Legal liability

In law, liable means "[r]esponsible or answerable in law; legally obligated." Legal liability concerns both civil law and criminal law and can arise from various areas of law, such as contracts, torts, taxes, or fines given by government agencies. The claimant is the one who seeks to establish, or prove, liability. Claimants can prove liability through a myriad of different theories, known as theories of liability. Which theories of liability are available in a given case depends on nature of the law in question. For example, in case involving a contractual dispute, one available theory of liability is breach of contract; or in the tort context, negligence, negligence per se, respondeat superior, vicarious liability, strict liability, or intentional conduct are all valid theories of liability.

Each theory of liability has certain conditions, or elements, that must be proven by the claimant before liability will be established. For example, the theory of negligence requires the claimant to prove that (1) the defendant had a duty; (2) the defendant breached that duty; (3) the defendant's breach caused the injury; and (4) that injury resulted in recoverable damages. Theories of liability can also be created by legislation. For example, under English law, with the passing of the Theft Act 1978, it is an offense to evade a liability dishonestly. Payment of damages usually resolves the liability. A given liability may be covered by insurance. In general, however, insurance providers only cover liabilities arising from negligent torts rather than intentional wrongs or breach of contract.

In commercial law, limited liability is a business form that shields its owners from certain types of liability and that amount a given owner will be liable for. A limited liability form separates the owner(s) from the business. This means that when a business is found liable in case, the owners are not themselves liable; rather, the business is. Thus, only the funds or property the owner(s) have invested into the business are subject to that liability. If, for example, a limited liability business goes bankrupt, then the owner(s) will not lose unrelated assets such as a personal residence (assuming they do not give personal guarantees). This is the standard model for larger businesses, in which a shareholder will only lose the amount invested (in the form of stock value decreasing). (For an explanation, see business entity.) There is an exception to this rule that allows a claimant to go after the owners of a limited liability business where the owners have engaged in conduct that justifies the claimant's recovery from the owners. This is known as "piercing the veil."

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