All-or-Nothing, or Something – Proportional Liability in Private Law

Abstract

Judges and juries often make factual decisions even if the facts are
disputed and there is no clear-cut evidence available. Despite this
common state of uncertainty, verdicts are thought of as having clear
winners and losers––either the plaintiff wins and receives a full
remedy, or the defendant wins and the plaintiff gets nothing. In private
disputes, factfinders base their binary factual determinations on the
preponderance of the evidence. There are, however, several doctrines
that allow for partial remedy, discounted by the probability that the facts
support the plaintiff’s case, given the available evidence (proportional
liability). This Article offers a general theory for proportional liability
in private law. It identifies three types of factual uncertainty—mutual
uncertainty, unilateral uncertainty, and institutional uncertainty—and
shows that legal economists should support proportional liability
when the state of uncertainty is shared by the parties and the court
(mutual uncertainty), and they should adopt an all-or-nothing rule
whenever the information is observable but unverifiable (institutional
uncertainty). In cases where one party holds private information
(unilateral uncertainty), proportional liability is sometimes, but not
always, superior to an all-or-nothing rule.