Showing papers on "Damages published in 1981"

Suit and Settlement vs. Trial: A Theoretical Analysis Under Alternative Methods for the Allocation of Legal Costs

Abstract: Will a party who believes that he has a legally admissible claim for money damages decide to bring suit? if so, will he subsequently settle with the opposing party or will he go ahead to trial? These questions are analyzed under four methods for allocating legal costs, namely, under the American system, whereby each side bears its own costs; under the "indemnity" or British system, whereby the losing side bears all costs; under the system favoring the plaintiff whereby the plaintiff pays only his own costs if he loses and nothing otherwise; and under the system favor the defendant, whereby the defendant pays only his own costs if he loses and nothing otherwise. Following the analysis, two brief illustrations are considered and comments are made on the relative social desirability of the methods of allocating legal costs.

Optimal Pricing of Sequential Inputs: Last Clear Chance, Mitigation of Damages, and Related Doctrines in the Law

Abstract: THE well-developed theoretical apparatus of economics can be used to help disentangle complex legal problems. Economics is here used as a prescriptive theory of law in cases where the production of damage takes place sequentially over time. Legal doctrines, including "mitigation of damages," "last clear chance" and "coming to the nuisance," are examined using the economic concept of marginal cost liability. Despite some confusion, if we include the role of criminal law, the working of the legal system is broadly consistent with economic theory. In fact, economic theory is able to explain the subtle differences in the approach to sequential behavior in accident, contract, and nuisance law. To that extent, economics is not only a prescriptive theory but a descriptive theory as well.

Unenforceable Contracts: Penalty Clauses and Specific Performance

Abstract: THAT many aspects of the common law may be explained in terms of economic efficiency, defined as wealth maximization, is a proposition that has been well-established by the work of Posner' and others. I have, along with others, provided arguments which partially explain why this is true.2 Thus, it is puzzling when there is some legal rule which cannot be so explained. To date, one of the main anomalies in the economic explanation of common law is the rule against penalty clauses in contracts. If two parties sign a contract specifying a payment in the case of breach and if the courts determine that damages are greater than the actual costs of the breach, the damages will not be allowed. Though there are some economic explanations for this behavior in the literature,3 these explanations have not been fully convincing.4 Another area in which economic analysis has not been fully satisfying is the area of specific performance. Kronman is able to explain some of the reluctance of the courts to order specific performance in the case of contracts, but he is still left with some puzzles.5 In this paper, I provide an explanation for both of these aspects of the courts' refusal to enforce contracts. The argument is based on Telser's

On the Design of Contracts and Remedies for Breach

Abstract: The implications of uncertainty for the design of contracts and of remedies for their breach are studied. After characterizing complete contingent contracts, incomplete contracts are examined. Specifically, in view of difficulties in making contingent provisions (costs of enumeration and of bargaining; verification of occurrence of events), it is shown for which contingencies provisions are made. Then, in the major part of the paper, two important implicit substitute for contingent terms are analyzed. The first is provided by remedies for breach of contract; for when a party must pay damages for breach, he will be induced to fulfill his obligations in approximately those contingencies which would have been agreed upon under the terms of a detailed contract. The second substitute for contingent terms lies in the opportunity for renegotiation in light of circumstances, since renegotiation will occur in more or less those contingencies where the contract terms would have differed under a more detailed agreement.

On the Design of Contracts and Remedies for Breach

Abstract: The implications of uncertainty for the design of contracts and of remedies for their breach are studied. After characterizing complete contingent contracts, incomplete contracts are examined. Specifically, in view of difficulties in making contingent provisions (costs of enumeration and of bargaining; verification of occurrence of events), it is shown for which contingencies provisions are made. Then, in the major part of the paper, two important implicit substitute for contingent terms are analyzed. The first is provided by remedies for breach of contract; for when a party must pay damages for breach, he will be induced to fulfill his obligations in approximately those contingencies which would have been agreed upon under the terms of a detailed contract. The second substitute for contingent terms lies in the opportunity for renegotiation in light of circumstances, since renegotiation will occur in more or less those contingencies where the contract terms would have differed under a more detailed agreement.

