Strict Liability Rule Research Articles

Strict liability versus negligence in the case of data breach

This study compares the efficiency of the strict liability and negligence rules in the case of a data breach. Contrary to standard results, we demonstrate that the strict liability rule cannot induce the efficient activity and care levels of a data controller. This is mainly due to possible positive externalities from data breaches, unlike in usual tort cases. We show that the negligence rule is more efficient than the strict liability rule if the positive externality is sufficiently large. The main insight is carried over to the case where a data controller uses a data processor to process personal information before selling it in the market. If hackers are explicitly introduced into the model, the care level of the data controller increases with the hacking activity, whereas the latter level decreases with the former. In this model, if the hacker’s gain is sufficiently small, the negligence rule can be made more efficient by adjusting due care to a harsher level than the equilibrium care level under strict liability to reduce hacking activity, although a pure strategy equilibrium may not exist for some due care levels.

Absolute Liability Merits Demerits – A Critical Analysis

In numerous circumstances, an individual is found liable for an act that he could not have performed, or for which he made all reasonable efforts to avoid causing any harm, yet was nevertheless held liable. This is a situation in which an individual is held liable notwithstanding the absence of fault; these are strict liability rules. The legislation recognises this provision based on the 'no-fault responsibility' criteria. These rules are based on case law. This clause was handed down in the case of Rylands vs. Fletcher, and hence this rule is commonly referred to as the "Rule in Rylands vs. Fletcher," however the rule of absolute A number of exceptions to this rule were established, and responsibility was established for them. The Supreme Court of India decided in M.C. Mehta vs. Union of India that the defendant is responsible for the act and that the offence should not be disputed. In tort law, the phrases strict liability and absolute liability must be defined. These two have a similar meaning, however there are some variances.

Inequality snowballing

It has long been argued that efficient policies tend to provide larger legal entitlements to the rich than to the poor. This article shows how efficient legal rules can become even more skewed against the poor over time by sowing the seeds of their own vicious cycles. Repeated application over time of these rules can lead to increasingly adverse outcomes for the poor, which the article calls “policy snowballing”.Consider a set of polluters choosing between locating in places with rich versus poor people and facing a strict liability rule for harm to earnings. Polluters will disproportionately locate in the poor area, where they face lower damages. That disproportionate share of polluters in the poor area can make it cheaper to harm the poor in the next period, making subsequent polluters locate yet more disproportionately in poor neighborhoods, driving down the poor’s earnings further. And so on.We identify the conditions for snowballing and explore its dynamics. When compensation for the harm is incomplete, policy snowballing can lead to spiraling income inequality. As a result, government transfers to the poor to compensate for the change in legal regime would be inadequate if calculated in a way that ignores the snowballing. The article raises the intriguing prospect that legal rules could generate state dependence in the legal costs of harm, and that efficient policymaking could be a contributing factor to increasing inequality over time.

How two wrongs may make a right, but four do not – The interesting case of Dutch employers’ liability

Dutch employers’ liability for workplace accidents is a very interesting topic, not only from a legal perspective, but also from a law and economics one. It is one of the few systems in Europe where liability is still based on the fault of the employer, whereas most countries apply a form of strict/no-fault liability or a system of no-fault insurance. It is interesting because the Dutch Civil Code explicitly refers to prevention of work-related losses. Law and economics focuses exactly on the behavioural incentives that are provided by tort liability, instead of on the compensation aspect. In this article, I provide an answer to the question of how Dutch employers’ liability compares to the law and economics desiderata. At first glance, the design of this type of liability (fault liability) is contrary to what law and economics would advocate (strict liability). In addition, the level of care that courts require from the employer seems to be excessively high. Interestingly, both characteristics together result in a situation which, from a law and economics perspective, is almost indistinguishable from the desired strict liability. So, two wrongs may make a right: the ‘wrong’ choice for fault liability combined with the ‘wrong’ level of due care results in the ‘right’ application of (quasi) strict liability. Therefore, at least in theory, employers receive the correct behavioural incentives, which induce them to take the optimal level of care and activity. However, when we subsequently turn our attention to employees, things look less perfect. Law and economics scholars argue that in situations where not only the tortfeasor but also the victim can influence accident probability, both parties should receive behavioural incentives. This implies that a rule of strict liability should be accompanied by a defence of contributory or comparative negligence. The Dutch employer liability regime contains a defence of intent or wilful recklessness on the part of the employee. From a law and economics perspective, this defence provides inadequate incentives to the employee, which is a third wrong. An often-heard response to this line of reasoning is that tort victims will receive behavioural incentives for fear of being involved in an accident in the first place, so the lack of a full defence of contributory or comparative negligence is not problematic. If this is true, then the damages the victims receive do not make them ‘whole’, which introduces a fourth wrong: uncompensated losses. This second set of two wrongs does not make a right, because if victims receive incomplete compensation, tortfeasors do not fully pay for the losses they have caused. This may reduce the behavioural incentives the tortfeasors receive, who may hence not choose optimal levels of care and activity after all.

