Critically examine and discuss the inter-relationship between the law of Contract and the law of Tort

          

The history of tort and contractual liability can be written as the history of two different remedies, both of these primarily rest on the fault and wrongness of damage is required. Contract law is to a significant extent informed by values and standards routinely attributed to the law of tort. A substantial difference exists between the law contract and tort which rests on the distinction between non-feasance, failing to act in a way which would provide benefits and misfeasance, acting, but doing the task badly. The law of tort on the other hand fundamentally deals with misfeasance, by adopting the neighbour principle which was introduced by ‘Lord Atkins’ who summarised that ‘one must not inflict harm on ones neighbour by ones negligent acts. On the distinction to tort the law of contract holds the doctrine of consideration in order to rectify liability for failing to act to the agreed standards.

In contrast the law of contract imposes positive duties in order to supply benefits and can be used to accommodate the level of performance which is required. For example if a customer wishes to ensure that 100 tons of cement of a particular quality are to be delivered on a certain date, a contract with a supplier provides the mechanism for achieving this, whereas in the law of tort obligations are owed generally rather than by particular individuals, which explains why tort is not equipped to fulfil this role. This therefore explains why one may switch out a claim in contract, rather than in tort or vice versa.

Some Torts, such as intentional interference with trade, play the role of supporting contractual relations by providing an additional remedy for there breach. A question is commonly asked in this context is whether a plaintiff who is in a contractual relationship with the defendant can invoke tort in order to benefit his case when there has been a breach of contract. There a number of reasons relating to damages and limitations of actions which may make it advantageous to switch a claim out of contract and into tort. In the case of Henderson v Merret Syndicates the House of Lords was concerned in that case with the question, amongst others, whether an obligation in tort could exist concurrently with a co-extensive obligation in contract.

There are doctrinal differences between the law of contract and tort on the basis of a ‘root distinction between voluntary and purely imposed obligations. Contractual obligations are voluntary and particular to the parties, whereas liability in tort is imposed by law as a matter of policy and affects persons generally. While tort law deals with conduct that flouts general notions of behaviour in society, contract law addresses injuries occasioned by the breaking of commitments voluntarily expressed.

The specific boundary line between the two areas, particularly in respect of negligently inflicted claims, has changed over the years, as fashions have changed. In the early 1980s, it was widely believed that the tort of negligence was expanding into territory of contract and had the capacity to take over a substantial parts of contracts role. However, there has been a retreat from this idea in recent years.

In the law of contract and tort damages are calculated differently, liability for damages in tort law is foreseeability, according to the standard of the reasonable man. In contract damages are supposed to mirror the expectations of the parties, in other words, to give the claimant no more and no less than what he bargained for this principle can be witnessed in the case of, Adams v Brownsword (2004).

When a claimant befalls an injury or loss he or she may seek to claim compensation, it is clearly up to the claimant on whether they convey there claim as one in tort or in contract.

Historically, there has been very little evidence of claims being bought under tort or contract; neither has lawyers taken any significant interest in this overlap between the law of tort and the law of contract. Over the years claimants have been actively investigating the ratio of an action against the defendant in both the laws of contract and tort. It is now the alternative view that if a claimant fails to succeed in a claim of tort, then he may well bring an action under contract law to avoid an obstacle in tort, which the general law is not opposed to.

A claimant may wish to pursue a claim under the law of tort, for example, the limitation period under one may be more favorable than under the other. This was evident in the case of Midland Bank Trust Co Ltd v Hett, Stubs and Kemp  where Oliver J said:

‘There is not and never has been any rule of law that a person having alternative claims must frame his action in one or the other. If I have a contract with my dentist to extract a tooth, I am not thereby precluded from suing him in tort if he negligently shatters my jaw’.A similar scenario can also be witnessed in the case of Matthews v Kuwait Bechtel Corpn [1959].