The Act of State Doctrine of the United Kingdom: An Analysis, With Comparisons to United States Practice

Abstract: Until quite recently the doctrine of act of state had long occupied a quiet backwater of English jurisprudence. Some cases of the last few years, however, have indicated that this doctrine may assume considerable importance in the future. In this respect the English experience is similar to that of the United States, where act of state cases were relatively rare and received little attention for many years before Sabbatino.I This coincidence should cause little surprise for, as the cases in both nations make clear, there are common underlying causes. Act of state doctrine developed in an era when governments confined themselves to a narrow range of activities. Nowadays, however, the doctrine is being strained to cope with the activities of states whose governments own and develop natural resources, and engage in international trade, while maintaining an approach to property and contractual rights vastly different from that of the United Kingdom and the United States. In general, the main areas of tension between old doctrine and present reality have been different in the United Kingdom from those in the United States. United States corporations have over the years invested in the development of the resources of other countries to such an extent that in several cases those countries have come to regard themselves as essentially controlled by the United States; so it is not surprising that a good number of the act of state cases now reaching its courts concern expropriation. In addition, the United States has antitrust laws with considerable extraterritorial reach, but trades with states whose policies mandate a noncompetitive economy; an organization in such a state may plead an act of state defense to a claim for damages under the U.S. antitrust acts. In the United Kingdom, on the other hand, act of state claims arise mainly in the setting of contractual disputes. For generations the United Kingdom has been a world center for contractual activity. Many commodities are traded through London without ever physically reaching the United Kingdom. The sources of these commodities, however, include states whose policies mandate subjugation of contractual rights to the government's view

Managing without Immunity: The Challenge for State and Local Government Officials in the 1980s

Abstract: The beleagured City of Newport, Rhode Island councilman, responding to these questions put by the attorney for an organization whose entertainment permit had been cancelled by the city council, may have voiced the quiet mutterings of many state and local government officials apprehensive about recent Supreme Court decisions which have significantly expanded their personal liability as well as that of their governmental units. The consequences of these decisions can be both direct and costly.2 The Newport councilman had ample reason for feeling that the world of government was no longer as before. When he gave the testimony quoted above, the city council had already been enjoined by a state court from cancelling a permit after a promoter proposed substituting a rock group, Blood, Sweat and Tears, for a jazz performer, Sarah Vaughn. A jury was soon to award damages to the concert promoters, finding the city liable for $72,910 in compensatory damages, for they determined that the city's attempt to cancel the permit resulted in the promoters being able to sell less than half of the 14,000 available tickets. More significantly, the jury awarded $200,000 in punitive damages against the city, and assessed liability for an additional $80,000 in punitive damages against the mayor and seven city council members in their personal capacities.3 Although the courts that considered the case found that the council's decision to cancel the permit infringed upon the promoter's right of free speech, for which the Supreme Court traditionally has applied strong protection, the case reflects the extent to which liability can arise while officials are exercising their responsibility to govern. The most recurring source of liability under the most recent Supreme Court pronouncements will likely derive from the performance of administrative functions, and in particular from those related to federally sponsored and federally assisted programs. With the present litany of managemental regulation and instruction far beyond any individual's capacity to absorb, misinterpretation and misapplication are inevit-

Suit and Settlement vs. Trial: A Theoretical Analysis under Alternative Methods for the Allocation of Legal Costs

Abstract: Will a party who believes that he has a legally admissible claim for money damages decide to bring suit? if so, will he subsequently settle with the opposing party or will he go ahead to trial? These questions are analyzed under four methods for allocating legal costs, namely, under the American system, whereby each side bears its own costs; under the "indemnity" or British system, whereby the losing side bears all costs; under the system favoring the plaintiff whereby the plaintiff pays only his own costs if he loses and nothing otherwise; and under the system favor the defendant, whereby the defendant pays only his own costs if he loses and nothing otherwise. Following the analysis, two brief illustrations are considered and comments are made on the relative social desirability of the methods of allocating legal costs.