Reputation and liability in experience goods markets with imperfect monitoring

This paper investigates the interaction of reputation and product liabilities from a new perspective. We introduce a reputation model in an experience good market with imperfect monitoring, in which reputation incentives without product liability are not sufficient for inducing a desired outcome. Even a firm with high market reputation will cheat consumers, and the reputation will eventually collapse. We then introduce two product liabilities into the reputation model: strict liability and negligence rule . It is shown that under certain conditions, these two liabilities can both improve firms’ incentives and final outcomes. What is the best product liability depends on the costs of firms and courts as well as courts’ professional level. The paper also sheds light on which liability regime is optimal in this reputational setting. • We investigate the interaction of reputation and product liabilities from a new perspective. • We introduce a reputation model in an experience good market with imperfect monitoring, in which reputation incentives without product liability are not sufficient for inducing a desired outcome. • Under certain conditions, strict liability and negligence rule can both improve firms’ incentives and final outcomes. • What is the best product liability depends on the costs of firms and courts as well as courts’ professional level.

The Application of Strict Liability Rule in Rylands V Fletcher to Oil Spills in Nigeria

The Research Paper ‘Application of the Strict Liability Rule in Rylands v Fletcher to Oil Spills in Nigeria’, is a robust and timely evaluation of the legal concept of Strict Liability as it applies to the recurrent problem of oil spillage in Nigeria. For several decades now, crude oil production sites have regularly spilled oil and other petroleum-related chemicals, into the riverine communities of the Niger-Delta region of Nigeria. This has sometimes devastated the fishing and farming livelihoods of the poor villages within the vicinity of such spillages, and agricultural productivity is greatly reduced. This is in addition to air pollution, wildlife decline and overall environmental degradation. This paper looks at efforts to hold accountable those responsible for such degradation using the concept of Strict Liability. In order to obtain justice and compensation for the riverine communities, it must be proven that the offending oil companies were guilty of nuisance and negligence, as described by the Rule in Rylands v Fletcher. The companies are expected to know that their activities are reasonably likely to cause far-reaching destruction to the environment. Concluding, the paper makes recommendations to further tackle the problem of oil spillage in Nigeria.

Lenders' liability and ultra-hazardous activities

The amendments made to the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) in 1996 reinforced the exemption of lenders that finance ultra-hazardous activities. Then, they become involved in liability only if they manage or own polluting activities. The paper compares strict liability and negligence rule in an agency model of vicarious liability type, and proposes to restore lenders as principal by applying negligence rules to them while operators would resort to a strict liability rule. This scheme leads the lender to propose to the borrower the most favourable loan level that induces the latter to provide the socially optimal security level.

Vicarious Liability Under a Strict Liability Rule

Abstract In this article, we extend the model of Newman, H., and D. Wright. 1990. “Strict Liability in a Principal-Agent Model.” International Review of Law and Economics 10: 219–231 and strengthens their result that the strict liability can attain social optimum in a principal-agent relation to the situation in which the court appreciates any contractual terms regarding apportionment of damages between an employer and an employee under vicarious liability rule. Our model also generalizes and extends vicarious liability to the negligence-based liability rule.

Smart products: Liability, investments in product safety, and the timing of market introduction

We analyze the role of product liability for the emergence and development of smart products such as autonomous vehicles (AVs). We develop, and calibrate to the U.S. car market, a dynamic model where a (monopolistic) innovator chooses safety stock investments, the timing of market introduction, and the product price. Inducing higher long-term product safety through a strict (partial) liability rule reduces short-term safety investments and slows down AV market penetration. By contrast, negligence-based liability fosters initial investments without hampering long-term product safety. However, too stringent liability might forestall investments in the development of AVs and their market introduction.