It has long been trite law that a defendant may be liable on the same facts in contract to A and in tort to B, it is now, after a period of uncertainty, also clearly established that there may be concurrent contractual and tortious liability to the same claimant. Concurrent liability is where the parties have a contractual relationship and there can also be liability in tort. As we know that contractual and tortious duties may co-exist on the same facts, for example concurrent liability may take place between a carter and passenger, doctor and patient, solicitor and client, and employer and employee.

The modern position of concurrent liability has been stated by the House of Lords in the   above named case of Henderson v Merrett syndicates Ltd. The House of Lords held that sub-agents acting on behalf on indirect Lloyd’s names owed a duty of care in negligence to the names, even though they were not in a contractual relationship with the names.

The principle judgment in this case was anticipated by Lord Goff in which he questioned; can there be concurrent liability in contract and tort? The verdict was ‘yes’ that there can be concurrent liability in both contract and tort through the doctrine of non-cumul. La regle de non-cumul is a principle of French law which regulates whether an action should be brought under contract law or tort law. It was also documented that other great civil systems did not posses such a doctrine. The case of Henderson v Merret Syndicates decisively affirmed the ‘concurrence’ approach. So when we consider the case of Henderson v Merret Syndicates Ltd, we are averse to knowing that it presents the facts of concurrent liability to be apparent.

A similar case which took precedence in the decision of Merrett v Syndicates Ltd [1994] was the commonwealth case of Central Trust Co v Rafuse [1986], where Le Dain J said:

‘a concurrent or alternative liability in tort will not be admitted if its effect would be to permit the plaintiff to circumvent or escape a contractual exclusion or limitation of liability for the act or omission that would constitute the tort. Subject to this qualification, where concurrent liability in tort and contract exists the plaintiff has the right to asset the cause of that appears to be the most advantageous to him in respect of any particular legal consequence’.

Lord Goff entirely agreed with this statement, which left the question that when considering, in each case, whether the ingredients of a tort action and contract action are present. The mere fact that all the ingredients for a contract are present does not prevent there being a tort duty or presumably vice versa.

A similar case to Central Trust Co v Rafuse is recognised as the case of, Junior Books v Veitchi Co Ltd, where the plaintiffs entered into a contract with A to build a warehouse. The defendants were nominated subcontractors for the flooring. The House of Lords held that the plaintiffs could have a tort action against the defendants even though there was no danger of physical injury or property damage to the plaintiffs. The decision was rationed by saying “there was revealed a sufficient proximity to give rise to a duty of care”. The decision of this case lead to the verdict that every negligent breach of contract is deemed as a tort. The courts had seemed to reject this view which was evident in the case of Leigh and Stilivan Ltd v Aliakmon shipping Co Ltd  and ever since the decision has restricted Junior Books v Veitchi within narrow limits. A case which supports this verdict is the case of Muirhead v Industrial Tank, this case constrained the amount of people claiming in tort for economic loss, unless there was a ‘reliance on the manufacture.’ This replicates that the courts are shifting in the direction of contractual relations and away from concurrent liability, therefore causing confusion.

Peter Schlechtriem (2006) is also in support and praise of the statement illustrated by Le Dain J, in the case of Central Trust Co v Rafuse, where he notes in the ‘Review of the convention on contracts for the international sales of goods’, where he said, ‘even in cases where there is liability under the convention, domestic provisions for liability in tort should not be displaced’. Whereas Dean F.Edgell, suggests that in the case of concurrent and product liability claims, the court should resort to applying a tort rule based upon the location of the ‘defining activity that constitute the wrong’

In support of the statement of Lord Goff, Professor Waddams, supports allowing the claimant a choice of the more ‘favorable law’ based upon on the Moran approach of ‘reasonable foreseeability of harm’ caused by the defendant non-privity manufacturers product, coupled with the jurisdiction ‘having reasonably close connection with the cause of action’.

