Business Law Chapter 4


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Business Law Chapter 4

  1. 1. Torts and Cyber Torts Roland Cyr CPCU – Instructor March 16, 2009
  2. 2. Cars Homes Life
  3. 3. Bus Accident Bus/Overhang Intentional Act
  4. 4. Sliding on Ice Ten Car Pile-Up Pedestrian/Car Car/Bus/Intersection
  5. 5. What is a tort?  What is the purpose of tort law?  What are the four elements of negligence?  What is meant by strict liability? In what  circumstances is strict liability applied? What is a cyber tort, and how are tort theories  being applied in cyberspace?
  6. 6. Part of doing business is the risk of being  involved in a lawsuit. An ever increasing business operating cost is the premium to obtain liability insurance to pay an adverse judgment in a suit. Many of these suits involve torts. In fact, in the United States today, negligence is the dominant cause of action for accidental injuries.
  7. 7. Tort law provides a remedy for acts causing  physical injury or interfering with physical security and freedom of movement, for acts causing destruction or damage to property, and for the invasion of protected interests in such things as personal privacy, family relations, reputation, and dignity. As new interests develop with social change, new torts are recognized to protect those interests.
  8. 8. Generally speaking, businesses may engage  in whatever is reasonably necessary to obtain a fair share of a market or to recapture a share that has been lost. They may not, however, engage in certain business activities with the motive of completely eliminating competition. It is for this reason that business torts have been defined. A tort is a breach of a duty owed to an individual or a group; a business tort is a wrongful interference with another‘s business rights.
  9. 9. A tort is a civil, legal injury to a person or  property caused by a breach of a legal duty. Plaintiff (the injured party) sues the  Defendant (the Tortfeasor) for damages. Three Torts:  ◦ Intentional. (punching someone in the face) ◦ Unintentional (negligence-no fault). ◦ Strict Liability (absolute liability). (dog bite)
  10. 10. Assault and Battery.  ◦ Assault: the reasonable apprehension or fear of immediate contact. ◦ Battery: completion (contact) of the assault. ◦ Defenses:  Consent.  Self-Defense and Others.  Defense of Property.
  11. 11. False Imprisonment.  ◦ Confinement or restraint of another person‘s activities without justification. ◦ Merchants can detain a suspected shoplifter as long as there is probable cause. Infliction of Emotional Distress.  ◦ Extreme and outrageous conduct. ◦ Some courts require physical symptoms.
  12. 12. Defamation (cont‘d).  ◦ Slander per se (no proof of damages is required): Loathsome communicable disease. (self explanatory)  Professional impropriety. (attorney/client priv)  Imprisonment for a serious crime. (shop lifiting)  Unmarried woman is unchaste ((plays the field) 
  13. 13. What is the basis for the tort of defamation?  The publication of a statement that holds an  individual up to contempt, ridicule, or hatred. Publication means that the statements are made to or within the hearing of persons other than the defamed party (statements dictated to a secretary, for example). Re-publication is also defamatory—thus, a  person who repeats defamatory statements is liable.
  14. 14. Imagine that Dave invites Beth to a swimming party.  At the party, Dave gives Beth a suit that Dave knows will dissolve in water. When Beth goes swimming, the suit dissolves, leaving Beth naked in the presence of the other guests. Beth suffers extreme embarrassment, shame, and humiliation. Is Dave liable for intentional infliction of emotional distress? Under the circumstances, Dave is liable for Beth‘s  emotional distress. Liability can be found where the conduct has been so outrageous in character, and so extreme in degree, as to go beyond what has been described as ―all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community.‖
  15. 15. Invasion of the Right to Privacy.  ◦ Person has the right to solitude. Breach of that duty is a tort. Appropriation.  ◦ Use of another‘s name or likeness without permission, and for the user‘s benefit.
