Difference with Law of Contract and Law of Torts - Essay Example

Contract Law and Tort Law The Law of Contracts, the Law of Torts, and the Law of Restitution are considered as the three main pillars of the English law pertaining to civil liabilities. The Law of Contract is related to the enforcement of exchange transactions, the Law of Torts is concerned with the imposition of certain acceptable standards of behavior, which may be or may not be linked with transaction exchange, while the Law of Restitution deals with parties which get unjustly enriched at the cost of another. Richard Stone (2002, p.11) states ‘The difference between contract, tort and restitution is sometimes said to be based on the nature of the remedies available in relation to each, and in particular the measure of damages.’ The concept of contract was established in the nineteenth century, which prompted the development of a body of associated laws generally known as the Classical law of Contracts. “The common law of torts originated in a rural society, where the centralized justice was being born.” 1 The Law of Contract is oriented around the idea of ‘Freedom of Contract’, probably due to the influence of the laissez faire economy existent in the 19th century. "The classical school reflects the priorities of its age, which greatly valued free enterprise, private autonomy and laissez-faire approach to economic activity." 2 With the increase in industrialization, it was realized that a separate set of regulations to regulate a business needed to be developed. The court and the law on the other hand would only intervene for settling any kind of disputes. Hence the parties signing a contract would be governed by a set of rationalistic principles and the resultant transactions would eventually benefit both the parties as well as the society. The Law of Torts comes into play when there’s a wrongful interference with the rights in a contract. Therefore, whenever a person intentionally breaches a contract between two parties, it’s said that a tort is committed. When a person becomes the subject of legal damages, he or she is liable to be compensated for the damages done. "Under the tort system, a person who has injured himself has no right to compensation." 3 In tort law, the person who’s committed the offence is called the plaintiff and generally, the Law of Torts covers intentional acts as well as accidents. Here’s a simple example which demonstrate the Law of Torts: Suppose Roger and Pete are playing golf, and suddenly a shot by Pete hits Roger. Roger can now sue Pete for losses such as pain or medical treatment because of the accident. However, Roger would need to prove that Pete rendered a tortious action, and if Roger wins the case, Pete needs to pay for the damages. "The claimant will not succeed unless it can be demonstrated that the negligent act of the defendant caused or contributed to the damage complained of."4 So, as we see, both these laws (Law of Contract and Law of Torts) are concerned with obligations. However, a major difference with both these laws is that whereas in the case of Law of Contract, the parties signing the contract are assuming the obligations voluntarily with minimum compulsions, in case of the Law of Torts, the tortious liability is mandatory and is imposed by the courts. The Law of Contract almost always has these characteristics. First of all, it’s founded on an exchange of agreements. Secondly, obligations arise when the contract is signed. Thirdly, it involves the exchange of goods, services or promises, and so one party gives something and gets assurance or promise from the other party. Additionally, the Law of Contract doesn’t give importance to later developments. So when a conflict arises, the agreement and the position of the parties at the time when the contract was made determine the outcome of the conflict. This is also called the ‘Will Theory of Contract’ and basically means that the disputes can be resolved by determining which parties agreed in the contract. In the Western world, the Law of Tort is basically based on the premise of negligence. So if the party (The defendant) who has suffered injuries at the hands of the plaintiff cannot prove the plaintiff’s negligent behavior, the Law of Tort will not be able to provide compensation. Mark Lunney (2008, p.156) states ‘Liability in the tort of negligence is premised on fault. It must be shown that the defendant was in breach of his duty to take reasonable caring of the claimant-assuming such a duty to exist.’ Furthermore, the Law of Torts defines injury very broadly. Injury is not limited to physical injury only, but it also includes trespassing of a defendant’s interests. Interest can be of several kinds. Interest can include property or some other tangible assets; it can also include components which are intangible. Richard Owen (2000, p.167) states ‘It has been said that damages should be based on what the plaintiff needs rather than on what he has lost. This is particularly relevant in cases of severe injury.’ The long list of intangible interests includes absence of emotional distress, protection against defamation and protection of one’s privacy. "The law of defamation seeks to protect individual reputation." 