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Should Courts Deduct Nonlegal Sanctions from Damages?

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  • Cooter, Robert
  • Porat, Ariel

Abstract

When legal and social norms regulate the same behavior, an act can trigger both legal and nonlegal sanctions. Should courts deduct the nonlegal sanction suffered by the wrongdoer from damages owed to the victim? We provide the answer for a legal system that seeks to minimize social costs. Nonlegal sanctions typically harm the wrongdoer and benefit other people. In principle, courts should avoid overdeterring wrongdoers by deducting the benefit of the nonlegal sanction from compensatory damages. In practice, instead of deducting the benefit of the nonlegal sanction to other people, courts should deduct the burden on the wrongdoer. Deducting the burden of the nonlegal sanction from compensatory damages typically improves the incentives of wrongdoers and victims. We make practical suggestions for courts to implement our proposal that would significantly reduce damages in torts and contracts. Copyright 2001 by the University of Chicago.

Suggested Citation

  • Cooter, Robert & Porat, Ariel, 2001. "Should Courts Deduct Nonlegal Sanctions from Damages?," The Journal of Legal Studies, University of Chicago Press, vol. 30(2), pages 401-422, Part I Ju.
  • Handle: RePEc:ucp:jlstud:v:30:y:2001:i:2:p:401-22
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    File URL: http://dx.doi.org/10.1086/322058
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    Cited by:

    1. Florian Baumann & Tim Friehe & Kristoffel Grechenig, 2010. "Switching Consumers and Product Liability: On the Optimality of Incomplete Strict Liability," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2010_03, Max Planck Institute for Research on Collective Goods.
    2. Baumann, Florian & Friehe, Tim & Grechenig, Kristoffel, 2011. "A note on the optimality of (even more) incomplete strict liability," International Review of Law and Economics, Elsevier, vol. 31(2), pages 77-82, June.
    3. Bruno Deffains & Claude Fluet, 2013. "Legal Liability when Individuals Have Moral Concerns," Journal of Law, Economics, and Organization, Oxford University Press, vol. 29(4), pages 930-955, August.
    4. Funk, Patricia, 2004. "On the effective use of stigma as a crime-deterrent," European Economic Review, Elsevier, vol. 48(4), pages 715-728, August.
    5. Edward M. Iacobucci, 2014. "On the Interaction between Legal and Reputational Sanctions," The Journal of Legal Studies, University of Chicago Press, vol. 43(1), pages 189-207.
    6. Bruno Deffains & Claude Fluet, 2007. "Legal versus Normative Incentives under Judicial Error," Cahiers de recherche 0718, CIRPEE.

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