Recent years have seen consideration given to such problems as the difference between the rules of remoteness in the two areas of law, differences as to running of limitation periods, and the question whether claims based on misrepresentation will lie alternatively in contract and tort.In the law of contract and tort there are rules of limitation, these rules state the period of time, in which an individual can bring a claim for damages. Limitation periods tend to differ between the law of contract and tort. In contract the period of time begins from the moment the contract is made and in tort from the time the damage is caused.

The leading case of Hedley Byrne v Heller was profound as the change in the law offered people the opportunity to sue for negligent advice leading to economic loss, even if they did not have a contract. The case started a chain of decisions sympathetic to the continuation of concurrent liability. Many cases which have been considered in the past claimants have been deprived from suing the defendant in contract simply because there was no contract between them. Over the occasion claimants who have had a contract with the defendant have initiated the above case of Hedley Byrne v Heller as a basis for arguing that the defendant has a duty of care in tort which is more extensive than its obligation under the contract.

In the case of Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd, where Lord Scarman introduced his opinion of the Privy Council, said

“Their Lordship do not believe that there is anything to the advantage of the law’s development in searching for liability I tort where the parties are in a contractual relationships…their Lordships believe it to be correct in principle and necessary for the avoidance of confusion in the law to adhere to the contractual analysis: on principle because it is a relationship in which the parties have, subject to a few exceptions, the right to determine their obligations to each other, and for the avoidance of confusion because different consequences do follow according to whether liability arise in contract or tort, e.g., in the limitation of action”.

The case does not deal with the position between professionals and clients and is probably best interpreted as meaning that liability in tort cannot be imposed, which contradicts the express terms of the contract. The case of Tai Hing Cotton Mill Ltd v Liu Chong Bank Ltd does not put a stop to a plaintiff from claiming advantage of a tortious duty which is the same as a contractual duty in order to use advantageous rules such as limitation periods.

The law of contract and the law of tort are gradually merging and becoming one. It has been exemplified that there are several distinctions when considering the law of contract and tort. Common lawyers find themselves having to deal with an increasing number of problems concerned with the interrelations of contract and tort.

The case of Henderson v merret syndicates marks out the boundary of concurrent liability as this case demonstrates that from the 1990’s the courts have seemed to impose tortious remedies in contractual situations, under certain conditions. For example as was evident in the case of Central Trust Co v Rafuse [1986], where Le Dain J said,

‘Where concurrent liability in tort and contract exists the plaintiff has the right to asset the cause of that appears to be the most advantageous to him in respect of any particular legal consequence’.

A claimant may wish to pursue a claim under the law of tort, for example, the limitation period under one may be more favorable than under the other.

Over the years decisions which have reached the court have intensely altered in tort, contract and concurrent liability. One possible conclusion may be that the change of society in which we live in today, may have an impact on the values of economic structures. So when we consider the law of contract and tort it is evident that there is an interrelationship between the two areas of law. The law of contract and the law of tort both contain advantages in which the claimant would benefit himself in ceasing his claim as one in tort or contract, in which area of the law the claimant decides to place his claim, is the one which appears to be the most advantageous to him.

Bibliography

Books Used:

        

Cheshire, Fifoot and Farmston’s, ‘Law of Contract’, 15th edition, Michael Furmston

‘Contract Cases & Materials’ 5th edition, H.G. Beale, W.D. Bishop, & M.P. Furmston

K.M Stanton, ‘The Modern Law of Tort, 2004, London Sweet & Maxwell

Carol Harlow, ‘Understanding Tort Law’, 2005, Thompson Sweet & Maxwell

Andrew Robertson, ‘The Law of Obligations’, 2004, Routledge Cavendish

Taylor R & Taylor D, ‘Contract Law Directions’, 2007, Oxford University Press

Winfield & Jolowics, ‘Tort’ 5th Edition, 2006, London Sweet & Maxwell

Websites Used:

Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd. Available From:

Hedley Byrne v Heller. Available From:

‘Review of the convention on contracts for the international sale of goods’ by pace international law   review’. Available From:

Words used for this assignment: 3,067

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