Risk Sharing Through Breach of Contract Remedies

Abstract: This paper examines the sharing of risk under three different remedies for breach of contract. The risk considered arises from the possibility that, after a seller and buyer have entered into an agreement for the exchange of some (not generally available) good, a third party who values the good more than the original buyer may come along before delivery has occurred; the seller will want to breach. It is shown that this risk is optimally allocated by the expectation damage remedy if the seller is risk neutral and the buyer is risk averse, by the specific performance remedy if the opposite is true, and by a liquidated damage remedy if both parties are risk averse. The level of damages under the liquidated damage remedy is also shown to be bounded by the expectation measure of damages and a "damage equivalent" to the specific performance remedy. By means of a numerical example, it is shown that use of the prevailing remedy for breach of contract -- the expectation damage remedy -- may plausibly cause a welfare loss of as much as 20% due to inappropriate risk sharing.

Use of feedback and reinforcement to increase the telephone reporting of independent automobile appraisers

Abstract: This case study describes a behavioral management program to modify the performance of employees of independent appraisal firms involved in the processing of insurance claims. Delays in appraising and reporting automobile damages had produced a corresponding delay in the payment of claims. The latter slowed the productivity of the claim department and often led to customer dissatisfaction, complaints and time consuming telephone conversations to explain the delay. Although appraisers were required by a contractual agreement. to report financial estimates of damages within twenty-four hours after receiving a request, informal observations indicated that appraisal forms typically failed to meet this criteria.

Improving Judicial Controls over the Pretrial Development of Civil Actions: Model Rules for Case Management and Sanctions

Abstract: This article follows two earlier pieces in which the author reported the findings of a pilot empirical exploration of how well the discovery system in civil litigation is functioning. Brazil begins by focusing on the principal problems his field studies exposed and by suggesting a theory of discovery reform which responds to the nature and sources of those problems. His principal thesis is that too often neither judges nor attorneys assume sufficient responsibility for the discovery system as a system. Most of this article is devoted to two major proposals that are designed to promote in the judiciary and in counsel a sense of responsibility for the pretrial system and to equip the judiciary to convert that sense into action. Brazil proposes a comprehensive model rule that courts could use to manage the pretrial development of civil actions. He then uses his model as a background for suggesting modifications to and extensions of the proposed revision of Rule 16 that the Advisory Committee on Civil Rules has circulated for comment. He also offers a critique of current provisions for sanctions and advances an alternative sanctions rule that acknowledges a right to compensation for damages caused by an opponent's breach of pretrial obligations and that reduces the scope of judicial discretion to refuse to impose compensatory awards.

The media and oil spills: does the press influence damage perceptions

Abstract: Although it is generally accepted that there is no evidence of socioeconomic damages resulting from the Argo Merchant oil spill, a survey undertaken approximately one year revealed that perceptions of significant damage exist among residents of adjacent areas. Concurrently, critics suggest the media exaggerated potential damages. Our findings indicate that erroneous damage perceptions are associated with a number of cultural and demographic variables, including differences in exposure to new media. Persons with erroneous damage perceptions had been exposed to a much larger number of information media reporting on the effects of the spill. Those concerned with providing accurate information will have to supply facts and data to the media, to local public officials, and to residents who are opinion leaders.

Conflict of Laws

Abstract: Lecture Notes are a resource for those studying and teaching law. Aimed primarily at students taking undergraduate or CPE courses, each title of the series examines a particular field of the law, with chapters for each of the major topics within the subject. Each chapter ends with a summary sheet giving an overview of the issues discussed. A basic analysis of the conflict of laws applicable in England, this book seeks to introduce students to the subject by examining preliminary topics such as when the rules come into play, the need for application, classification and connecting factors. It includes coverage on the rules on jurisdiction, choice of law in relation to contract, tort, property and damages; and full commentary on the law of domicile, family law and recognition and enforcement of judgements.