  16. 16. Wrongful Interference with Contractual  Relationship. ◦ Valid, enforceable contract exists between two parties. ◦ Third party knows about contract. ◦ Third party intentionally causes either party to breach the original contract. CASE 4.1: Mathis v. Liu (2002).   Enters into a contract with K-mart. 2 months later he breaks the contract to re-contract with another party – K- mart sues and wins
  17. 17. Trespass to Land.  Trespass to Personal Property.  ◦ CASE 4.2: v. Verio, Inc. (2004).  Computer trespass to personal property occurs when one party impairs the condition, quality, or value of another‘s computer Conversion. (borrow your car to go to the store, intending  only to go to the store. But then I decide later not to return it) Disparagement of Property.  ◦ Slander of Quality. ◦ Slander of Title
  18. 18. Unintentional Torts (Negligence)  Under negligence theory, a tortfeasor (wrongdoer) neither wishes to  bring about the consequences of an act nor believes that they will occur. The actor‘s conduct merely creates a risk of the consequences. Without the creation of a risk, there can be no negligence. The risk must be foreseeable—that is, it must be such that a reasonable person would anticipate it and guard against it. In determining whether the conduct creating the risk was reasonable, courts consider the nature of the possible harm. A very slight risk of a dangerous explosion might be unreasonable; a distinct possibility of burning one‘s fingers on a stove might be reasonable. Negligence involves four elements: (1) a duty of care; (2) a breach of  the duty; (3) a legally recognizable injury; and (4) causation (the breach must have caused the injury).
  19. 19. A A DUTY OF CARE. (DRIVE CAREFULLY) IS THE  DUTY OWED? B BREACH OF A DUTY OF CARE. Did the  Defendant breach that duty? C CAUSATION (THE BREACH OF THE DUTY OF CARE  MUST CAUSE AN INJURY). D DAMAGE (INJURY OR HARM). Did the  Defendant‘s breach of duty cause the Plaintiff‘s injury?
  20. 20. THE DUTY OF CARE  Duty is measured by a standard of reasonableness.  The measure is objective—how would a reasonable person act in the same circumstances? The answer defines the duty: A reasonable person would exercise reasonable care. An individual with knowledge, skill, or intelligence superior to that of an ordinary person has a higher standard of care—his or her duty is that which is reasonable in light of those capabilities. Business firms that invite persons onto their premises usually have a duty to exercise reasonable care to protect their business invitees against foreseeable risks that the owner knew or should have known about.
  21. 21. BREACH OF THE DUTY OF CARE  Failing to exercise reasonable care is potentially  tortious conduct. The failure may be an act (setting fire to a building) or an omission (neglecting to put out a fire); it may be intentional or careless; it may be unavoidably dangerous. Whether conduct is unreasonable depends on a number of factors: the nature of the act, the manner in which the act is performed, the nature of the injury, whether the activity causing the injury was socially useful, and how easily the injury could have been guarded against.
  22. 22. CAUSATION  The breach of the duty of care must have caused  the harm for which recovery is sought. There must be (1) causation in fact and (2) the act must be the proximate cause of the injury. If an injury would not have occurred without the breach, there is causation in fact. Causation in fact can usually be deter-mined by the but-for test: But for the wrongful act, the injury would not have occurred. Proximate cause is a question not of fact but of law and policy: is the connection between an act and an injury strong enough to justify imposing liability?
  23. 23. INJURY  Without an injury (loss, harm, wrong, or  invasion of a protected interest), there is nothing to recover. The purpose of damages is to compensate injured parties. To discourage especially reprehensible behavior, however, punitive damages may be awarded.
  24. 24. DEFENSES TO NEGLIGENCE  A superseding intervening force may break  the connection between a wrongful act and an injury, thereby canceling the liability of the party who committed the wrongful act. Assumption of risk  Contributory negligence  Comparative negligence  The last-clear-chance doctrine can excuse  the effect of a plaintiff‘s contributory negligence
  25. 25. On what basis might patrons at a ballpark  recover for an injury suffered during a game? Courts have ruled that patrons can recover  only for injuries caused by the park‘s operator's failure to exercise reasonable care in the construction, maintenance, or management of the facility.
  26. 26. Injury Requirement and Damages.  ◦ Plaintiff must suffer a legally recognizable injury. ◦ Not all injuries can be compensated. Causation.  ◦ Causation in Fact (―but for‖ test). ◦ Proximate Cause (foreseeably strong connection).
  27. 27. In any scenario analyze circumstances involving  potential negligence and then use a basic duty- breach causation-injury analysis. If any of these elements is missing, there may be liability but it won‘t be on a negligence theory. - Example Driving down a one-way street in the right direction,  at no more than the posted speed limit, Walter hits a teenager, who is injured. The boy had jumped in front of Walter‘s car from behind a stone wall to impress his friends by scaring Walter. Walter had a duty to drive his car in a safe manner; Walter‘s car struck the boy; the boy was injured. But Walter is not liable because he did not breach the duty to drive with care
  29. 29. WALTER IS DYING. PAULA REFUSES TO DONATE BLOOD  TO SAVE HIM. PAULA HAS COMMITTED NO TORT AND NO CRIME. Injury Requirement and Damages.  ◦ Plaintiff must suffer a legally recognizable injury. ◦ Not all injuries can be compensated. Causation.  ◦ Causation in Fact (―but for‖ test). ◦ Proximate Cause (foreseeably strong connection).