Liability for robots I: legal challenges

Abstract In robot torts, robots carry out activities that are partially controlled by a human operator. Several legal and economic scholars across the world have argued for the need to rethink legal remedies as we apply them to robot torts. Yet, to date, there exists no general formulation of liability in case of robot accidents, and the proposed solutions differ across jurisdictions. We proceed in our research with a set of two companion papers. In this paper, we present the novel problems posed by robot accidents, and assess the legal challenges and institutional prospects that policymakers face in the regulation of robot torts. In the companion paper, we build on the present analysis and use an economic model to propose a new liability regime which blends negligence-based rules and strict manufacturer liability rules to create optimal incentives for robot torts.

Strict Products Liability 2.0: The Triumph of Judicial Reasoning Over Mainstream Tort Theory

Abstract Strict products liability has evolved in a manner that is widely misunderstood. The liability rule was first formulated to govern defective products that did not minimally perform one of their ordinary functions as expected by consumers—a malfunction that violates the implied warranty of quality. After adopting this rule, courts began applying it to products that did not malfunction and found that a test for defect based on consumer expectations often is indeterminate or can otherwise unduly limit liability in an important class of cases. To address these problems, most courts adopted the risk-utility test, a form of cost-benefit analysis that functions like the negligence standard of reasonable care. Relying on these cases, the Restatement (Third) of Torts: Products Liability embraced the risk-utility test, jettisoned the consumer expectations test, and characterized strict products liability as a misleading label that perpetuates confusion about liability being strict when it instead is based on negligence. In response, a clear majority of courts have rejected this negligence-based framework and affirmed the continued vitality of strict products liability. Puzzled by this unexpected development, mainstream scholars claim that courts are confused by the rhetoric of strict products liability. The prevailing scholarly opinion about this matter is confused; its fixation on negligence ignores the implied warranty rationale for strict products liability. Having been largely formulated as a rule of contract law, the implied warranty is under-theorized as a tort doctrine. Once adequately developed, the tort version of the implied warranty shows why courts have transformed the rule of strict products liability from the last century into a more comprehensive regime—“strict products liability 2.0”—that relies on consumer expectations to incorporate the risk-utility test into the framework of strict products liability. As compared to ordinary negligence liability, the implied warranty defines the safety problem in the normatively appropriate manner, thereby sharpening the inquiry about what’s at stake. In dismissing this important development, mainstream tort theory relies on legal categories that fundamentally differ from the ones courts have used to develop strict products liability with analogical reasoning. Scholars have either resorted to overly general theories of tort liability or have otherwise focused on narrow doctrinal questions. By not engaging in the mid-level categorical theorizing required by analogical reasoning, the mainstream position could not see how this characteristic form of judicial reasoning has created the substantively sound regime of strict products liability 2.0.

БЕЗВИНОВНАЯ ОТВЕТСТВЕННОСТЬ ЗА ПРИЧИНЕНИЕ ВРЕДА ПРИ ЭКСПЛУАТАЦИИ ВЫСОКОАВТОМАТИЗИРОВАННОГО И ПОЛНОСТЬЮ АВТОМАТИЗИРОВАННОГО ТРАНСПОРТНОГО СРЕДСТВА КАК ИСТОЧНИКА ПОВЫШЕННОЙ ОПАСНОСТИ

This article is devoted to the liability for damages caused by highly automated and fully automated vehicles as sources of danger. The author considers owner and manufacturer of these vehicles as possible responsible persons by the rule of strict liability. It is concluded that neither option has clear advantages.

Liability Rules and Prevention for Risky and Ambiguous Activities: Theory and Experimental Evidence

We develop a formal model to compare the incentive effect of strict liability rules in a risky and ambiguous environment. The firm's business activity entails a risk of technological disaster, which likelihood is a decreasing function of prevention. To assess our theoretical predictions, we design a lab experiment by varying the legal regime and the environment. Consonant with our theory, we obtain that limited liability stimulates subjects' investment in prevention in comparison to unlimited liability when only risk matters. Besides, subjects opt for more prevention under the regime of unlimited liability when shifting from risk to ambiguity. Nevertheless, this last theoretical finding is not observed with limited liability. Empirical results from panel fixed effect regressions confirm the treatment effects. We also collect some additional characteristics about the subjects' social preferences during the experiment.

