Law of Contract and the Law of Torts - Essay Example

? Law of Contract and the Law of Torts Historically, the law of obligations was based on the presumption that contract and tort were two areas that admitted of a clear and unambiguous demarcation. Thus, it had been assumed that the obligations and rights derived from a contract were formed by the parties to the contract, and most importantly accepted voluntarily by these parties.1 In this manner, the law of contract was visualised as an area of voluntary obligations; and the contract was understood as the expression of what was desired by the parties. It had been the practice to consider the law of contract as a means of promoting voluntary choice. As a consequence, it was unacceptable to contend that a contract could be imposed. It was also, believed that no contractual obligation could be non – consensual or involuntary.2 Thus, a clear limit was believed to persist between the law of tort and the law of contract. In the past, liability was automatically imposed for causing injury to another, and this was the province of tort. On the other hand, contract law applied liability, only if there was consent among the parties. However, there is some commonality between the contract and tort laws. This has induced some plaintiffs to proceed against the defendant, under one of these laws. Although, it is not permissible to recover damages twice for the same injury, claimants have taken an active interest in exploring the possibilities offered by these two bodies of law. In fact, a plaintiff may recover by suing in contract, in order to circumvent some difficulty presented by the tort law to his action.3 The situation obtaining in this regard has been clearly described in their Lordships ruling in Henderson v Merrett Syndicates Ltd. In this case the House of Lords held that the defendant company was concurrently liable.4 As such, the defendants in this case were held liable under both contract and tort law. This shows that the contractual duty of care between the parties does not preclude concurrent tortious liability claims by the plaintiff. As such, we find that in the Henderson case, their Lordships held that there could be a concurrent existence of an obligation in tort and an obligation in contract. As such, the ruling in Henderson v Merrett Syndicates Ltd directed that irrespective of the relevant nature of the damage,5 concurrent liability betwixt contract and the tort of negligence was to be conceded.6 The situation prevailing, on account of the tort law has no bearing upon the law of restitution, which remains independent of the tort law. However, the tort committed does not inescapably constitute the basis of the recovery. It is the enrichment that results from the invasion or appropriation of the protected interest of the plaintiff that constitutes the basis of recovery.7 Not surprisingly, establishing the elements of the tort of interference is not indispensable for permitting recovery. It is an incontrovertible fact that new needs have arisen, which have not been adequately addressed by the traditional concepts that emerged from tort law.8 This serves to unequivocally demonstrate the independence of restitutionary claims. The principle of concurrent liability in contract and tort was recognised with Hedley Byrne & Co Ltd v Heller & Partners. In this case, it was held by the court that there could be a claim in tort, despite the existence of a contractual remedy.9 The ruling in Hedley Byrne states that assuming responsibility does not place the defendant under a duty of reasonable care to benefit the plaintiff. Jane Stapleton, an eminent legal scholar, has contended that the tort of negligence usually comes into play, with regard to a negligent failure to benefit. In such cases, it is the general practice to impose liability under the tort of negligence. As a consequence, it would be incorrect to consider such cases under contractual liability. 10 This stance is based on the notion that the commencement of the performance of a beneficial service by the defendant immediately places him in a situation, wherein there is a change in the normal anticipations of the plaintiff. The outcome of this change is that the defendant is placed under a duty of reasonable care to benefit the plaintiff.11 This principle was reiterated in Esso Petroleum v Marden, wherein Lord Denning MR held that liability could arise due to negligence in making pre – contractual statements. It was his considered opinion that a professional person was expected to exercise reasonable care. This requirement derives from contract law, as well as tort law. Consequently, it is permissible to initiate action under tort law.12 In addition, the principle of tortious negligence established in Hedley Byrne was subsequently applied to several cases. Thus, in Midland Bank Trust Co Ltd v Hett Stubbs and Kemp, Oliver J held that this principle’s applicability was to be determined on the basis of the relationship between the plaintiff and the defendant. It was opined that tortious negligence was the outcome of special relationships.13 By the end of the 1990s, it was generally accepted that there could be concurrent claims in tort and contract. However, such claims had to involve facts that justified protection of the economic interests of the parties. The plaintiff can claim damages either in contract or tort, with regard to a breach of duty of care.14 As such, it has become common for a defendant to be subjected to claims in tort and contract for the same alleged breach. There are certain situations, where this holds good in all the cases. Some of these relate to warehousemen, carriers and those who damage goods on account of negligence. Furthermore, any commercial purchaser who procures dangerous goods could be subjected to claims in contract and tort.15 This practice has made its presence felt in other areas of law, as well. Thus, we find individuals, suing for professional malpractice, by relying on either a breach of implied duty, as stipulated in the contract, or by resorting to the tort of negligence. The UK has occupied the pride of place, amongst the other nations, in this context, and such cases are on the increase in this nation.16 This trend served to make the liability of the defendant more burdensome. Moreover, this legal position has been found to apply even to those entities that enjoy third party rights under a contract. Some legal luminaries have contended that there is considerable variation in the manner in which concurrent liability is dealt with by contract law and tort law. This implies the existence, in cases of concurrent loss, of tortious and contractual measures of loss.17 In practice, such a state of affairs has not come into