The Functions and the Theories of the Law of Torts: Compensation, Deterrence, Corrective Justice and Distributive Justice

Two questions are usually run together and are better kept apart. The functions of the law of torts describe what the system actually does: it compensates, it deters, it vindicates rights, it sets standards, and it spreads loss. The theories answer a harder question, which is why the loss should be moved from one person to another at all. Corrective justice says that the wrongdoer must undo the wrong he has done, which explains the fault principle exactly and explains liability without fault hardly at all. Distributive justice says that the loss should fall where it can best be borne and spread, which explains strict and absolute liability and the statutory no fault schemes, but cannot easily explain why the money goes to this particular plaintiff. The tension between them is the central argument of the subject.

What the law of torts does, and the two rival justifications for its doing it

1. The Compensatory Function

• It is the dominant function. The object of an award of damages is to put the plaintiff, so far as money can do it, in the position he would have occupied had the tort not been committed. That is restitutio in integrum.
• It looks backward, at the loss, and not forward at the defendant's conduct.
• It covers both pecuniary and non pecuniary loss: medical expenses and lost earnings on the one hand, and pain, suffering and loss of amenity on the other.
• It is the function the statutes have taken over. The Employee's Compensation Act, 1923, Section 164 of the Motor Vehicles Act, 1988 and the Public Liability Insurance Act, 1991 all pursue compensation, and do it faster than a civil suit.
• Its weakness is that it works only where there is a solvent defendant. A plaintiff injured by an uninsured and impecunious wrongdoer is compensated by nobody, which is the principal argument for compulsory insurance and for public compensation funds.

2. The Deterrent Function

• Liability makes carelessness expensive, and what is expensive tends to be avoided. That is the deterrent claim.
• It looks forward, at conduct, and not backward at the loss.
• It is strongest where the defendant can actually control the risk, which is why it works better against a manufacturer or an employer than against a motorist in a moment of inattention.
• Liability insurance weakens it considerably. Where the defendant is insured, the cost of the judgment falls on the insurer and is spread across the premium pool, so the individual wrongdoer feels little of it.
• Insurance does not destroy deterrence altogether, because premiums are experience rated and a bad record is costly, but the connection is much looser than the theory supposes.
• Exemplary damages are deterrence in its clearest form, since they exceed the plaintiff's loss and are awarded precisely to discourage the conduct.

3. The Other Functions

4. Corrective Justice

• The idea is Aristotelian. Aristotle distinguished distributive justice, which allocates benefits and burdens across a community, from corrective justice, which restores an imbalance created between two individuals by a wrong.
• The claim is bilateral. It runs between this plaintiff and this defendant, and involves nobody else. The wrongdoer must undo the wrong he did, to the person he did it to.
• It explains what nothing else explains, namely why the damages are paid to the victim rather than into a public fund, and why they are measured by his loss rather than by the defendant's culpability or means.
• It fits the fault principle exactly. If liability rests on the defendant having done something he ought not to have done, the obligation to repair follows naturally.
• It struggles with liability without fault. If the defendant did nothing wrong, there is no imbalance for him to correct, and corrective justice has no obvious answer to Rylands v. Fletcher or to M.C. Mehta.
• It also struggles with insurance. If the loss is in fact borne by an insurer and ultimately by the premium pool, the bilateral correction between wrongdoer and victim is a fiction, however useful.

5. Distributive Justice

• The question it asks is different. Not "who did wrong?" but "where should this loss fall?"
• The answer it gives is that the loss should fall where it can best be borne, by the party best placed to insure against it, to spread it through prices, and to prevent it in future.
• It justifies strict liability. A person who brings a dangerous thing on to his land for his own purposes should bear the cost of its escape, whether or not he was careless.
• It justifies absolute liability even more directly. In M.C. Mehta v. Union of India, (1987) 1 SCC 395, the Court reasoned that an enterprise engaged in a hazardous activity for its own profit must absorb the cost of the harm it causes as an item in the cost of that activity, and tied the quantum to the magnitude and capacity of the enterprise.
• It justifies the statutory no fault schemes, and the compulsory insurance that makes them work.
• Its weakness is that it cannot explain the shape of a tort action. If the object is to put the loss where it is best borne, there is no reason for the money to go to this plaintiff rather than into a general fund, and no reason for a two party lawsuit at all.

6. The Two Theories Compared

7. The Fault Principle and Its Retreat

1. The fault principle is still the general rule. No liability without fault, meaning either intention or negligence, remains the starting point of the subject.

2. Its justification is corrective justice, and its practical merit is that it gives a person a standard he can comply with: take reasonable care, and you are safe.

3. The retreat began with Rylands v. Fletcher (1868), which imposed liability for the escape of a dangerous thing without proof of negligence, though subject to a list of exceptions.

4. Vicarious liability is a second inroad, since the employer is liable for a tort he did not commit and may have taken every step to prevent.

5. The statutory schemes are a third, and quantitatively the largest: most compensation actually paid in India for personal injury is paid under the Motor Vehicles Act and the Employee's Compensation Act, without any finding of fault.

6. Absolute liability is the furthest point reached. M.C. Mehta removed every exception for an enterprise engaged in a hazardous activity.

7. But the retreat is not a rout. Outside the defined classes, a plaintiff must still prove fault, and the ordinary negligence action remains the centre of the subject.

8. Where the Theories Meet the Practice

9. The Position Stated Shortly

1. The functions of tort law describe what the system does; the theories explain why the loss should be moved at all.

2. The compensatory function is dominant, and its principle is restitutio in integrum.

3. The deterrent function looks forward at conduct, and is strongest where the defendant can control the risk.

4. The other functions are appeasement, vindication of rights, loss spreading, regulation of conduct, and, through exemplary damages, punishment.

5. Corrective justice is the Aristotelian idea that the wrongdoer must undo the wrong he did, and the claim is bilateral.

6. It explains why damages go to the victim and why they are measured by his loss, and it fits the fault principle exactly.

7. Distributive justice asks where the loss should fall, and answers that it should fall where it can best be borne and spread.

8. It justifies strict liability, absolute liability and the statutory no fault schemes, and it is the reasoning of M.C. Mehta.

9. Neither theory explains the whole subject: corrective justice cannot account for liability without fault, and distributive justice cannot account for a two party action.

10. Liability insurance serves compensation, weakens deterrence, and complicates corrective justice as a description of what actually happens.