Under principles of tort law, persons are sometimes, but not always, held liable for conduct that causes others to suffer personal injuries, property damage, or impairment of legally valuable relationships. In general, compensation for a particular type of harm is governed by tort law (mandatory obligations imposed by the rules of society) rather than by contract principles (obligations voluntarily assumed by the parties or supplied by default rules) if the market does not offer a viable mechanism for the parties to allocate the risks of loss.

From an economic perspective, tort law is concerned with promoting optimal investment in safety and minimizing the costs of accidents. The rules of [Page 770]tort law that determine whether liability is imposed and how extensively damages are assessed have important ...