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Getting Incentives RightImproving Torts, Contracts, and Restitution$
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Robert D. Cooter and Ariel Porat

Print publication date: 2014

Print ISBN-13: 9780691151595

Published to Princeton Scholarship Online: October 2017

DOI: 10.23943/princeton/9780691151595.001.0001

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Unity in the Law of Torts and Contracts

Unity in the Law of Torts and Contracts

(p.92) 6 Unity in the Law of Torts and Contracts
Getting Incentives Right

Robert D. Cooter

Ariel Porat

Princeton University Press

This chapter deals with the problem of providing efficient incentives for the promisor and promisee simultaneously and repurposes the model of torts in a way that unifies tort law and contract law. In the basic torts model, the injurer and the victim can reduce the probability and severity of accidents by taking precautions. “Precaution” against accidents can be reinterpreted to fit contracts and other bodies of law. The chapter first considers forms of precaution and the paradox of compensation, showing that compensating victims is often inconsistent with double responsibility at the margin that is required in efficient incentives. It then examines three mechanisms that allow liability law to combine compensation and incentives for efficient precaution: the fault rule, invariant damages, and a coercive order from a court, such as an injunction against a nuisance.

Keywords:   incentives, tort law, contract law, accidents, precautions, victims, double responsibility, liability law, compensation, nuisance

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