Contract and Tort Interrelationship - Case Study Example

"Because contract was traditionally seen as the method for resolving disputes involving pure economic loss, it was originally thought that where two parties had made a contract, a negligence action could not be used to fill in any gaps in that contract" How has Tort overcome the restrictions involved in a strict reading of the law of Contract The law of torts developed out of court decisions in providing remedies where there are no remedies available in any statutory law enacted by the legislation. In the beginning of law where disputes arise between parties the courts use to see whether there is any remedy for the dispute. The court recognized the right only when there is a remedy on the principle Ubi remedium ibi jus, which means where there is remedy there is right. One had to search for the proper remedy that suits his right then only he could succeed. If there was no remedy there was no right and there is no case. By passage of time the complicated litigations coming before the courts necessitated to change the concept of law. Accordingly the concept of law was changed as Ubi jus ibi remedium, which means where there is right there is remedy. This concept enable the courts to see that if there is a right existing then it will decide what is the remedy. Right of the litigant is given prominence over the remedies to protect the rights effectively. Under the new concept the courts have provided a remedy whenever there has been unjustifiable interference with the rights of a person. When the law of contract is read strictly, we find the rights are restricted to its terms and conditions. The law recognizes the rights that are specifically created by a contract and ignores if that right is not covered in the terms of contract. And such rights created by the contract are limited to only the parties to the contract, a third party do not derive any right against any of the parties to the contract even though the loss is caused to him due to the negligence. It provides relief to the parties to the contact only, that too it is limited to the extent of monitory or economic loss. The law of contract see whether there is any breach of contract by either of the parties to the contract but non else. The remedies in law of contract are strictly connected with the terms and conditions of the contract entered into by the parties. Once all the terms and condition of the contract are fulfilled no cause of action arises to either parties, even though any inconvenience caused due to unjustifiable interference by the other party with in the terms and conditions. But the law says that no person can interfere unjustifiably with the rights of the other person. If that happens the court provides remedy not under the law of contract but under the law of tort. This is how the tort overcomes the restriction involved in strict reading of the law of contract. The law fills up the gap in the law of contract mostly in cases of negligence of one of parties to the contract due to which the other part causes mental agony or physical or mental loss in addition to the economic loss. Some time the party who is not a party to the contract too subjects to the mental agony or physical loss due to the negligence act of the any other parson. In certain situations the courts cannot find any remedy in the law of contract, but the law of tort fills up this gap and provides the remedy. Contract and Tort inter relationship[9]: Contract and Tort have interrelationship as far as the remedies are concerned. Plaintiffs are at a liberty to choose the remedy either in law of contract or in Tort. The law of contract is specific and remedies under contract are time consuming and costly when compared to the Tort. As discussed above sometimes remedy cannot be found in contact in such conditions the remedy lies in the Tort. Where a dispute consists of ingredients of both contract and Tort as well then the plaintiff is at a liberty to choose the action either under contract or under Tort. It means that mere existence of all the ingredients of Contract do not prevent the plaintiff from seeking relief under Tort. "Junior Books v. Beitchi Co Ltd"[1] In this case the plaintiff entered into a contract with 'A' for construction of a warehouse building. 'A' has given construction of flooring for subcontract. The sub contractor 'B' has installed substandard flooring. The plaintiff has a contractual right on 'A' to claim compensation and 'A' in turn has contractual right on 'B' for defective construction of the flooring. The plaintiff has a remedy against 'B' in Tort for his negligence construction. Therefore Tort has wider scope than that of contract. "Donoghue v Stevenson(1932)AC 562 House of Lords(Sctoland)" [2] It is a famous English case law. In this case the liability towards the negligence under Tort is elaborately discussed. This case relates to liability of the manufacturer to the ultimate consumer. In the case the appellant/plaintiff has consumed ginger beer in Minchella's caf. In the beer they noticed a decomposed body parts of snail after they consumed the beer. Due to consuming of that ginger beer they suffered with shock and gastric illness. The appellant filed a case on the manufacturer of the ginger bear for his negligence. The respondent manufacturer side it was argued that the manufacturer is not liable to the consumer since there is no contractual relationship between the manufacturer and the consumer. The trial court accepted the respondent arguments and decided in favour of the respondent. Then this appeal came before the court of appeal. There are two well established principle in