Economic Analysis of Law

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. 
SHARE

College Assignment Samples

  • Image
  • Image
  • Image
  • Image
  • Image
    Blogger Comment
    Facebook Comment

0 comments:

Post a Comment