TORT -

A tort is an act or omission that gives rise to injury or harm to another and amounts
to a civil wrong for which courts impose liability. In the context of torts,
“injury" describes the invasion of any legal right, whereas "harm" describes a loss
or detriment in fact that an individual suffers.
The primary aims of tort law are to provide relief to injured parties for harms caused
by others, to impose liability on parties responsible for the harm, and to deter others
from committing harmful acts. Torts can shift the burden of loss from the injured
party to the party who is at fault or better suited to bear the burden of the loss.
The economic purpose of tort liability is to induce injurers and victims to internalize
the costs of
harm that can occur from failing to take care. Tort law internalizes these costs by
making the injurer compensate the victim.

When potential wrongdoers internalize the costs of the harm that they cause, they
have incentives to invest in safety at the efficient level. The economic essence of tort
law is its use of liability to internalize externalities created by high transaction costs.

The Traditional Theory of Tort Liability

Three elements must be present for recovery by the plaintiff under the traditional
theory of torts:
1. The plaintiff must have suffered harm;
2. The defendant’s act or failure to act must cause the harm; and
3. The defendant’s act or failure to act must constitute the breach of a duty owed to
the plaintiff by the defendant.
1. Harm The first element required for a plaintiff to sue in tort is that he or she must
have suffered harm. Without harm, there can be no suit in tort, even if the act was
dangerous. Harm has a simple economic interpretation: a downward shift in the
victim’s utility or profit function.
2. Cause According to the traditional theory, the second element of a tort is “cause.”
In order for the plaintiff to sue, according to the traditional theory, the defendant
must have caused the plaintiff’s harm.
3. Breach of a Duty In some circumstances, the first two elements harm and
proximate cause—are sufficient to establish liability in tort for the defendant. A rule
of liability based upon harm and causation is called “strict liability.” In the usual case,
however, the victim must demonstrate more than harm and cause in order to
recover damages from the defendant. In addition to these two elements, the plaintiff
must usually demonstrate that the defendant breached a duty that he or she owed
to the plaintiff, and that the breach caused the plaintiff’s harm.
Modern courts sometimes find liability in cases where one of the three elements of a
tort is missing
II. An Economic Theory of Tort Liability
Rather than defining “tort” by its essential elements, economic analysis models the
effects of liability. When high transaction costs preclude private agreements, tort
liability can induce injurers to internalize the costs that they impose on other people.
Now we develop the simplest model of cost internalization by tort law, using the
economic interpretations of harm, cause, and fault.
• Minimizing the Social Costs of Accidents -Bilateral precaution describes
circumstances in which the victim and the injurer can take precaution, and
efficiency requires both of them to take it.
• Incentives for Precaution Under No Liability and Strict Liability –
 • Bilateral Precaution - Bilateral precaution describes circumstances in which
the victim and the injurer can take precaution, and efficiency requires both of
them to take it.
• Incentives for Precaution Under a Negligence Rule - The solution to the
paradox of compensation lies in a negligence rule. We shall now prove that a
negligence rule can give efficient incentives to the victim and the injurer. A
negligence rule imposes a legal standard of care with which actors must
comply in order to avoid liability. We assumed that courts apply a definite
standard requiring a fixed amount of precaution, and this assumption
permitted us to represent the legal standard.
• Contributory Negligence and Comparative Negligence – the negligent injurer
can escape liability by proving that the victim’s precaution fell short of the
legal standard of care. The defense of contributory negligence imposes a legal
standard of care upon the victim.
Computing Damages
The damages accomplish two things simultaneously:
First, they put the victim back onto the utility level or indifference curve occupied
before the tortious act, and
second, they are the “price” that the injurer must pay for having harmed the victim.

Hand Rule Damages

Compensatory damages are intended to “make the victim whole.”
The Hand Rule is an algebraic formula (B = PL), according to which liability turns on
the relation between investment in precaution (B) and the product of the probability
(P) and magnitude (L) of harm resulting from the accident. If PL exceeds B, then the
defendant should be liable.
In the usual way, the court uses the Hand rule to determine whether the injurer’s
precaution satisfied the legal standard. In its unusual use, the decision maker uses
the accepted legal standard of care that an individual violated to determine his
liability.
There are two distinct methods for computing compensatory damages: the
indifference method and Hand rule damages. The first method is appropriate for
market goods—that is, for losses for which there is a market substitute; the second
method is appropriate when there are legal and moral barriers to such markets. Only
when the indifference method is appropriate can damages be perfectly
compensatory. However, both methods, when applied without error, provide
incentives for an efficient level of precaution by potential injurers.
Punitive damages are the payment that a defendant found guilty of committing a
wrong or offense is ordered to pay on top of compensatory damages. They are
awarded when compensatory damages—the money given to the injured party—are
deemed to be insufficient. They are awarded by a court of law not to compensate
injured plaintiffs but to punish defendants whose conduct is considered grossly
negligent or intentional.
There have been a number of enactments such as the Public Liability Insurance Act,
1991, Environment Protection Act, 1986, Consumer Protection Act, 1986, Human
Rights Protection Act, 1998, Pre-Natal Diagnostics Techniques Regulations and
Prevention of Misuse Act, 1994, embodying the new principles of tortious liability in
India. The Motor Vehicles Act, 1988.
Also judicial interpretation continue to contribute to development of accident
jurisprudence.
The unfortunate Bhopal Gas Leak disaster has triggered a new path of tort
jurisprudence, leading to environment tort, toxic torts, governmental torts, MNCs
liability, congenital torts, stricter absolute liability, etc.
Still the Indian Law Reports furnish in this respect a striking contrast to the number
of tort cases before the Courts.

Applying economic theory of tort liability

• Cases on Environmental Law
• Cases on Consumer Laws
• Cases on Defamation Laws