Damages in Torts and Breach of Contract - Term Paper Example

Damages in Torts and Breach of Contract a. Introduction Damages is a form of compensation intended for the innocent party as a form of recovery from losses suffered as a result of a breach of contract or for torts. According to Lord Diplock in The Albazero (1977)1 “Damages recoverable for the invasion of a legal right, whether of a contract or by commission of a tort, is compensatory...The person whose right has been invaded” shall be restored to that “ same position” upon which he/she would have been had the contract or right have “ been respected” to the extent that “ the award of a sum of money” can compensate for such loss triggered by the breach of contract of personal injury resulting from tort. Recovery for damages can be done for tort and breach contracts. Although both are premised on an “invasion of a legal right” there is a marked difference in the elements constituting the invasion of the right differs between breach of contract and torts. To get a clearer picture, let us discuss them separately. b. Breach of Contract Breach of contract is premised on the agreements of the parties and the non-compliance thereof by any of the parties. The non-compliance of contract by one or both of the parties constitute a breach which may be compassable upon a showing that actual loss has been caused by the breach, such loss is directly connected with the contract and not too remote or too far removed, such loss is recognized as giving rise to compensation or restitution as the case may be and that losses or damages can be proven based on the evidential requirements presented under the law. In contracts, the expectations of the parties as embodied in the document, are binding. Lord Wilberforce in the case of Johnson v Agnew (1979)2 explained that the purpose of imposing penalties or damages is to restore the aggrieved party “in the same position as if the contract had been performed.” a. Proof of Actual Losses Proving actual losses in cases of breach of contract falls upon the claimant based on the principles that “he who asserts must prove.” Where a claimant alleged that he/she suffered losses due to the non-performance of the other party, such claim must be adequately documented and verifiable. The premise of the remedy for breach is to compensate the victim for actual losses and not to transfer the gains generated by the contract breaker from the breach to the victim3. In other words, there has to be actual verifiable loss on the part of the claimant and such losses should not be too remotely connected to the breach of contract. In case of Hadley v Baxendale (1854)4 , the Court laid down the rules for ascertaining the connection of the losses to the breach of the contract. First rule states that it should be “naturally, (i.e. according to the usual course of things) form the breach of contract” and second, such must be within the purview of the intentions of the parties at the time of they entered into the contract to constitute a “possible breach of it.” Two elements therefore should be observed in this situation in order for a breach to occur; first the reasonableness of the act to be performed and second, the intent of the parties that such act be performed in connection with the contract. To illustrate, in a contract to build a house, the act to be performed is construction, which is the logical action and coming up with a durable and well-constructed house as the intent of the parties. Given these premises, a purported breach of contract may be observed if the house would collapse in a matter of months due to poor construction. b. How can losses be measured in Breach of Contract? According to the case of Robinson v Hartman (1848)5 there are three possible measures of losses which are as follows: (a) loss of bargain (b) wasted expenditures or reliance losses and (c) a claim for restitution. Unlike tort which takes the primary remedy of reliance damages, breach of contract normally rely on loss of bargain where the aggrieved party purportedly did not get what he/she expected to get out of the contract. A good example of this is the loss of market value, which stem from the defective work of the contract breaker6. Note that the measure in loss of bargain is there are actual losses incurred and not just an arbitrary claim that a loss was incurred or the other party to the contract enjoyed a profit without necessarily putting the other party at a disadvantaged position7. This is evidenced in the case of Chaplin v Hicks (1911)8 where the Court ruled that the fact that the respondent won a prize in connection with a transaction entered into by the respondent as part of the performance of the contract between respondent and claimant does not entitle the claimant to a share of the prize. On the other hand, reliance loss is characterized by the existence of wasted expenditures due to the breach9. This is more difficult to prove compared to the loss bargain. As for restitution, unlike the two other measures of damages, which are alternative and mutually exclusive and prevents double recovery of damages, this arises even if there is total absence or failure of consideration. Restitution hinges on the premise that what has been expended should be restored. As the term “quantum meruit” means “the amount he deserves” or “what the job is worth” such would bring about an obligation to pay a reasonable sum. This also true in quasi-contracts of where there is no express agreement as to price10 and for work done which are outside of the provisions of the contract11. c. Defence in Breach of Contract The defence of good faith and “force majeure” is valid in cases of breach of contract. Where there is a clear showing that the act was performed in good faith and that the resulting damages was cause by acts of nature or “force majeure” such defence is valid provided that no delay in the performance thereof have been incurred. Otherwise, where delay have already been incurred prior to the occurrence of the event which result in the destruction of damage of the goods subject to the contract, such defence of good faith and “force majeure” will no longer be applicable. c. Liabilities in Torts Unlike is the breach of contract where there is agreement between the parties, which was violated; tort arises in cases where there is no expressed agreement and