In the law of torts of negligence, calculus of negligence can be understood as; weighing up various variables to assess whether a party acted appropriately while countering a foreseeable risk. This is an inquiry to determine whether a party has breached that necessary amount of duty of care. This rule aims to maintain a balance between protecting people from the carelessness of others and ensuring that businesses are not unduly disadvantaged. It ensures that people do not have to take costly precautions to alleviate every potential risk of causing a loss to others.
The term was originated in the 1947 case of the United States v. Carroll Towing Co. In that case, a barge had not been properly secured to a pier, and it drifted away, causing damage to several other boats. While determining whether the defendants had taken the necessary amount of care the court held that, "The owner's duty, in other similar situations, to provide against resulting injuries is a function of three variables: the probability that he will break; the severity of the resulting injury if he does; The burden of adequate precautions. "
The term can be simplified through representation by a formula;
Where B is the burden of taking precautions, P=the probability of a loss/damage is occurring, and L=the gravity/seriousness of that loss/damage.
If the loss can be avoided for less than the cost of the loss (less than the BPL), then the person should be cautious, rather than incurring the loss. If precautions are not taken, we find that a legal duty of care has been breached, and we impose an obligation on the person to pay the damages.
Outside legal proceedings, this rule is also made of use during insurance, risk management, quality assurance, information security, and privacy practices. It takes into account due care and due diligence decisions in business risk.