STRICT LIABILITY: A SOLUTION TO HOLD PEATLAND DESTROYERS ACCOUNTABLE

In 2019, burned forests and peatlands reached 328 thousand hectares. The World Bank estimates that total loss from this event reached 5.2 billion USD. At least, until September 2019, there were 900,000 residents who experienced respiratory health problems and hundreds of schools in Indonesia, Malaysia and Singapore had to stop teaching and learning activities due to the haze. One of the factors that ‘fertilizes’ problems for destruction of forests and peatlands that continue to grow is difficulty to account the perpetrator. This paper will attempt to answer and solve these problems with the concept of strict liability. This research will answer two problems, how can the concept of strict liability solve the issues for peatland law enforcement? And how does the application of strict liability rules compare with Netherlands and United States? The government has pursued a moratorium policy. Starting from Presidential Instruction (Inpres) No. 10 year 2011 and extended by Inpres No. 6 year 2013 also Inpres No. 8 year 2015. However, this policy is considered unsatisfactory because there are still forestry and plantation permits issued by the government and massive forest and land burning. Therefore, there needs a solution from a repressive approach to provide a deterrent effect on forest fire perpetrators. Strict liability concept means that the defendant will still be responsible even though his activities were lawful and carried out carefully. Furthermore, strict liability is an accountability that not only eliminates elements of subjective error, but also objectively. Some countries have practiced strict liability, namely the Netherlands and the United States.
 
 Keywords: Forest Fire, Law Enforcement, Moratorium, Peatland, Strict Liability

Liability rules can rationalize greater victim vulnerability

ABSTRACT This paper shows that an imperfect strict liability rule can induce victims to increase the losses they incur in the event of an accident, and that similar incentives exist under the negligence rule. Using a simple model in which victims can influence their harm distribution, we identify two potential reasons why victims may benefit from greater ‘vulnerability’, namely strategic effects on own future and others’ behaviour.

Product Liability's Amazon Problem

Throughout its rise from startup bookseller to the world’s most valuable company, Amazon has managed to disrupt nearly every aspect of the twentieth-century retail model. Its website now accounts for over half of all online shopping in the United States, acting as a literal “Everything Store” for the millions of customers who browse its virtual catalog each day. But Amazon is more than just a store - in addition to directly selling merchandise, its marketplace also lists the offerings of hundreds of thousands of independent merchants. By some estimates these third-party sellers now account for over 60% of Amazon’s transactions, and the fees collected from these sales now make up one of the company’s most important revenue streams. As Amazon has reinvented retail, tort law has struggled to keep up. Modern product liability doctrines were developed at a time when supply chains were linear and market participants could be neatly cabined into roles like “seller” or “manufacturer.” By design, Amazon’s business model disrupts that paradigm, removing the middlemen between manufacturers and consumers while reducing the friction that might keep foreign (or otherwise judgment-proof) manufacturers from putting dangerous products on the market. And while courts have readily held its third-party merchants strictly liable when they sell defective products through Amazon’s website, Amazon’s own role in these transactions is far less clear. This Article proceeds in three parts. Part I begins with an overview of contemporary product liability law, discussing the origins of the strict liability rule and the rise of the Second Restatement’s approach to no fault recovery. Part II focuses on the doctrine’s application to Amazon, tracking the outcome of every product liability lawsuit filed against the company between January 2015 and December 2020. Finally, Part III is prescriptive, discussing both why and how courts should respond to Amazon’s disruption of product liability law.

Liability for Intelligent Robots from the Viewpoint of the Strict Liability Rule of the Hungarian Civil Code

The European Parliament resolution of 16 February 2017 on Civil Law Rules on Robotics proposed that the strict liability and the risk management approach are alternative legal instruments to achieve the goals set out by this instrument. The evolution of strict liability is parallel with technological change; our question here is whether the elaborated rules are appropriate for managing new problems. For establishing accountability, the question arises: who is to be held liable for damages and based on which form of liability? Setting aside the issues of product liability and setting aside the independent liability of the most sophisticated autonomous robots having ‘electronic personality’, this essay concentrates on liability questions of the user, and it examines the strict liability rules instituted by the Hungarian Civil Code and their application in practice. According to the results of our previous research, the judicial practice regarding the general clause of liability for dangerous activity (Section 6:535. HCC) is quite flexible and covers the liability issues of damage caused by artificial intelligence. We observed also that the criterion ‘dangerous’ means less and less risk of damage within normal circumstances, and this statement of fact in practice also successfully competes with other strict liability rules (i.e. product liability for malfunctioning medical devices, liability for dangerous animals, etc.). The capacity of the ‘keeper’ or ‘operator’ of the robot and the emerging new types of risks are also touched upon.

