The court has to somehow figure out what would have happened if the tort had never happened. The counterfactual is the plaintiff's life without the tort. If someone slanders you and you sue for damage to your reputation, then the court has to estimate the dollar value of the difference between your actual reputation and your counterfactual reputation if you had not been slandered.
More common are lawsuits over contract law, and these also depend on counterfactual reasoning. This is one of the most misunderstood points in all of law. If you sign a contract to rent a house from someone for $1000, and you break the contract, then he can sue you for the $1000. But the court will only award the counterfactual damages. If he could have easily found another tenant to pay the $1000, then you may not owe anything. Or you might even owe more than $1000, if he has lost business because of your vacancy.
The debate about Trayvon Martin asked questions like: What if Martin had been white? What if Zimmerman stayed in his car?
At the Zimmerman trial, the prosecutor misunderstood the role of the expert:
Prosecutor Bernie de la Rionda: In order to give an opinion, when someone gives you a hypothetical, it has to based on facts that are accurate and truthful, correct?Di Maio is correct. An excellent expert witness could testify entirely by answering hypothetical questions, and never even look at the facts of the case. For example, a witness might be useful just answering these hypothetical questions: "What does a gunshot would look like if the gun is pressed against the skin? If the gun is 3 inches away? 12 inches? 24 inches? How is that known?" The jury could then apply his knowledge to the facts of the case.
Di Maio: A hypothetical doesn't have to be true. A hypothetical is just "suppose this and this happened ...".
Prosecutor Bernie de la Rionda: So we would be speculating, I guess, or potentially speculating?
Di Maio: It is not even speculating. You are giving a presentation and asking what it is.
Most witnesses in court are not allowed to speculate, or offer counterfactual reasoning. That is restricted to lawyers making arguments (not under oarh), and expert testimony. A expert must follow the Daubert standard, as codified in US federal court as FRE 702:
A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if:When the expert describes those reliable principles and methods, he often tells how they apply to hypothetical situations. As the jury (or maybe the judge) determines the facts, testimony about counterfactuals in the most useful. Often there is no need for the expert to offer any opinion about the facts of the case, if the jury is taught how to apply the generally accepted knowledge.
(a) the expert’s scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;
(b) the testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and methods; and
(d) the expert has reliably applied the principles and methods to the facts of the case.
Thus counterfactuals are essential to the law.
Update: A 2010 US Supreme Court decision said that a lawsuit "does not require precise proof of what the Board's policies might have been in that counterfactual world." I mention this because it is understood that lawsuits are all about proving scenarios in counterfactual worlds, even tho that terminology is uncommon.