The many faces of fault in contract law: Or how to do economics right, without really trying

Michigan Law Review

Volumn 107, Issue 8, 2009, Pages 1461-1478

  Epstein, Richard A ^a,b  

^a UNIVERSITY OF CHICAGO   (United States)

^b NEW YORK UNIVERSITY   (United States)

Author keywords

[No Author keywords available]

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EID: 66749175093     PISSN: 00262234     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (75)

1. See United States v. Carroll Towing, 159 F.2d 169, 173 (2d Cir. 1947).
2. 60 F.2d 737 (2d Cir. 1932).
3. See Richard A. Posner, A Theory of Negligence, 1 J. LEGAL STUD. 29 (1972).
4. For a rejection of the Hand formula, see Richard A. Epstein, A Theory of Strict Liability, 2 J. LEGAL STUD. 151,155-60 (1973).
5. See 1 FUNK & WAGNALLS STANDARD DICTIONARY 461 (Int'l ed. 1982).
6. Namely, the thesaurus feature on Microsoft Word.
7. For example, see F.H. LAWSON, NEGLIGENCE IN THE CIVIL LAW 77-78 (1950), where even the choice of the title tilts the inquiry by equating the notion of culpa with negligentia, or negligence, when the more accurate translation is "culpable."
8. Funk & Wagnalls captures the ambiguity: "Culpa: A fault, especially of negligence. Culpable: Deserving of blame or censure." 1 FUNK & WAGNALLS, supra note 4, at 314.
9. (1703) 2 Ld. Raym. 909, 92 Eng. Rep. 107 (Q.B.).
10. See generally RESTATEMENT (SECOND) OF TORTS §§ 157-64 (1965) (trespass to land); id. §§ 504-05 (livestock);
11. id. §§ 506-18 (animals other than livestock);
12. id. § 520 ("Abnormally Dangerous Activities");
13. id. §§ 821A-840E (nuisance). For a defense of the negligence approach in animal cases,
14. see GLANVILLE L. WILLIAMS, LIABILITY FOR ANIMALS (1939).
15. (1868) 3 L.R.E. & I. App. 330 (H.L.), aff'g Fletcher v. Rylands, (1866) 1 L.R. Exch. 265.
16. See Epstein, supra note 3.
17. For a discussion of this concept, see Richard A. Epstein, Holdouts, Externalities, and the Single Owner: One More Salute to Ronald Coase, 36 J.L. & ECON. 553 (1993).
18. See H. LAURENCE ROSS, SETTLED OUT OF COURT: THE SOCIAL PROCESS OF INSURANCE CLAIMS ADJUSTMENT 98-99 (2d ed. 1980).
19. (1837) 3 Bing. (N.C.) 468, 132 Eng. Rep. 490 (CR).
20. 132 Eng. Rep. 490, Id. at 493.
21. 132 Eng. Rep. 490, Id. at 491.
22. 132 Eng. Rep. 490, Id. at 493.
23. 132 Eng. Rep. 490, Id. The accurate (and economic) definition of good faith requires a defendant to treat the potential loss of the plaintiff as having equal weight to his own. For its application in relation to the duty to settle insurance claims within policy limits,
24. see Merritt v. Reserve Insurance Co., 110 Cal. Rptr. 511 (Ct. App. 1973).
25. See discussion infra Section. 1I1.A.
26. See Vaughan v. Menlove, (1837) 3 Bing. (N.C.) 468, 475, 132 Eng. Rep. 490, 493 (C.P.) (Tindal, C.J.).
27. See Turberville v. Stampe, (1697) 9 Will. 3, 91 Eng. Rep. 1072 (K.B.);
28. Beaulieu v. Fingiam, Y.B. 2 Hen. 4, fol. 18, pi. 6 (1401).
29. See, e.g., Robert Addie & Sons (Collieries), Ltd. v. Dumbreck, [1929] A.C. 358 (H.L.) (appeal taken from. Scot.) (U.K.).
30. RESTATEMENT (SECOND) OF CONTRACTS § 90 (1981).
31. (1703) 2 Ld. Raym. 909, 92 Eng. Rep. 107 (Q.B.).
32. Coggs explicitly overrules Southcot v. Bennet, (1601) Cro. Eliz. 815, 78 Eng. Rep. 1041 (Q.B.), which held the gratuitous bailee to a high objective standard of care.
33. Literally "slight negligence by an objective standard," by which it is meant that slight negligence is sufficient to create liability.
34. See DIG. 10.2.25.16 (Paulus, Ad Edictum. 23).