5 For instance, if a baseball player enters into an agreement or contract with a certain team and it’s clearly stated in the contract that the media will not be allowed to enter his locker room, however if the media is allowed by the team to enter the locker room, the team is considered to have breached the contract, and according to the Law Of Torts, the team is liable to pay the damages for failing to protect the privacy of the baseball player. In the American Bar Association, the Law of Torts is included in the first year’s curriculum for law students. The party who commits an act which is against the Law of Torts is known as a ‘Tortfeasor’. Although the Law of Torts and the Law of Contract are interrelated, there are a number of differences which make them separate laws. For instance, in case of contract, a party can either choose to be bound by the contract or not to be bound by the contract. But in case of tort, the party will have no choice; hence it will be bound by the Law of Torts. When it comes to duties, the law is the main determinant in case of the Law of Torts but for duties in a contract, the primary determinant is the party. When discussing agreement between parties, M.P. Furmston (2006, p.39) states ‘In order to determine, whether, in any case given, it is reasonable to infer the existence of an agreement, it has long been usual to employ the language of offer and acceptance. In other words, the court examines all the circumstances to see if the one party may be assumed to have made a firm offer and if the other may likewise be taken to have ‘accepted’ that offer.’ Moreover, duties are allocated to people in general in the Law of Torts, whereas in the Law of Contract, the duties are allocated to specific people. In addition, there are some other notable differences between torts and contract, some of which include capacity of the concerned parties (A minor has limited liability in a contract but has full liability for their tortious act), the conflict in the laws, the compensation for damages(There is a considerable difference between the damages in torts and damages in a contract), the difference in the limitation of specific actions, difference between tort law and contract law as regards the servicing of writs outside jurisdiction and finally the difference between the two in matters of assignment( A debt can be assigned but a right of action cannot be assigned) The body of law called the Law of Obligations lays down the duties that an individual has to perform for another individual. It also clearly explains the right that each of the individuals has, with regard to their private dealings. The Law of Contract and the Law of Negligence basically are two of the branches of the Law of Obligations. Moreover, the Law of Obligations has another element called the Law of Restitution. The law is now recognized as a separate law, and it is concerned with ‘Unjust Enrichment’. "Unjust enrichment is a complex field, covering many situations that have nothing to do with contract.” 6 Here is an example where the Law of Restitution can be enforced: Suppose a person has purchased a dinner table. Although he intended to purchase a large sized dinner table and paid for the large size, he was given the medium size. Hence, the shop owner was paid extra money because of a mistake and according to the Law of Restitution; the person will have the right to recover the money from the shop owner. If we take the same example of ‘Unjust Enrichment’ and try applying the Law of Contract, we’ll find that ‘Unjust Enrichment ‘does in no way engage in an Exchange Transaction (Law of Contract). Furthermore, an ‘Unjustly Enriched’ shop owner doesn’t also fall below a minimum standard as laid down by the Law of Torts. Therefore, these subtle differences make the Law of Restitution stand out from the Law of Contracts and the Law of Torts. Although restitution has some connection with contracts, it’s hardly used in situations where the parties are bound by a contract. There is sometimes an overlap of torts and contracts, as in a scenario as follows: Suppose a builder is given a contract by the government to construct a shopping mall. During the construction, a wall collapses and injures a pedestrian. This would mean the builder is liable in two counts. Firstly, the collapsing of the wall breaches the Law of Contract, since the wall was defective. Secondly, the builder breaches the Law of Torts because the builder was negligent in the construction process, which led to the pedestrian getting injured. However if the person who was injured belonged to the other party in the contract, the claimant needed to be compensated in both contract and tort. "Perhaps the search for coherence in law is no more than an academic dream and obsession."7 When discussing losses due to breach of contract, David W.Oughton (2000, p.603) states ‘Losses suffered as a result of a breach of contract are of three possible varieties, namely personal injury, property damage and economic loss. Since contracts are essentially concerned with the exchange of economic resources between the parties, it is more likely than not that the most frequently encountered loss resulting from the breach of contract will be of the economic variety.’ In all the three laws (Law of Contract, Law of Torts and the Law of Restitution), the distinction between them is based on the type of liability. In contract law, the liability for damages to the Expectation Interest is designed to place the claimant in a position wherein it seems the contract has been successfully performed. In case of tort law, the liability is determined after placing the claimant in the position where no tort had occurred to him. "In a vast majority of torts, the claimant is seeking compensation for personal injuries or damage to property.” 8 While for the Law of Restitution, the liability is basically the unjustly taken money or assets which need to be returned to the claimant. A point to note here is that there are no hard and fast rules in the Law of Contract which forces a claimant to recover damages by the Expectation Interest alone. The claimant can even recover damages through the tort measure or the restitution measure. This once again shows the interrelationship between the Law of Contracts and Law of Torts, despite having several differences between them. There have been a number of cases where the line which distinguishes a tort and a contract has been blurred. One such famous case was the Harold Smith (Motors) Ltd vs. Dick Bentley Productions Ltd. In his case, the mileage of the car was misinterpreted and this misinterpretation led to a liability in tort. Eventually, the plaintiffs were awarded for the damages for breaching the Law of Contract. Many feel that the claimant has the right to choose between damages in tort and damages in contract, and decide on the one which is the most advantageous to him or her. However, since the Unfair Contract Act of 1977 clearly defines the interrelationship between contract and tort, the choice is restricted by the terms of contract. The claimant often chooses the contract over tort, probably because claimants prefer getting the damages recovered through a loss of profit, as opposed to the recovery process in torts, which involves calculating of what is required to compensate for the position that the claimant would have been in, had the tort not occurred. According to the Limitation Act of 1980, the standard limitation period for tort and contract is given as six years. Once again, there’s a difference in the two laws although they are interrelated. Whereas in contract, the time commences to run from the date of the breach, in tort, the time begins to run from date when the damage was incurred. Even though the time in both the cases is identical most of the time, there are certain situations where there will be an inconsistency, which would often result in a disadvantage for the defendant. The remoteness of recoverability of the damage caused to the claimant is yet another point which the claimants often have to consider. Even here, an interrelationship between Tort Law and Contract Law is seen. The tests which establish the amount of damage of the claimant are ‘Reasonable Contemplation’ and ‘Reasonable Foresee-ability’ for Contract Law and Tort Law respectively. Among the two tests, the test in contract is regarded as more rigorous. So, we find that Law of Contract and the Law of Torts have similarities as well as dissimilarities. “Commentators have suggested ways of dividing the Law of Obligations that contrast with conventional distinction between contract and tort." 9 In some cases, the line between Tort Law and Contract Law becomes thin, which is primarily due to the assimilation of certain tortious principles into the Law of Contract. "New torts may be created by statute, such as the tort of Illegal Eviction."10 Hence, it is evident that Law of Contract and the Law of Torts continue to evolve with the passage of time. Its being observed that the boundary between the Law of Torts and the Law of Contracts is shifting in favor of tort. Courts of today are increasingly applying the principles of tort to resolve disputes, when actually they should have applied the Law of Contracts. So a sort of ‘Tort Crisis’ has appeared on the legal horizon, probably because the government has started giving less respect to the rights of the people. Therefore, only a sustained effort from governments, individuals, corporations and the courts can help restore the boundary between the Law of Torts and the Law of Contracts. Bibliography Joseph W. Glannon, Joseph W.1995, The Law of Torts: Examples and Explanations, Little Brown & Co Law & Business, New York Deakin, Simon. 2003, Markesinis and Deakin’s Tort Law, Clarendon Press, Gloucestershire Kidner, R.2004, Casebook on Torts, Oxford University Press, Oxford Poole, J.2004, Textbook on Contract Law, Oxford University Press, Oxford Treitel, G. 2003, The Law of Contract, Sweet & Maxwell, London Blum, B.A. 2007, Contracts Examples & Explanations, Aspen Publishers, New York Stone, Richard. 2002, The Modern Law of Contract, Cavendish Publishing Limited, London Owen, Richard.2000, Essential Tort Law, Cavendish Publishing Limited, London Knapp, C.L. 2007, Problems in Contract Law: Cases and Materials, Aspen Publishers, New York Peel, Edwin.2007, Treitel on the Law of Contract, Sweet & Maxwell, London Frey, Martin. 2007, Introduction to the Law of Contracts, Delmar Cengage Learning, New York Beatson, Jack. 2002, Ansons Law of Contract, Oxford University Press, Oxford Burton, S.J. 2008, Contract Law: Selected Source Materials, West, Eagan Smith, J.C.2000, A Casebook on Contract, Sweet & Maxwell, London Gordley, James. 2007, Foundations of Private Law: Property, Tort, Contract, Unjust Enrichment, Oxford University Press, Oxford Read More