where the duty of care is inherent in a given situation. Damages in tort rely on the basic principle of damages for personal injury. The primary remedy is reliance damages, which purport to extend compensatory damages to the claimant. In the case of Livingstone v Raywards Coal (1880)12 Lord Blackburn defines personal damages for personal injury in tort as “that sum of money which will put the party who has been injured, or who had suffered, in the same position as he would have been if he had not sustained the wrong for which he is now getting this compensation.” There are two types of damages, which can be claimed under tort namely, pecuniary loss and non-pecuniary loss. d. Pecuniary Losses Pecuniary losses arise where there is direct monetary loss incurred by the claimant in case of tort. Unlike in breach of contract where claims for unjust enrichment is totally prohibited13, damages in torts allow for recovery thereof. Accordingly, there are a number of instances where damages in tort can be rightfully claimed namely (a) trespass to land (b) trespass to goods (c) Conversion (d) Nuisance (e) deceit (f) economic torts and (g) miscellaneous torts. In the case of Stoke-on-Trent CC v W&J Wass ltd.(1988)14, the Court observed that where a person wrongfully used the property of another is guilty of tort and may be compelled to pay damages for wrongful use of property. The wrong done in this case is that the rightful owner of the property is divested the right to use his/her property during the time the respondent used such property without consideration within the period of wrongful possession. The remedy of restitution can be claimed under this circumstance is restitution and an assessment of the gains which the torfeasor acquired in relation to the wrongful act15. With regards to trespass to goods and conversion however, the court adopted a narrow approach in the case of Chesworth v Farrar (1967)16 following the rulings of the case of Lamine v Dorrell (1701)17 the Court said that remedies for trespass to properties is only disgorgement of benefits where the claimant can only recover the price or the proceeds of the goods sold without attempting to ascertain the market value of the goods in question. e. Non-pecuniary Damages Claims for non-pecuniary losses usually arise in cases of (a) breach in the duty of care (b) loss of amenities (c) damages for distress (d) loss of chances and (e) loss of reputation. Unlike pecuniary damages, which are usually based on losses measurable by actually, loss of money and opportunities related to thereto, non-pecuniary losses are more abstract and has to be quantified in terms of the degree of personally injuries and damages suffered by the claimant18. In the case of Penny and others v East Kent Health Authority19 the Court ruled that respondents are liable for negligence in the duty of care after a patient developed cervical cancer following an incorrect screening which purportedly gave a negative result. Accordingly, the respondents have the duty of care to the patient to take the necessary steps and within the reasonable bounds of care to ascertain the patient’s true condition and to submit for further screening where there are uncertainties and abnormalities noticed during the examination. Furthermore, in cases of damages in torts, third parties such the family members of the victim may also claim for damages for breach in the duty of care under the arguments of nervous shock or damages for distress20. As in the case of f. Defence in Torts Self-defence is available in cases of personal damages incurred in relation to an act. In the case of Cross v Kirby (2000)21, the Court ruled that the defendant is not liable where he acted in self-defence to protect himself from serious injuries. The gauge of the liability is not in the actual damages resulting thereto nor the degree of action the defendant took to protect himself but rather on the degree of necessity as perceived by the defendant in the “agony of the moment”. Further more, the defence of ‘ex turpi causa” of the “illegality of the act” which provoked the action which resulted to damages is also a valid defences. g. Conclusion Damages on breach of contracts and torts are similar in terms of the intent of the law to compensate the aggrieved party for losses incurred due to the wrongful act of another. However, they differ in terms of the powers from which the obligation would be based and in the applications of the damages. For breach of contract, it is essentially a breach in the terms of the agreements of parties and the consequential losses incurred. On the other hand, damages for torts arises out personal injuries incurred from the acts or omissions of the other (i.e. malfeasance, misfeasance and nonfeasance.) Wherefore, where the defences available to parties in cases of damages arising from torts and those arising from breach of contract would also vary accordingly. In other words, although both acts give rise to damages the causes and effects thereof differ based on the nature of the relationship among parties involved. Bibliography Books and Articles 1. Francesco G. (2001) Restitution for Wrongs: A comparative Analysis. Oxford U. Comparative L. Forum 6 2. Law Commission Report 257 Published 1999: Damages for personal Injury – Non-Pecuniary Loss 3. Law Commission Report, No. 247, para 3.44, published in December 1997. Cases 1. Albazero (1977) AC 774 at 801 2. Angelia Television v Reed (1972) 1 QB 60 3. British Steel v Cleveland Bridge (1984) 1 All ER 504 4. Chaplin v Hicks (1911) 2 KB 786 (1911-13) All ER Rep 224 CA 5. Chesworth v Farrar (1967) 1 QB 407 6. Cross v Kirby (2000) CA Times 5/4/2000 7. Farley v Skinner (2001) UKHL 49, (2002) 2 AC 344; 8. G W Atkins Ltd. v Scott (1980) & Const LJ 215 CA 9. Hadley v Baxendale (1854) 9 Ex 341 10. Jarvis v Swan Tours (1973) QB 233 (S&T) 11. Johnson v Agnew (1979) 1 All ER 883 at 896 12. Lamine v Dorrell (1701) 2 Ld. Raym. 1216; 92 ER 303 13. Livingstone v Raywards Coal (1880) 5 App Cas 25, 39 14. MoD v Ashman (1993) 2 EGLR 102 15. MoD v Thompson (1993) 2 EGLR 107 16. Parkinson v Commissioners of Work (1949) 2 KB 632 17. Penny and others v East Kent Health Authority CA 16th November 1999 18. Robinson v Hartman (1848) 1 Exch 850 19. Stoke-on-Trent CC v W&J Wass ltd.(1988) 1 WLR 1406 20. Surrey County Council v Bredero Homes ltd. (1992) 3 All ER 302 Read More