being. With regard to professional malpractice, the chief issues related to the possibility to recover for consequential damage. However, such claims are treated as a single initiative that is classified on the basis of whether the liability is contractual or tortious.18 Hence, a single measure of damages should be in force, with regard to professional malpractice. It has been recommended that this tenet should apply to the sale of goods. Thus, a seller of goods should be made similarly liable for the consequential loss caused to the buyer of those goods. This should apply, regardless of whether the action is brought in for negligence, under the sale contract, reckless behaviour or product liability.19 Moreover, on occasion, it may transpire that despite the absence of concurrent liability, it may not be possible to obtain compensation for damage. Such failure would be unaffected by whether the claim was based on tort law or contract law. This makes a strident call for a common standard to be implemented. Finally, a common standard is desirable, because in reality, the courts in general, do not strictly apply the difference in tort and contract. This difference is clearly depicted in theory and not in what obtains in practice. A civil jury is conspicuous by its more or less general absence in the UK.20 This requires the presiding judge to precisely describe issues related to remoteness of damage. Apparently, the principal difference between tort and contract lies in the seemingly greater stress placed by tort on harm caused due to commission of some act. On the other hand, contract seems to be chiefly concerned in providing damages for the harm resulting from acts of omission. Thus, the chief objective of tort is to provide compensation for harm resulting from a breach of a legally stipulated duty. Accordingly, tort, in general, provides a remedy for breach of duty that involves a claim for damages. It is important to realise that tort acts as a deterrent towards behaviour that could result in harm. In contrast to this, the principal aim of a contract is to promote and enforce the conditions specified in the contract.21 In addition, contract law seeks to prevent any breach of the contractual agreement. In practice, the difference between contract and tort is not very marked. There are several instances, where the facts permit an action in tort as well as contract. Whether the action is initiated under tort or contract, is rendered subjective, and depends on the actual situation. Thus, a claim based on tort could be preferred; as such a claim provides a greater period of limitation, in comparison to a claim under contract. The cause of action comes into existence where the damage takes place, under tort law.22 However, in contract law, the cause of action arises at the instant when there is a breach of the contract, and this has no relation to the time when the damage occurred. A contract is distinguished by the element of voluntariness that it entails. The parties to a contract willingly consent to perform certain acts, in return for some specific benefit. The assumption of duties and obligations towards others is voluntary in a contract. In direct contrast to this is the tort law, which imposes mandatory duties upon individuals. The awareness or specific agreement of the concerned parties is irrelevant to this imposition of duties. For example, if a guest is injured on the premises of a landowner, then the landowner is liable to the guest.23 Such liability arises due to the obligations imposed on the landowner by the law. The remedy available under contract law for the harm suffered by a party to the contract is limited to compensation with the benefit of bargain. Therefore, the injured party obtains what had been promised to him in the contractual agreement. The situation changes drastically, when it comes to a remedy under tort law. In such instances, the remedy could encompass monetary compensation for pain and suffering, punitive and economic damages.24 Nevertheless, a certain degree of overlap subsists between contract law and tort law. Thus, it could transpire that some tort duties could be the same as stipulated in the contract. In such situations, failure of one of the parties to fulfil its obligations could result in an action that was based on contract law or tort law. In addition, contract law, in a manner that is akin to tort law, imposes certain conditions, such as the requirement to act in good faith, upon the parties to the contract.25 Such mandatory obligations do not require the assent of the parties. A very important distinction between tort law and contract law is the fact that the duties derived from tort law are owed to society and are imposed by the law. On the other hand, the contractual duties are the outcome of the agreement between the parties. In contracts, the requirement is to act in a reasonable manner towards the other party to the contract. However, in tort law every individual has to perforce behave in a reasonable manner towards others. On occasion, tort law imposes duties that result from the special relationship between people. The development of a distinct area of law, namely the Law of Obligations will resolve the ambiguity inherent in claiming redressal under the contract, as well as the tort law. Bibliography Burrows, Andrew S, Understanding the law of obligations: essays on contract, tort and restitution (Hart Publishing, 1998) Edwards, JS, Edwards, LL, and Wells, PK, Tort Law for Legal Assistants (4th edn, Cengage Learning 2008) Esso Petroleum v Marden (1976) 2 All ER 5 Farran, S and Care, Jennifer Corrin, ‘Towards a Pragmatic Approach to the Contract Or Tort Debate in the South Pacific’ (2000) 4 Journal of South Pacific Law accessed 26 June 2011 Freeman, MDA, and Halson, R, Current Legal Problems 1995: Collected Papers, Volume 48, Part 1 (OUP 1996) Furmiston, MP, Cheshire, GC, and Fifoot, CHS, Cheshire, Fifoot & Furmston’s Law of Contract (15th edn, OUP 2006) Hedley Byrne & Co. Ltd v Heller & Partners (1963) 2 All ER 575 Henderson v Merrett Syndicates Ltd (1995) 2 AC 145 Harpwood, V, Modern Tort Law (7th edn, Taylor & Francis 2008) Jones, G H, and Cornish, W R, Restitution: past, present, and future: essays in honour of Gareth Jones (Hart Publishing 1998) Midland Bank Trust Co Ltd v Hett Stubbs and Kemp (1978) 3 All ER 571 Robertson, Andrew, The law of obligations: connections and boundaries (2nd edn, Routledge 2004) Tettenborn, A, ‘Symposium: The Common Law of Contracts as a World Force in two Ages of Revolution: A Conference Celebrating the 150th Anniversary of Hadley v Baxendale: Foreseeability and Damages: Hadley V. Baxendale: Contract Doctrine or Compensation Rule?’ (2005) 11 Texas Wesleyan Law Review 505 Read More