obligation to you personally to not make defamatory statements about your past. That obligation will be broke if I falsely tell your employer that your were once convicted of murder. I will b a tortfeasor a person who has committed a tort. You will then be entitled to sue me. If you win that lawsuit, the court will hold me liable and it will probably order me to pay damages to you. • A tort can be compared with a crime. Whereas a tort occurs when a person breaks a private obligation, a crime occurs if a person breaks a public obligation. A public obligation is owed to society as a whole, rather than to any particular person. Consequently, if something goes wrong, the government will prosecute the accused on behalf of the whole community. That is true even if the crime was one (theft) that affected a specific person. Finally, if the court agrees with the government, then the accused will be found guilty and may be subject to some form of punishment (fine or imprisonment). • Examples: If I hit you, I will commit the tort of battery and the crime of assault; if I take your car without permission, I will commit the tort of conversion and the crime of theft; if I sneak into your house, I commit the tort of trespass to land and the crime of break and enter. • The idea of allowing a victim to demand compensation from a wrongdoer developed into the system of private tort law; the idea of allowing the community to punish a wrongdoer developed into the public system of criminal law. ***PAGE 61 Torts and Contracts (One Similarity and Four Differences) • Structure (similarity): Both tort and contract involve primary and secondary obligations. Primary obligations tell people how they ought to act. For instance, the tort of battery says, “Don’t touch another person in an offensive way.” The law of contract says, “Keep your promises.” Secondary obligations are remedial. They tell people how they must act after primary obligations have been broken. In most cases, the defendant is told, “Pay money to the plaintiff as compensation for the losses that you caused.” • Source of Primary Obligations: The first is concerned with the source of primary obligations. Obligations in tort are simply imposed by law. Even though you never promised to behave yourself, even though we are complete strangers, and even if (remarkably) you never heard of such a law, you must not commit a battery against me. Obligations in contract, are created by the parties; if you have an obligation to deliver a car to me, it is only because you voluntarily agreed to do so. • Privity: When two people enter into a contract, they create a special relationship for themselves. Consequently, the doctrine of privity states that the only people who can sue, or be sued, on a contract are the parties themselves. In contrast, because obligations in tort are simply imposed by law, there is no need for the parties to create a special relationship for themselves. I can sue you for battery, even if you never promised to hit me. • Compensation: Compensation is available in both tort and contract; but calculated differently in each. The purpose of imposing obligations in tort law is to prevent harm. The tort of battery prohibits you from hurting with punches and kicks. Consequently, if you have breached your primary obligation, then you will have a secondary obligation to put me back into position that I enjoyed at the outset. In contrast, the purpose of creating obligations in contract is usually to provide benefits. I paid $10,000 to you because I wanted your car. If you breach your primary obligation, then you will again be required to compensate me. This time, the goal is to put me into the position that I expected to enjoy once you fulfilled your promise. • Risk Management: The fact that primary obligations in tort and contract arise for different reasons also has a significant affect on the issue of risk management. Because tort obligations are imposed by law, they are more likely to take a person by surprise, and they may require more than a person is actually capable of providing. In contrast, because obligations surprise, and they should never require more than the parties believe they can actually provide. ***PAGE 63 Types of Torts • Tort law responds to different challenges in a variety of ways. One of its most important strategies focuses on mental culpability. Because tort law needs to strike a different balance in different circumstances, some torts require proof that the defendant acted with a guilty mind, with others do not. 3 Possibilities: •Intentional Torts: occur when a person intentionally acts in certain ways. Some torts require proof that the defendant intended to hurt the plaintiff. Others are satisfied by proof the defendant merely intended to act in a certain way, even if they did not realize that the plaintiff would be hurt. •Negligence Torts: occur when a person acts carelessly. •Strict Liability Torts: occur when a person does something wrong without intending to do so and without acting carelessly. It is enough that the defendant was responsible for the situation that resulted in the plaintiff’s injury. ***PAGE 64 Strict Liability • Strict liability torts create special problems for risk management. They do not require proof of any sort of intentional or careless wrongdoing. Liability is imposed simply because the defendant was responsible for the situation that injured the plaintiff. • Strict liability torts consequently may substantially affect behavior. It would be wrong, to overestimate that possibility. Tort law is dominated by intentional torts and negligence torts; strict liability is rare. • It would be unfair to impose liability on a person who didn’t intentionally or carelessly cause the plaintiff’s injury. Strict liability is therefore limited to situations in which the defendant is involved in some extraordinarily dangerous activity. It allows the defendant to engage in that activity, but it also requires the defendant to pay for any damage that occurs. General Principles of Tort Law Liability Insurance • Because torts can occur unexpectedly, risk management is especially important. Business people should know enough about tort law to predict potential problems and develop strategies for avoiding liability. • Liability Insurance is a contract in which an insurance company agrees, in exchange for a price, to pay damages on behalf of a person who incurs liability. Liability insurance also includes a duty to defend. A duty to defend requires the insurance company to pay the expenses that are associated with the lawsuits brought against the insured party. • Liability insurance creates an interesting tension between two of torts law’s most important functions: •Liability insurance contributes to the compensation function of torts. The compensatory function aims to fully compensates people who are wrongfully injured. If a tortfeasor can’t personally afford to pay damages, the plaintiff will not receive full compensation unless the defendant is insured. •Liability insurance undermines tort of law’s deterrence function. The deterrence function discourages people from committing torts by threatening to hold them liable for the losses that they cause. People have little reason to be afraid; if they know that their insurance companies will pay if something goes wrong. Vicarious Liability • Vicarious liability occurs when an employer is held liable for a tort that was committed by an employee. The idea of holding one person responsible for another person’s actions raises difficult ethical issues. • The doctri
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