common law one being "non other than a party to the contract can complain of a breach of contract", which is also known as privity to contract, and the other being "negligence apart from contract gives a right of action to the party who is injured". The first principle is applicable to the law of contract and the second is applicable to Tort. In the present case on strict reading of the law of contract the plaintiff cannot get relief applying the first principle. But the plaintiff gets relief in Tort by applying the second principle. Ultimately the basic principle of the law is to provide relief to the person injured. Where relief cannot be provided to the injured person under the contract law Tort provides the relief. Similarly the court of appeal has provided relief to the appellant in the present case duly applying the second principle. It was held that the manufacturer was liable to pay the compensation though there is no contractual relationship between the appellant and the manufacturer and no relief is available under the law of contract. The manufacturer cannot take a plea that the appellant is not a party to the contract, but the manufacturer is liable under Tort for its negligent act, thereby the Tort has overcome the restrictions involved in the contract law for providing the justice to the injured. "George v. Skivington (L. R. 5 Ex. 1.)"[3] It is another case where the appellant has used the noxious hair wash and suffered injury due to the negligence of the manufacturer. It was held that the manufacturer is liable for the negligence act even in the absence of the contractual relationship. The appellate court has relied on this case while dealing with "Donoghue v Stevenson" case. "Murphy v. Brentwood District Council (1990) 2 All ER 908"[4] In this case the plaintiff engaged a contractor for construction of a building company. The contractor has engaged a subcontractor for construction of a floor in the same building. The owner has recommended the subcontractor. The flooring constructed by the subcontractor was defective and the owner was required to remove the flooring and reconstruct. There by the owner has incurred financial loss. He claimed compensation from subcontractor. The House of Lords held that the subcontractor is liable. In this case there is no contract between the subcontractor and the owner. In strict reading of the contract law the owner has no remedy against the subcontractor under the rule of privity to contract since the owner is not a party to the contract. But justice cannot be denied to the deserving, this limitation in the law of contract is overcome by tort by providing relief to the owner against the negligent or defective action of the subcontractor leading to defective construction of flooring. The Tort applies in cases of services provided by transport organizations such as railway transportation. When a passenger is purchasing a ticket he is entering into a contract with the railway. The terms and conditions of the contract between the railway and the passenger determine the responsibility of the railway to provide him the accommodation for which he has paid and to reach him to the destiny. If any of the terms and conditions are not fulfilled by the railway it leads to breach of contract and liable to pay compensation under the law of contract. But some times the passenger gets inconvenience and causes mental agony due to the negligence on part of the railway which is not covered under the contract, for instance if any unauthorized persons intrude into the compartment and causes any loss to the passenger the law provides remedy to the passenger against the railway under Tort, fixing the railway liable for its negligence act, since it is the primary responsibility of the Railway to arrest the entry of unauthorized persons into the reserved compartments and to provide security to the passengers throughout their journey even thought such things are not covered in the contract. Railway cannot take shelter under the law of contract. Tort is customer welfare oriented legislation aiming at speedy and less cost remedial tool. Negligence in performance statutory duty gives right to sue the third party: "Duttton v. Bongnor Regis"UDC (1972)1 QB 373"[5] In this case the council was vested with a statutory duty to inspect and supervise the construction of the building. It negligently allowed the builder to construct the building with inadequate foundation. The council aught to have stopped the builder from constructing house with the inadequate foundation. It has carelessly allowed and failed to perform its legally bounded duty. The house got damaged the landlord had to incur expenses for repair. Since it all happened because of the negligence of the council the landlord filed a suit on the council for recovery of expenses. If we look into the case from contract law angle we find that the council is not liable and there is no cause of action to the landlord against the said council since he is stranger to the contract of construction. And no suit lies against him for damages or for any other reasons. But Tort comes to the rescue. Under the Tort he is liable and suit lies against him from the landlord. There fore the court has allowed the suit and held that the council is liable for compensation since it was negligent in performing its legally bounded duty and thereby causing loss to the plaintiff. The cause of action arises in tort out of a careless action causing physical injury or property damage to the customers directly. The law has changed to provide the maximum relief and to protect the consumer's from any sort of injuries caused out of a contractual obligation, though