The liability to consumers of manufacturers of defective goods -- An Australian perspective

Abstract: There is an increasing tendency for consumers to regard the manufacturer as being primarily responsible for the safety and quality of consumer goods, even though in many if not most legal systems the common assumption by the consumer that the manufacturer rather than the retailer bears the primary liability for defective goods is not in fact correct. The legal position of the consumer in Australia under the general law of contract and tort is outlined as a background to the reforms made in 1978 by an important amendment to the Federal Trade Practices Act. A manufacturer (or importer) of consumer goods now is bound by statutory obligations, enforceable by the consumer, in respect of the quality of his goods. He is also bound by any express warranty given by him, and is liable where the goods require to be repaired or where replacement parts are required, but repair facilities or spare parts are not reasonably available. Except in the case of the obligations relating to the provision of spare parts and repair facilities, the manufacturer's statutory obligations cannot be excluded or limited. The Act also contains provisions limiting the time during which a consumer can commence an action against a manufacturer. Although the author considers that there are some defects in the legislation, he concludes that it represents a significant advance in the legal protection of the consumer's economic interests. There is a need for the expansion of existing mechanisms for the informal resolution of consumer claims, but the author also believes that the existence of the new legislative code setting out reasonably clearly defined rights will often in practice greatly strengthen the position of government agencies and others in attempting to negotiate a settlement on behalf of a consumer. Damages recoverable by a consumer from a manufacturer extend to consequential losses, including death or personal injury. As a result, a measure of strict liability for personal injury caused by defective products has been imposed on manufacturers. The legislation does not, however, offer a comprehensive regime of strict liability for personal injury and many anomalous situations will arise. The author considers that there is therefore a need in Australia for a review of the whole question of strict liability for personal injury caused by defective products, although even were this to occur there would still exist a strong need for a scheme such as that discussed in the article to govern the claim of a consumer for economic losses caused by the supply of defective or inferior products.

The Criminal Justice System: Its Technology and Inefficiencies

Abstract: THIS essay is concerned with two policy issues: (1) optimal distribution of resources among branches of the criminal justice system such as police, courts (plus prosecution), and corrections; and (2) optimal allocation of resources to the system. This analysis pursues Stigler's approach of formulating a model of rational agency behavior based on the objective criterion of minimizing the sum of damages plus control costs.1 Damages are determined by both the severity and the supply of offenses.2 Costs of control are specified in terms of the joint outputs of the branches of the system and the prices of inputs to police, corrections, and the other system branches.

What price disability? a perspective on the law of damages for personal injury

Abstract: In the absence of any satisfactory set of rules for determining the quantum of damages in personal injury cases, this article examines various concepts of reform according to both basic and subsidiary principles. Part one focuses on the concepts of “full compensation” and “functional compensation” as methods of honouring the principle restitutio in integrum. Part two considers the “periodic payment” model and whether any or all of these concepts satisfy subsidiary principles relating to the form of the award, the component method of categorizing loss, use of actuarial and economic evidence, calculation of present worth, allowance for future taxation, deduction for contingencies, type of care required, the effect of family care, lost earning capacity, avoidance of double compensation, collateral benefits and non-pecuniary loss.

Consequential loss and exemption clauses

Abstract: Exemption clauses have come into the legal limelight in many countries, partly through case law, partly through recent legislation dealing with standard terms in contracts, unfair contract terms or consumer protection. The tendency has been to restrict the validity of such clauses, by various devices differing among legal systems. Recently there have been signs that the trend is changing, and it is admitted that an exemption clause may fulfil a useful function, or be an integrated part of a general contractual arrangement that is useful. This may be the case particularly with exemptions relating to consequential loss. The following study is not comparative in the sense that its object is to compare systematically the laws of different states. The aim is rather to clarify the practical issues, and in this procedure material from various legal systems is used freely. I shall draw particularly on the law of Sweden, not because I believe it to be important, but because it provides illustrative examples and also, of course, because it is the legal system with which I am familiar.' The emphasis will be laid on policy questions. However, it is not possible to present a simple and general opinion on policy, which aims at giving a clue to the treatment of all or most exemption clauses relating to consequential loss. Even if it is sometimes tempting to generalize findings based on a special type of loss or clause, further analysis will generally reveal situations to which other considerations apply. Exemption clauses can be understood only against the background of the law of contracts, in particular the rules which in the absence of such clauses would govern the breach. For the general law of contractual damages, the UNCITRAL Convention is used as an example, and an account of its rules on damages is given. The possibilities of setting contract terms aside constitute another part of the background for judging particular clauses, and these possibilities are surveyed briefly. A general contention will be that different contracts, breaches and losses must be judged differently. In the analysis of the special questions, the contract of sale receives particular attention, both because of its general importance and because the issues appear clearly there.