  30. 30. What is the purpose of tort law? What are the  two basic categories of torts? Generally, the purpose of tort law is to  provide remedies for the invasion of legally recognized and protected interests (personal safety, freedom of movement, property, and some intangibles, including privacy and reputation). The two broad categories of torts are intentional and unintentional.
  31. 31. Assumption of the Risk.  Superseding Intervening Cause.  ◦ Event must be unforeseeable. Contributory Negligence (few jurisdictions).  ◦ Plaintiff recovers nothing if he is at fault. Comparative Negligence (more common).  ◦ As long as Plaintiff is less than 50% at fault he can recover a pro-rata share of the verdict.
  32. 32. Most crimes involve torts, but the commission of  a tort is not always a crime. A crime is an act so reprehensible that it is considered to be a wrong against society as a whole. The state prosecutes criminals, who may receive jail terms, fines, or both. A tort action is a civil action in which one per-son brings a suit of a personal nature against another. The state is not a party, and the judgment may impose damages but no jail term. The function of tort law is to provide an injured party with a remedy.
  33. 33. What is a tort?  A tort is a wrongful action—a civil, as  opposed to criminal, wrong not arising from a breach of contract. A tort is a breach of legal duty that proximately causes harm or injury to another.
  34. 34. What are the four elements of negligence?  (1) a duty of care owed by the defendant to  the plaintiff (2) the defendant‘s breach of that duty  (3) the plaintiff‘s suffering a legally  recognizable injury (4) the in-fact and proximate cause of that  injury by the defendant‘s breach.
  35. 35. Assumption of the Risk.  Superseding Intervening Cause.  ◦ Event must be unforeseeable. Contributory Negligence (a few jurisdictions).  ◦ Plaintiff recovers % if he is at fault. (80/20) Comparative Negligence (more common).  ◦ As long as Plaintiff is less than 50% at fault he can recover a pro-rata share of the verdict. ◦ NH and MA allows for 50% recovery anyhow....
  36. 36. Res Ipsa Loquitur. (a rule of evidence whereby the negligence  of an alleged wrongdoer can be inferred from the fact that the accident happened) Negligence Per Se. Violation of law is legal breach  of duty. Plaintiff must show: ◦ Defendant broke a law/statute. ◦ Plaintiff is in special class to be protected; and ◦ Statute designed to prevent injury to Plaintiff. ―Danger Invites Rescue‖ doctrine. (if a tortfeasor  creates a circumstance that places the tort victim in danger, the tortfeasor is liable not only for the harm caused to the victim, but also the harm caused to any person injured in an effort to rescue that victim) Dram Shop Acts. 
  37. 37. Res Ipsa Loquitur  Under the doctrine of res ipsa loquitur,  negligence may be inferred (and a defendant must prove that he or she was not negligent). This applies when the event causing damage or injury is one that ordinarily does not occur in the absence of negligence—train derailments, falling elevators, and so on. It must be caused by something within the exclusive control of the defendant, and it must not have been due to any act on the part of the injured party.
  38. 38. Negligence per se may occur if an individual  violates a statute providing for a criminal penalty, injuring another. The injured person must prove (1) that the statute clearly sets out the expected standard of conduct, when and where it is expected, and of whom it is expected; (2) that he or she is in the class intended to be protected by the statute; and (3) that the statute was designed to prevent the type of injury that he or she suffered.
  39. 39. Most states have Good Samaritan statutes, under  which persons who are aided voluntarily by others cannot sue them for negligence. Many states have dram shop acts, under which a tavern owner or bartender may be held liable for injuries caused by a person who became intoxicated while drinking at the bar or who was already intoxicated when served by the bartender. In some states, statutes impose liability on social hosts (persons hosting parties) for injuries caused by guests who became intoxicated at the hosts‘ homes.
  40. 40. Does not require fault, intent or breach of  duty. Usually involves ‗abnormally dangerous‘  activities and risk cannot be prevented. Dangerous Animals.  Product Liability—manufacturers and sellers  of harmful or defective products.