such obligation or relief against breach of such obligation is not provided in law of contract. It is equally important that mere careless or negligent action or misrepresentation alone is not enough for a cause of action to arise in tort, the intention or the knowledge behind such an action determines the existence of cause of action, if such negligent action is due to innocence or out of knowledge that it would cause an injury to the other party then there is no cause of action to fix liability in tort. "Hedley Byrne & Co Ltd v. Heller and partners"[6] Another instance where the Tort overcomes the limitations of the law of contract is in construction cases. When a builder is engaged to construct a building, he construct the building, after sometime the owner of the building sells to the another purchaser subsequently the building gets damaged due to defective construction. Then the subsequent buyer gets rights to sue the builder on Tort, though the buyer is a stranger to the contract of the construction, and the builder is forbidden from taking the shelter under the law of contract under rule of privity to contract. Remedy against Fraud lies in Tort: If any person incurs any loss due the fraudulent action of the other such person gets remedy under Tort. For example if 'A' gives fraudulent information about his product to induce 'B' to purchase the same. Subsequently 'B' incurs any loss by purchasing the product. 'B' can sue 'A' on the charges of fraud under Tort. "Mc Connel v. Wright"[7] In this case the plaintiff purchased shares in defendant's company influenced by the fraudulent information in its prospectus. There by he incurs loss. The plaintiff cannot sue him under breach of contract since there is no breach of contract. The contract is completed as soon as the plaintiff has performed the contract by paying the share amount. And the defendant has performed its contract by allotting the shares there is no breach of contract. But still the plaintiff has incurred loss due to fraudulent prospectus. If the Prospectus is not containing any fraudulent information and the plaintiff has purchased the shares the plaintiff has no remedy either in contract law or in Tort. Since the prospectus was fraudulent and induced the plaintiff to buy the shares the plaintiff derives right to sue for damages from the defendant for fraud in Tort. Who ever give wrong information knowingly with an intension to induce the other to act upon is liable to pay damages under Tort irrespective of the fact that he is a party to the contract or not. We find such litigations take place in the business of real estate mostly. For instant 'A' an agent of real estate firm gives wrong information about a building and induces 'B' to purchased the building from the real estate firm. Subsequently he finds some defect in the building and incurs loss. 'B' do have remedy not only against the real estate firm under breach of contract but also 'A', since it is very clear in the terms of contract it fulfilled all the terms and conditions of contract. But it is the 'A' agent who gave wrong information. Under such circumstances the 'A' is liable to pay the damages to 'B' for giving wrong information and 'B' relied on the information given by 'A' and purchased the building. "Shanklin Pier v. Detel Products Ltd"[8] In this case the plaintiff Pier enquired the agent of the Detel Products Ltd that whether the paint is suitable for pier. The representative has given assurance to the plaintiff about the paint its quality and suitability to his requirements. He assured the life of the paint for seven years. The plaintiff has contracted for the paint believing the assurances given by the representative. Contrary to the assurance of the representative the paint was not suitable for the job and faded away. It was held that the cost of repainting could be recovered either under contract law or in Tort. As argued in above cases and circumstances it is clear that there are circumstances where there is no remedy available in law of contract to the injured because though the contract is performed in strict compliance of the terms and conditions still the customers are subjected to injury or loss due to either negligence or fraud or providing of wrong information. These are key areas of the restriction involved in strict reading of the law of contract in providing relief to the injured. Tort overcome these restrictions and provides relief. This legislation is has become essential in the modern economic conditions and modern market, in which it is very easy to make undue influence and mislead the consumers with innovative techniques and lead them to injuries for the sole benefits of promoting the business. Foot Notes List of Cases referred In the essay [1] Law of contract, p.26 Thirteenth edition, by Cheshire, Fifoot & Furmstone [2] Contract - Cases and material, p.23, Authors: Beal GH, Bishop WD & Furmston MP [3] www.leeds.ac.uk/law/hamlyn/donoghue.htm [4] Contract - Cases and material, p.32, Authors: Beal GH, Bishop WD & Furmston MP [5] Contract - Cases and material, p.30, Authors: Beal GH, Bishop WD & Furmston MP [6] Contract - Cases and material, p.27, Authors: Beal GH, Bishop WD & Furmston MP [7] Contract - Cases and material, p.37, Authors: Beal GH, Bishop WD & Furmston MP [8] Contract - Cases and material, p.37, Authors: Beal GH, Bishop WD & Furmston MP [9] Law of contract, p.25, Thirteenth edition, Author: Cheshire, Fifoot & Furmston's, Bibliography Law of contract, Thirteenth edition, Author: Cheshire, Fifoot & Furmston's Contract - Cases and material, Authors: Beal GH, Bishop WD & Furmston MP www.leeds.ac.uk/law/hamlyn/donoghue.htm Read More