Question

Sebastian runs a restaurant specializing in Thai cuisine. Many dishes use peanuts and, on occasion, peanuts find their way in dishes that normally don't have them. Imagine a person with a peanut allergy goes to Sebastian's restaurant and orders a dish without peanuts, but peanuts get in the dish anyway. The customer takes an epipen and is rushed to a hospital; he survives. He sues Sebastian, arguing he should take greater care ensuring peanuts don't get where they are supposed to. Based on trial evidence, suppose the judge concludes: About 1% of people have a peanut allergy; There's a 20% chance that any non-peanut dish will have peanuts in it; The cost of the epipen, hospital bills, and the customer's pain and suffering from a near-death experience total $600,000; It would cost Sebastian $5,000 to re-tool his kitchen to make sure no peanuts get in the wrong dishes Using the Learned Hand Formula, predict how the judge would rule. (Keep in mind, two things have to happen at the same time for there to be a problem: a customer to have a peanut allergy and that dish must have mistakenly got peanuts in it.)

		In favor of the Sebastian, because B>pL.
		In favor of the Sebastian, because B<pL.
		In favor of the customer, because B<pL.
		In favor of the customer, because B>pL.

Answer 1

As per learned hand formula

PL > B

where B is the cost (burden) of taking precautions, and P is the probability of loss (L). L is the gravity of loss. The product of P x L must be a greater amount than B to create a duty of due care for the defendant.

so as given

P(Peanut allergy) = 0.01

P(A non peanut dish will have peanuts in it) = 0.20

so L (Gravity of loss) = $ 6,00,000

PL = 6,00,000 * 0.01 * 0.20 = $ 1200

Here the cost of taking precautions = B = $ 5,000

so the judge would rule in favour of the Sebastian, because B > PL. Option A is correct here.