Strict Liability for Damage Caused by Self-Driving Vehicles: The Estonian Perspective

Abstract In the case of damage caused by a conventionally driven vehicle, it is usually possible in EU Member States to subject the possessor/controller of the vehicle to heightened tortious no-fault liability, i.e. strict liability. The development and possible introduction of self-driving vehicles pose a challenge also for tort law, because it is unlikely that self-driving vehicles will not cause any damage to third parties. With the application of strict liability in mind, this article attempts to identify possible differences between damage caused by a conventional vehicle as opposed to that caused by a self-driving vehicle. In light of this developing technology the key legislative question to be answered is whether the introduction of self-driving vehicles calls for, among other things, the revision of strict liability rules. Answers to these questions are sought mainly based on Estonian tort law.

Liability Determination of School Sports Injury Accidents: An Analysis Framework Based on Evolutionary Game.

In recent years, the outbreak of many school sports injury accidents aroused widespread public concern about liability determination of accident. Previous studies have examined the legal application of the liability principles from a law perspective, but few kinds of research attempted to analyze the progress of liability determination from the perspective of “law economics”. To fill this research gap, we introduce the evolutionary game model, as an important theoretical tool of “law economics”, to investigate how various factors influence the strategy selection of the parties, as well as examine what liability principle can effectively treat school sports injury accidents. The results indicate that the strategic selection of the subject of liability is significantly related to the accident compensation cost and the prevention cost of both parties. Moreover, we also find that both strict and proportional liability rules can play key roles in dealing with the issue of liability determination of school sports injury accidents, but the two liability rules have different effects on the strategic selection of parties. More specifically, compared to the strict liability principle, the proportional liability principle can motivate both the school and the students to adopt the active strategy of “appropriate caution” to prevent occurring sports injury accidents in schools.

The Twist of Long Terms: Disasters, Elected Judges, and American Tort Law

The received wisdom is that American judges rejected strict liability through the nineteenth and early twentieth century. To the contrary, a majority of state courts adopted Rylands v. Fletcher and strict liability for hazardous or unnatural activities after a series of flooding tragedies in the late nineteenth century. Federal judges and appointed state judges generally ignored or rejected Rylands, while elected state judges overwhelmingly adopted Rylands or a similar strict liability rule. In moving from fault to strict liability, these judges were essentially responding to increased public fears of industrial or man-made hazards. Elected courts were more populist: They were more likely to adopt strict liability than appointed courts. But surprisingly, state courts elected to longer terms were the most populist. Many of these judges never expected to face another election, but even without direct political pressure, they were the most responsive group of judges in adopting Rylands after the floods. This historical episode illuminates the differences between types of political influence on judges. Judicial elections generally may produce judges more sympathetic to public opinion and more responsive to recent events. Longer terms, shielding judges from opposing political pressure from industry favoring the fault rule, then allowed judges to follow those sympathies or new perceptions of public interest in favor of strict liability. The historical record suggests that judicial elections plus long terms shaped a more responsive bench. A shorthand for these effects are: filtering, fidelity, and and favor. First, these elections created a populist filter: Elections seemed to have filtered out some elite jurists from major urban centers and filtered in more local lawyer-politicians, who would be more connected to public opinion. Second, borrowing from the language used by nineteenth-century advocates of judicial elections and by modern historians, I suggest that the elected judges' fidelity to the people led them to perceive public opinion as an important factor in their decisions. Even with filtering and fidelity, judges elected to short terms would still face the reality of fear and favor, due to special interests and partisan renomination politics. Elected judges with more job security could be more faithful to their (hence, role fidelity) and could follow their own perception of public interest or public opinion, rather than industrial interests. The Article concludes with some priorities for judicial reform based upon this historical episode.