To be subject to products liability 1 this includes

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to be subject to products liability 1. This includes manufacturers, wholesalers, and retailers 2. Could also include endorser, franchisor, or licensor ii. A technical “sale” is not required iii. Some cases apply strict liability to home builders ( Hyman v. Gordon ), but courts are mixed iv. Landlords are traditionally not strictly liable for defects in premises v. Services : defendants are not strictly liable for delivering defective services, because services are not products 1. If it advances our efficiency objectives, courts may construe a transaction as a “hybrid” consisting of a product and a service, in which case defendant can be held strictly liable ( Newmark v. Gimbel ) 2. This idea is almost never applied to doctors—medical help is a pure service vi. Tangible : Things must be tangible to qualify as defective products, so dangerous media communications don’t count vii. Blood and Body Products : by statute, suppliers of blood, body organs, etc. are generally not strictly liable VII. T HE I NSURANCE A LTERNATIVE 1. Problems with Tort System 901-912 a. Overcompensation of small injuries: if I’m injured and threaten litigation, defendant may be willing to settle for more than the actual cost of my injury so he can avoid the transaction costs associated with litigation
35 b. Undercompensation of large injuries: if I’m seriously injured, I really need compensation, but defendant has an incentive to ignore my settlement requests knowing that the longer he waits, the more desperate I will become and the less money I’ll be willing to settle for c. Lottery System : recovery is often based on the luck of the circumstances; the lack of predictability messes with our incentive objectives, which requires that we be able to predict the cost of injuries d. Misallocation of Insurance Resources : Some people get huge pain and suffering damages, while others can’t even pay their medical bills; most money in the system goes to various administrative costs other than actually compensating the victim e. Social costs of adjudication : moral hazard: an actor won’t respond to incentives since he does not have to internalize the costs (insurance pays for it instead) f. Delay in Payment : can taken months or years for victim to be compensated; ties in to undercompensation above 2. Possible Alternatives a. Eliminate Fault as a prerequisite for liability: strict liability dramatically reduces transaction costs because we wouldn’t need to prove that someone was at fault b. Eliminate Pain and Suffering : instead we could use this money to compensate for actual economic injuries that are currently undercompensated c. Alternate Incentive Methods : criminal law or administrative regulations d. More Insurance : either more comprehensive or mandatory e. Eliminate Tort System: Separate Compensation from Liability i. Maybe we should deal with compensation in a socialized system and deal with deterring bad behavior in the criminal system ii. We might do a better job of compensation if we didn’t have to balance it

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