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Abstract

This article explores the economic rationale for applying product liability law to computer software. As demonstrated in the article, a well-designed liability regime must place liability upon all parties who economically control the risks of accidents. Accordingly, this article finds that strict liability may be appropriate for certain types of “intrinsic” software, but not for other types of software requiring that the customer be actively involved in the selection, operation and maintenance thereof. The authors show that for this type of “extrinsic” software, a strict liability rule is unlikely to be economically optimal and, therefore, choosing a generic liability regime applicable to all forms of software is ill-advised. Instead, a more nuanced approach is required to achieve a desirable policy outcome.