  41. 41. Under the doctrine of strict liability, liability is  imposed for reasons other than fault. For example, strict liability is applied to abnormally dangerous activities because of their extreme risk. Abnormally dangerous activities  (1) involve potentially serious harm to persons or property (2) involve a high degree of risk that cannot be completely guarded against by the exercise of reasonable care (3) are activities not commonly performed in the area. Strict liability is imposed on persons who keep dangerous animals for any harm in-flicted by the animals. Strict liability is also a theory applicable in product liability cases.
  42. 42. What is meant by strict liability? In what  circumstances is strict liability applied? Strict liability is liability without fault. Strict  liability for damage proximately caused by an abnormally dangerous or exceptional activity, or by the keeping of dangerous animals, is an application of this doctrine. Another significant application of strict  liability is in the area of product liability
  43. 43. Can a person be liable for a tort committed in  cyberspace? Communications Decency Act (1996).  ◦ ―No provider/user of an interactive computer service shall be treated as the publisher …provided by another information content provider. (Only Service Providers) ◦ Supreme Court held that the Communications Decency Act violated the First Amendment's guarantee of freedom of speech ◦ rejects censorship of the on-line medium and establishes the fundamental principles that will guide judicial consideration of the Internet
  44. 44. SPAM – JUNK E-MAIL  The First Amendment limits what the  government can do to restrict it, but its sending may constitute trespass to personal property. The Controlling the Assault of Non-Solicited  Pornography and Marketing (CAN-SPAM) Act preempts State anti-spam statutes to permit the use of unsolicited commercial e-mail but prohibit certain spamming activities (details are listed in the text).
  45. 45. DEFAMATION ONLINE  Under the Communications Decency Act  (CDA) of 1996, Internet service providers (ISPs) are not liable for the defamatory remarks of those who use their services.
  46. 46. What is a cyber tort, and how are tort theories  being applied in cyberspace? A cyber tort is a tort committed in cyber  space. The text states that determining what tort duties apply in cyber-space and the point at which one of those duties is breached is not an easy task for the courts. Generally, tort theories are being applied in cyberspace in traditional ways with some additional problems caused by the technology.
  47. 47. New applications of traditional tort law may  arise from the use of new technology. Future Cyber-torts will likely arise from a number of areas, including but not limited to: Online websites  Electronic e-mail  Computer bulletin boards  Software claims………. 
  48. 48. 1) the injurious exposure rule -- when the  claimant was exposed to the injurious condition, i.e., when the asbestos fibers were inhaled (2) the manifestation rule -- when the injury  becomes evident (3) quot;injury in factquot; -- when effects of exposure  result in diagnosable and compensable injury (4) A continuous trigger theory which implicates  all policies in effect during exposure, exposure- in-residence and manifestation This slide is beyond the scope of this course. 
  49. 49. The choice for a coverage trigger is not a  consistent endeavor. Often, the choice is influenced by public policy reasons which lean toward maximizing coverage/protection
  50. 50. Most commercial general liability policies contain  an exclusion for person injuries or advertising injuries quot;arising out of oral or written publication of material whose first publication took place before the beginning of the policy period.quot; In cases where the advertising activity or defamation may have arisen before the beginning of the policy period coverage should also be excluded for online or other similar forms of publication. no coverage for alleged libelous statements  published prior to the effective date of the policy
  51. 51. In cyberspace, conversations happen in ―chat  rooms‖, and messages are posted on ―bulletin boards with instant distribution worldwide. Although our ancestors would not be surprised that people are still saying disturbing and sometimes actionable things about each other, they likely did not contemplate that these wrongs would occur in a place known as ―cyberspace‖. Defamation issues arise through multiple means in ―cyberspace.
  52. 52. Defamatory statements may be published over  private e-mail systems or distributed through the Internet, Service provider discussion lists, roundtables, real-time conferences, news groups, list servers, and bulletin boards - all potential sources of defamatory publications. The technology used to publish allegedly defamatory statements does not change the nature of the underlying tort. It will, however, result in an increased number of claims due to the proliferation of the use of e-mail in the United States…….
  53. 53. Why are Internet service providers (ISPs) exempt  from liability, under some statutes, for the actions of their customers? Sometimes it is viewed as unfair to impose  liability on an ISP for the actions of its customers, who may number in the hundreds of thousands, or more. Imposing such liability would inhibit the development of the Web and the Internet. An analogy might be the imposition of liability on  a bookseller for the statements of every author in every book that the seller sold. To so restrict ISPs (or booksellers) would limit access to their products and services to very few customers.