Strategic Approaches to the Legal Environment of Business. Michael O'Brien
removing a potential economic engine from the economy—the plaintiff—and that this was not always wise. He posed the following hypothetical involving trespass to land:
Let’s say that a rancher lives next door to a farmer, and the farmer grows something that the rancher’s steers would like to eat. The rancher’s fence is broken, and it will cost $9 to fix. The rancher’s herd will provide the following damage on the farmer:
| Size of herd (steers) | Crop Loss ($) | Marginal Crop loss per steer |
| 1 | 1 | 1 |
| 2 | 3 | 2 |
| 3 | 6 | 3 |
| 4 | 10 | 4 |
How large would the rancher’s herd have to be to justify building the fence? It would have to be four steers, at which point the crop loss extends past the cost of fixing the expense. The rational rancher would simply pay the farmer for the damage done by the herd at a lesser number. Coase pushes the hypothetical further and assumes that the farmer spends $10 to grow and harvest a crop worth $2. Now, with a herd of a mere two steers, the rancher is better off paying the farmer the expected profit and asking the farmer not to grow crops at all.
Coase then turns to nuisance. Nuisance is an unreasonable interference with the property of another. At the time Coase was writing, any interference with the property of another was a nuisance, but what if the defendant had more to offer society than the plaintiff? Coase uses Sturges v. Bridgman, (1879) LR 11 Ch D 852 as an example. In this case, Bridgman operated a candy factory, and Sturges moved in next door and started up a medical practice. The medical practice expanded almost to the property line of the factory. The noise from the factory was so great that the addition to the Sturges building could not be used. Coase would resolve the problem, again, in terms of marginalism. Does the continued use of machinery add more to the factory than it subtracts from the doctor? If so, then the business should proceed, and the factory should pay off the doctor the revenue lost less the costs of operating in that part of the building. This is an optimum allocation of resources in the absence of transaction cost. Coase takes on transaction costs in another article that is discussed later in this monograph.
Negligence
Negligence is a breach of a duty of care which is the actual and proximate cause of damage.22 Each of those elements is taken in turn.
The Breach of a Duty of Care
Restatement of the Law (3d) Torts: Liability for Physical and Emotional Harm § 7 takes the position that the duty of care is that of a reasonable person whose conduct could create a risk of harm. If the person is a child then the standard is that of a child of like age, intelligence, and experience under the circumstances.23 Mental deficiency does not change the standard of care, but physical deficiency does.24 This high-level reasoning of a “reasonable person” standard use to be the sole manner for determining a breach of a duty of care and created a good deal of moral relativism while judges and juries struggled with what a reasonable person would do.
A breach of a duty of care typically happens in one of four ways. First, a breach of a duty of care occurs when the benefit of defendant’s conduct is outweighed by the product of the probability of harm and the likelihood of harm.25 This test places the loss on the plaintiff unless the defendant knew (or should have known) that avoiding the breach of a duty of care was cheaper than the cost of the accident. This is a kind of utilitarian reasoning that is presently manifested in the Law and Economics legal theory. This reasoning is shown in the Carroll Towing case below.
Second, under negligence per se, a breach of a duty of care occurs when a statute sets forth a standard of care. Then, the defendant breaches the standard of care by violating the statute and harming the plaintiff in a way that the statute was intended to prevent.26 This is a variety of Legal Positivism reasoning. Statutes are commonly passed in response to a court not finding liability in a case reasoned under the utilitarian test above. The Gore case shows this reasoning.
Third, the doctrine of res ipsa loquitor (Latin for “the thing speaks for itself”) applies where 1) an injury occurs that does not normally occur without negligence, 2) of a class of actors of which the defendant is the relevant member.27 This creates an inference of negligence from which the factfinder can find for the plaintiff. The increased use of the jury to use its insight into human behavior to determine liability is a natural law solution.28 The Mintzer case below shows this reasoning.
Fourth, an actor breaches a duty of care if one does not act to inform those who may not know of the risk that the actor knows.29 Where the actor is a professional (generally, one with a license to do something) a breach of a duty of care occurs when the actor fails to act with the competence necessary to prevent an unreasonable risk of harm to another.30 Informed consent poses a duty to one party to avoid breaching a duty of care with another party. This is deontological reasoning.
Case Problems
Conners Marine Company chartered the barge Anna C to the Pennsylvania Railroad Company. Anna C loaded flour owned by the United States at Pier 58 and then moved to Pier 52 where its entire crew disembarked for the evening. Since the Anna C was not going anywhere, the tug Carrol began mooring and unmooring ships against the Anna C. Grace Line, Inc. chartered the tug Carrol from the Carrol Towing Company. The unmooring did not go well. Wind caused the Anna C to break free from the pier and crash into a tanker at Pier 51 causing a hole in the Anna C’s hull. Anna C. subsequently sank because, as of 2:15 PM, the crew had not returned, and there was no one on board to inspect for damages. The contents of flour poured into New York Harbor. Who is responsible for the collision damages? Who is responsible for the sinking damages?31
Oscar Whitlock was a trampoline user. He joined the Beta Theta Pi fraternity which lived in a house leased from the University of Denver. Whitlock began regularly using the trampoline in the front yard. On June 19, 1978, at approximately 10:00 p.m., Whitlock suffered an injury while attempting to complete a one-and-three-quarters front flip on a trampoline rendering him a quadriplegic. Whitlock then sued the University of Denver for negligence. Does the University of Denver have a duty to remove the trampoline from the front yard and prevent Whitlock from using it?32
Dolly Mintzer was staying in a hotel operated by Robert A. Wilson. Shortly before 4 am, a piece of plaster ceiling weighing some thirty pounds fell on her causing injuries requiring hospitalization. Mintzer sued Wilson for negligence. Wilson simply argued that Mintzer had failed to show he breached a duty of care. How would this issue be resolved under the common law? How does res ipsa loquitor change that?33
Thomas Gore and his son rented a residential dwelling from People’s Savings Bank. The son was exposed to lead-based paint and suffered injuries. Conn. Gen. Stat. § 47a-7(a)(2) provides that a landlord shall “keep the premises in a fit and habitable condition.” At the time, Conn. Gen. Stat. § 47a-8 provided that the presence of lead based paint in a residential dwelling violated § 47a-7. Gore sued People’s Savings Bank for negligence. How would this issue be resolved under the common law? How does negligence per se change that?34
Proximate and Actual Causation
Actual cause