In this blog post, we compare and analyze various principles of liability for effectively deterring illegal acts from a law and economics perspective and examine their effectiveness.
An illegal act is defined as an act that infringes on the rights of others and causes damage. Tort law serves to deter illegal acts by allocating the damages caused by illegal acts to the victim and the perpetrator. Through this, tort law plays an important role in realizing social justice and protecting individual rights.
However, depending on which liability principle the court applies, the damages resulting from the tort are distributed differently, and the effect of deterring torts also varies. Therefore, legal economics analyzes the applicable liability principles to find liability principles that can effectively deter torts. Important concepts in analyzing liability principles for torts are “level of care” and “standard of care.”
The level of care refers to the degree of care that the perpetrator or victim takes to prevent illegal acts. As the level of care increases, the cost of care, such as the time and effort required to take care, increases, but the probability of illegal acts occurring decreases, thereby reducing the damages caused by illegal acts. The standard of care refers to the level of care determined by the court to allocate damages caused by illegal acts to the victim and the perpetrator. Generally, the optimal level of care is the point at which the sum of the costs of care to prevent illegal acts and the damages caused by illegal acts is minimized, thereby achieving social efficiency. And since this is the level of care that can effectively prevent illegal acts, the court sets it as the standard of care. Based on this, the effectiveness of the principles of liability for illegal acts can be analyzed as follows.
Let us look at the principles of liability that consider only the liability of the perpetrator without considering the liability of the victim for illegal acts. The principle of non-liability is the principle that even if an illegal act occurs, the perpetrator is not liable for any damages to the victim. On the other hand, the principle of strict liability is the principle that the perpetrator is liable for all damages. These two principles are common in that they do not consider the level of care of the perpetrator when determining whether the perpetrator is liable for damages. In contrast, the principle of negligence is the principle of determining the perpetrator’s liability for damages based on whether the perpetrator was negligent. In this case, negligence means failure to comply with the standard of care imposed by the court. Under the principle of negligence, only the perpetrator is subject to a standard of care, so if the perpetrator is negligent, the perpetrator is fully liable for compensation, and if there is no negligence, the perpetrator is not liable for compensation.
If the court applies the principle of non-liability to an illegal act, the perpetrator is not liable and the victim bears all damages, so the level of care required of the perpetrator under the principle of non-liability is very low. Therefore, this principle cannot be said to be effective in deterring illegal acts. On the other hand, when the strict liability principle is applied, the perpetrator must always compensate for all damages, so the level of care required of the perpetrator becomes very high. In this case, the level of care required of the perpetrator is guided to the point where the sum of the costs of care for deterring illegal acts and the damages caused by illegal acts is minimized, that is, the optimal level of care that achieves social efficiency. And when the court applies the negligence principle, the perpetrator will try to comply with the standard of care set by the court in order to avoid liability for damages. Ultimately, both the strict liability principle and the negligence principle are principles of liability that can effectively deter illegal acts.
On the other hand, there are principles of liability that consider not only the perpetrator’s liability for illegal acts but also the victim’s liability in combination with the principle of liability that considers only the perpetrator’s liability. First, contributory negligence is defined by the court as the victim’s failure to comply with the standard of care imposed on them, and the victim’s negligence can be used as a defense to exempt the perpetrator from liability for damages. When contributory negligence is combined with the principle of negligence, the principle of negligence applies first, so if the perpetrator is negligent, they must compensate for the damages in full. However, if the perpetrator’s defense is accepted, i.e., if the victim’s negligence is proven, the perpetrator is exempt from liability for damages even if he or she is at fault, and the victim bears the entire burden of damages. Ultimately, contributory negligence can be said to be a principle of liability that can effectively deter illegal acts, as it induces the perpetrator to exercise the optimal level of care and also induces the victim to exercise the optimal level of care.
Next, comparative negligence is basically based on the principle of negligence, but it also gives the victim a standard of care. If the perpetrator is not at fault, there is no liability for compensation, and if the perpetrator is at fault and the victim is not, the perpetrator is liable for compensation. If both the victim and the perpetrator are at fault, they share the liability for damages in proportion to the degree of their negligence. Under this principle, both the perpetrator and the victim seek to comply with their respective standards of care. Comparative negligence leads to a slightly higher level of caution on both sides, as even if both sides are at fault, the party with greater fault bears more of the damage. Therefore, comparative negligence can be said to be a principle of responsibility that effectively deters illegal acts. This differs from the principle of contributory negligence, under which the perpetrator can escape liability for compensation through a defense even if the victim’s fault is less than that of the perpetrator.
Finally, from a legal economic perspective, the choice of liability principle affects not only the courts but also the economic efficiency of society as a whole. The efficiency of social resource allocation can vary depending on how the liability principle is applied, which can contribute not only to the deterrence of torts but also to overall economic cost reduction. Therefore, when choosing a liability principle, courts should consider economic efficiency and apply the most appropriate principle.
