parent nodes: Breach of Duty | Coase Theorem | custom | derivative suit | ex ante hypothetical bargain | incitement | liability rule | standard of care | Torts Theories
Hand Formula
A defendant who imposes a risk on others is negligent iff B < PLwhere: B is the cost of precautions taken by defendant
P is the probability that a particular accident will occur
L is the magnitude of a loss
Hand explicitly denied that B, P, and L were variables capable of precise measurement. [US v Carroll Towing]. Additionally, economic analysis would require that B, P, and L be measured in terms of marginal cost: that is, the marginal cost, accident risk, and risked accident magnitude coming from a defendant's choice of possible precautions. See, e.g., [Bolton v Stone] (NL where person injured by ball going over defendant club's wall, which rarely happened).
Posner argues that the Hand Formula is descriptive, rather than normative, in that it merely describes the results reached by judges using more formalistic discourse. However, the Hand Formula can be seen to express moral goals: alternatively, that (1) putting other people at risk of a cost larger than the social benefit one produces is wrong or that (2) the results of the Hand Formula express anger at squandered social resources. However, juries may punish defendants who follow the Hand Formula too explicitly, for example where a jury awarded $4.9 bn against Ford for following Hand Formula-like calculations.
The Hand Formula can also be used to fulfill ex ante hypothetical bargains. [Eckert v Long Island Ry] (L for where plaintiff killed while saving child from defendant's train). In this way, the Hand Formula works as a liability rule. See also Coase Theorem.
Where parties to an accident are involved in a contractual relationship, or in a market more generally, the customary standard of care is more likely to be a reasonable level of care. Rodi Yachts v National Marine
Doctrinal Definition
A person acts negligently if the person does not exercise reasonable care under all the circumstances. Primary factors to consider in ascertaining whether the person's conduct lacks reasonable care are the foreseeable likelihood that the person's conduct will result in harm, the foreseeable severity of any harm that may ensue, and the burden of precautions to eliminate or reduce the risk of harm.
[alias: Hand formula]
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