University of Virginia Legal Working Paper Series
University of Virginia John M. Olin Program in Law and Economics Working Paper Series
Should Vicarious Liability be Based on Negligence or Strict Liability?
Abstract
Under the doctrine of vicarious liability, a deep-pocket principal is often held responsible for a judgment-proof agent's tortious conduct. We examine two possible regimes: making the principal liable regardless of the agent's behavior (a la strict liability) or making the principal liable only when the agent is found negligent. An important difference between the two is that the negligence-based regime offers richer contracting possibilities, and hence a better ability to control the agent's actions, for the principal. We show that when the court's propensity to declare the agent negligent is, at the margin, either very high or very low, negligence-based regime fares worse than the regime based on strict liability. We also show that, in many instances, the principal does not condition the agent's salary on the court's determination of negligence. This supports the argument that causing an accident (or a reliable allegation of misconduct) should be sufficient to justify a "just cause" termination of an employee.
Subject Area
Law and Economics
Recommended Citation
Juan Carlos Bisso and Albert H. Choi,
"Should Vicarious Liability be Based on Negligence or Strict Liability?"
(June 2006).
University of Virginia Legal Working Paper Series.
University of Virginia John M. Olin Program in Law and Economics Working Paper Series.
Working Paper 30.
http://law.bepress.com/uvalwps/olin/art30
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