35. See Coggs, 92 Eng. Rep. at 110-111
36. 92 Eng. Rep. Id. at 110-111
37. 92 Eng. Rep. Id. at 113.
38. (1602) 4 Coke Rep. 91a, 76 Eng. Rep. 1072 (Q.B.).
39. On mutuum generally, see BARRY NICHOLAS, AN INTRODUCTION TO ROMAN LAW 167 n.4, 169-170 (1962).
40. For a general discussion of the rules of bailment, see W.W. BUCKLAND, A TEXT-BOOK OF ROMAN LAW: FROM AUGUSTUS TO JUSTINIAN (Peter Stein ed., 3d ed. 1963) 459-62 (discussing mutuum), 464-67 (discussing depositum), 467-70 (discussing commodatum), 470-78 (discussing pignus, or pledge), 494-504 (discussing locatio, or lease), and 512-518 (discussing mandátům).
41. Coggs v. Bernard, (1703) 2 Ld. Raym. 909, 919, 92 Eng. Rep. 107, 113 (Q.B.).
42. 92 Eng. Rep. 107, 113, Id. ("As if a drunken man had come by in the streets, and had pierced the cask of brandy.").
43. 34. 60 F.2d 737 (2d Cir. 1932), aff'g 53 F.2d 107 (S.D.N.Y. 1931). For a showing of how Hand mangled the evidence on custom,
44. see Richard A. Epstein, The Path to The T.J. Hooper: The Theory and History of Custom in the Law of Tort, 21 J. LEGAL STUD. 1 (1992).
45. For the most influential statement, see Ezra Ripley Thayer, Public Wrong and Private Action, 27 HARV. L. REV. 317, 321-323 (1914).
46. See, e.g., Barker v. Lull Eng'g Co., 573 P.2d 443 (Cal. 1978) (announcing a two-part test of product defect that exposed the manufacturer of its High-Life Loader to the misconduct of both its purchaser and driver). 37. 4 Johns. 84 (N. Y. Sup. Ct. 1809).
47. Id. at 99.
48. Id. at 84.
49. For a recent discussion of vis maior, see In re Flood Litigation, 607 S.E.2d 863, 879 (W. Va. 2004); for a nineteenth-century account, see Nichols v. Marsland, (1876) 2 Exch. D. l.
50. 138 N.E. 414 (N.Y. 1923).
51. Id. at 415.
52. 268 N.Y.S. 192 (Sup. Ct. 1933).
53. These confusions arise in more modern cases. See, e.g., Kremen v. Cohen, 337 F.3d 1024 (9th Cir. 2003),
54. critiqued in Richard A. Epstein, The Roman Law of Cyberconversion, 2005 MICH. ST. L. REV. 103.
55. Just this distinction is taken in Powers v. Massachusetts Homeopathic Hospital, 109 F. 294, 304-305 (1st Cir. 1901).
56. For an articulation of the old distinction, see Robert Addie & Sons (Collieries), Ltd. v. Dumbreck, [1929] A.C. 358 (H.L.) (appeal taken from Scot.) (U.K.). For the American reception,
57. see RESTATEMENT (SECOND) OF TORTS § 342 (1965).
58. 443 P.2d 561 (Cal. 1968) (en banc).
59. Id. at 567-569
60. See id. at 569 (Burke, J., dissenting).
61. See CAL. CIV. CODE, § 846 (West 2008) (setting a standard of care to that owed to a trespasser, i.e., refraining from willful or wanton, behavior).
62. See Massaletti v. Fitzroy, 118 N.E. 168 (Mass. 1917),
63. defended in Andrew Kull, Comment, The Common Law Basis of Automobile Guest Statutes, 43 U. CHI. L. REV. 798 (1976).
64. See, e.g., Brown v. Merlo, 506 P.2d 212 (Cal. 1973) (en. banc). Earlier challenges at the federal level had been rebuffed in Silver v. Silver, 280 U.S. 117 (1929).
65. See, e.g., Holland v. Pitocchelli, 13 N.E.2d 390 (Mass. 1938).
66. See, e.g., Travelers Indem. Co. v. Trans. Indem. Co., 51 Cal. Rptr. 724 (Dist. Ct. App. 1966) (upholding a clause that excludes the named insured and its employees from coverage).
67. See Taylor v. Caldwell, (1863) 3 B. & S. 826, 122 Eng. Rep. 309 (Q.B.).
68. 122 Eng. Rep., Id. at 312.
69. 122 Eng. Rep. See id. at 314.
70. 122 Eng. Rep. Id. at 312.
71. See 122 Eng. Rep. id. at 313
72. (citing Hyde v. Dean and Canons of Windsor, (1597) Cro. Eliz. 552, 78 Eng. Rep. 798 (Q.B.)).
73. See 78 Eng. Rep. 798 id. at 314.
74. [1903] 2 K.B. 740.
75. Id. at 750-751