Economic Analysis of Prescription in Tort Law

Abstract

This chapter highlights the complexity of economic analysis which examines whether, when and to what extent prescription law contributes to the efficiency of tort law or reduces it. It is complex because the of the many relevant aspects of efficiency: deterrence, loss spreading, litigation costs, costs of preserving evidence and financial reserves, clarity of financial situation and uncertainty aversion. It is further complicated by the cross-effects between these various aspects. The analysis leads to the following conclusions. As to the length of the general prescription period, there are good reasons to believe that relatively short prescription periods are efficient. As to rules of suspension, postponement of expiry and renewal of the pre-scription period, it appears that the overall efficiency of each rule depends on the degree of uncertainty that it generates, and on the number, size and the quality of the actions which it “saves” or is expected to save from prescription.The efficiency of the “long-stop” (ceiling) period, seems also to depend on the number, the size and the quality of claims that such a long-stop period pre-scribes or is expected to prescribe. It is further argued that the common intuition which tells us that prescription law is “bad” for plaintiffs is misleading. Potential and actual plaintiffs may well benefit from time limits that improve deterrence and loss spreading, increase their chances of winning and lowering the costs they incur.

Keywords: prescription, limitation of civil actions, time limits, tort law, economic analysis, discovery rule

JEL Classification: k13, k49