Agenda for 19th Class Handouts Slides Readings: Levi, Escola Lunch sign up Thursday 12:50-1:50 PM, Rm. 106 Common Law (continued) MacPherson v Buick Strict Liability and Negligence

Assignment for Next Class Review any questions from today’s assignment that we don’t discuss in class Read “Levi / Escola” packet Questions to think about / Short papers Everyone should be prepared to discuss all the questions on the last page of the “Levi / Escola” handout Mandatory writing Group 1. Qs 1 & 5 Group 2. Qs 2 & 5 Group 3. Qs 3 & 6 Group 4. Qs 4 & 6 Optional writing -- All questions that are not mandatory

MacPherson v Buick Buick sold car to dealer Dealer sold car to Macpherson Macpherson got in accident Wheels made of defective wood and crumbled while vehicle in motion Buick did not know of defect, nor did it conceal the defect Buick could have discovered the defect by reasonable inspection But did not inspect Majority (Cardozo) Buick liable Dissent (Barlett) Buick not liable

Questions 1. How does the majority opinion of Judge Cardozo, and the dissenting opinion of Judge Bartlett, deal with Winterbottom? Do they accord it the same importance? 2. How do the majority and dissent interpret Thomas v Winchester? Do they accord it the same importance? 3. How do the majority and dissent interpret Loop v. Litchfield? Is their interpretation the same or different from the way you interpreted the case when you first read it? 4. How do the majority and dissent interpret Devlin v Smith? 5. Which had the better interpretation of these four precedents, majority or dissent? 6. What is the holding of MacPherson?

Negligence A person or company is “negligent” if it does not take precautions that a “reasonable man” or ordinarily prudent person or company would take. Failure to check that scaffolding is properly constructed Failure to test and inspect car wheels before incorporating them into car What precautions would an ordinarily prudent person or company take? Sometimes just left for jury to decide without much guidance Economic interpretation (Hand formula) Action is negligent if there was an alternative that would have been safer AND the cost of the alternative (B) is less than the reduction in the probability of harm (P) times the average dollar amount of the loss (L) B<PL Negligent not to do additional inspect of scaffolding if cost of additional inspection (e.g. $100 of worker time) is less than reduction in probability of harm (e.g. from 11% to 1% =10%) times average harm ($100,000). $100 < 10% x $100,000=$10,000

Strict Liability Strict liability is liability without proof of negligence In some situations, the law will impose liability upon proof of harm, without proof that the defendant was negligent If defendant is using explosives for mining purposes, and the explosions harm a third party, the defendant is liable, even if it took all reasonable precautions If defendant creates a reservoir of water which bursts and causes harm to people or property below it, defendant is liable, even if it took all reasonable precautions Strict liability for “ultra-hazardous” activities Strict liability for patent infringement, even if defendant was unaware of patent and had performed reasonable search Liability based on negligence is more common “Absolute liability” is a synonym for strict liability

Strict Liability v Negligence Economists sometimes argue that strict liability and negligence will lead to the same behavior by defendants Suppose precaution costs $900 and prevents 10% chance of $10,000 harm If legal rule is negligence Defendant would take precaution, because defendant would be found negligent ($900 < 10%x $10,000) Rational defendant would pay $900 to avoid 10% chance of $10,000 damages (Expected value of damages is 10% x $10,000 = $1000) If legal rule is strict liability, defendant will obviously take precaution Suppose precaution costs $2000 and prevents 10% chance of $10,000 harm Defendant would NOT take precaution, because would NOT be found negligent ($2000 > 10% x $10,000 = $1000) If legal rule is strict liability, defendant would still not take the precaution Because better to pay $1000 (expected value of damages) than $2000 for precaution Persuaded?