Lenders and Risky Activities: Strict Liability or Negligence Rule?

Gerard Mondello

No 2017-13, GREDEG Working Papers from Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France

Abstract: The amendments made to CERCLA in 1996 reinforced the exemption of lenders that finance ultra-hazardous activities. Then, they become involved in liability only if they manage or own polluting activities. The paper compares strict liability and negligence rule in an agency model of vicarious liability type, and proposes to restore lenders as principal by applying negligence rules to them while operators would resort to a strict liability rule. This scheme leads the lender to propose to the borrower the most favorable loan level that induces the latter to provide the socially optimal security level.

Keywords: Strict liability; negligence rule; moral hazard; judgment-proof; lenders; risky activities (search for similar items in EconPapers)
JEL-codes: K0 K32 Q01 Q58 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2017-04
New Economics Papers: this item is included in nep-law
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http://195.220.190.85/GREDEG-WP-2017-13.pdf First version, 2017 (application/pdf)

Related works:
Working Paper: Lenders and risky activities: strict liability or negligence rule? (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:gre:wpaper:2017-13

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