Q7
The underlying rationale in both situations is the need to ensure that
costs are efficiently allocated. Strict liability holds somebody liable for
their actions or omissions even when they are not at fault. It helps in
ensuring that costs are allocated to the parties most capable of avoiding
accidents at the least possible cost. Both hazardous activities and product
defects possess some of the key features necessary for justifying strict
liability.
In both cases, one party has exclusive control of what may cause an
accident. Hazardous activities normally take place in properties where only the
owners have control. The law would, therefore, be very inefficient if it were
to demand that those staying in a town with a nuclear power plant to take more
precaution than the attendant benefit from doing so. Similarly, there is
information asymmetry in favor of manufacturers vis users of those products.
Except in some few cases, it is also costly for the parties involved in
the two situations to bargain in advance. Victims of both defective products
and hazardous activities are never known to the tortfeasor in advance. Such
bargaining would lead to mutually beneficial outcomes.
Lastly
and this is specific to defective products, strict liability does away with
complex contract liability. Absent this form of liability, users of defective
product would not have no direct recourse as against the manufacturers as they
would have to sue the immediate seller.
Q8
Yes, the owner of the ship should be expected to fit the extra-strong
cables. The benefit of doing so would the $ 500,000 avoided damage to the
nearby boats while the cost to be incurred is only $ 100,000. This brings a net
welfare gain of $ 400,000($500,000-$100,000). This was the position in U.S. v.
Carroll Towing (1947) where the court noted to the effect that care should
always be taken when the benefits of so doing outweighs the costs. As to why the owner of the ship is the
specific person that should discharge this burden, the law deems him/her as the
least-cost avoider of the accident. Owner of neighboring boats may be able to
take precaution but this can only happen inefficiently. For one, these boat
owners are dispersed and this would entail negotiation costs.
In expecting the owner of the ship to use the extra-strong cables, the
duty of care would be governed by the reasonable person standard. This is a
hypothetical reasonable person that the courts use for the analysis of duty of
care. The court or any policy maker need only check who between the owner of
the ship and the owners of the nearby boats will be the least-cost accident
avoider. In is clear from this case that the owner of the ship best fits this
requirement.
Q9
Yes, a strong economic rationale exists for this avoidance. In line with
the economic goal of promoting efficient outcomes, it sometimes become
economically wasteful to insist on the specific performance in such places if
compensation would lead to more efficient outcomes. An example would be the
contract with a musician to perform at a specific function but who decides that
performing at another function would more remunerating. The courts would be
reluctant to force the musician to perform in the earlier function if it is
established that his services were not very unique as to make the performance
of any other musician acceptable.
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