Steven Shavell, Liability for Accidents, in 5 The New Palgrave Dictionary of Economics 3690 (Steven N. Durlauf & Lawrence E. Blume eds., 2nd ed. 2008).
Abstract: Legal liability for accidents governs the circumstances under which parties who cause harm to others must compensate them. There are two basic rules of liability. Under strict liability, an injurer must always pay a victim for harm due to an accident that he causes. Under the negligence rule, an injurer must pay for harm caused only when he is found negligent, that is, only when his level of care was less than a standard of care chosen by the courts, often referred to as due care. (There are various versions of these rules that depend on victims’ care, as will be discussed.) In fact, the negligence rule is the dominant form of liability; strict liability is reserved mainly for certain especially dangerous activities (such as the use of explosives). The amount that a liable injurer must pay a victim is known as damages.