concurrent Liability

Contract law stems from common law and it is said to be the offspring of tort law. Most contracts take the form of an agreement, assuming, each party agrees to accept the promise or promises of the other in return for the promise or promises made by themselves. Tort law is based on duty of care where as contract law is based on promises made by the contracting parties. Contract law is said to be a part of "private law" because it does not involve or bind the state or people that are not parties to the contract. Tort law on the other hand can be defined as a civil wrong which is committed against an individual rather than the state. Tortious liability arises from the breach of a duty which is fixed by law. This duty is generally towards individuals and its breach is usually remediable by an action for damages.

Tort law has two main objectives it acts as deterrence the possibility that having to pay damages will cause the defendant to alter his behaviour and avoid inflicting damages again. It also exists to protect the interests of individuals, one such interest is personal security. If ones puts another in fear of being hit there may be an action in tort of assault, But for instance if the person fearing an attack is actually hit then an action in tort may be brought of battery. Tort law also protects an individual’s interest in property. This interest is protected by a number of torts such as nuisance, Rylands and Fletcher, trespass to land, trespass to goods and conversion. Individual’s reputations as also protected under tort law this is known as Defamation making a false statement of fact that injures someone's reputation. Joyce v Sengupta [1993] 1 WLR 337. Tort law is not interested in pure economic loss which is a purely financial loss however that is the sole interest that contract law protects. One objection to allowing economic loss claims in negligence is that it would involve the courts having to assess quality, whereas if the claim is brought in contract the quality has already been fixed by the contract itself. Donoghue v Stevenson [1932] AC 562, 34 in this case the Claimant had gone to a cafe with a friend, who had bought her a drink of ginger beer. She had poured some of the drink into a glass and consumed it. When she poured the rest she found the decomposing remains of a dead snail which resulted in her feeling unwell. The duty of care owed by the defendant under tort law was a duty not to cause physical damage; if the claimant for instance had been sick over her clothes she could have had a claim for damage to property. Both claims for personal injuries and the claim for damage to property are status quo claims (meaning “the state of things as they were before”) But she could not have claimed for the cost of the ginger beer drink. This is regarded as a claim for economic loss and as the claimant had no contract as she had no claim. The doctrine of privity in contract law provides that a contract “cannot confer rights or impose obligations arising under it on any person or agent except the parties to it”. Since the contract was between the claimant’s friend and the shop owner as it was the friend who brought the drink, there was no privity of contract, but it was established that the manufacturer has a duty of care owed to their consumers and the claimant was awarded damages in tort. The Donoghue case was a cornerstone to negligence as a cause of action, Lord Macmillan stated: 'The fact there is a contractual relationship between the parties… does not exclude the co-existence of a right of action founded on negligence as between the same parties…'

In a situation where there is a contractual relationship it may be that liability arises in both contract and tort simultaneously, this is known as concurrent liability, The turning point for concurrent liability came about from the case of Hedley Byrne & Co v Heller & Partners [1964] AC 465 Although the claim failed on the facts, the court recognised in principle that there could be a claim in tort even though there was a contractual relationship between the parties. This was followed by Esso Petroleum Ltd v Marden [1976] a All ER 5, in which Lord Denning MR held that negligence in pre-contractual statements could also attract liability on the grounds that: “in the case of a professional man, the duty to use reasonable care arises not only in contract, but is also imposed apart from contract, and is therefore actionable in tort.”

This is a preview of the whole essay

Concurrent liability has been considerably widened by the case of Henderson v Merrett Syndicates Ltd [1994] 3 All Er 506, 31 In this case The House of Lords refined the rules relating to concurrent liability. The claim related to Lloyd's Names bringing an action for negligence, under an agency agreement, against their 'managing agents'. Lord Goff gave the leading passage on concurrent liability. His statement concurred with that made by Lord Oliver in Midland Bank Trust Co some years before, when he stated that: 'where concurrent liability in tort or contract exists the plaintiff has the right to assert the cause of action that appears to be the most advantageous to him in respect of any particular legal consequence.' He did however qualify this statement, adding: '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'

The general rule will be that the plaintiff can sue in tort unless he or she has contracted out of tortious liability.

Therefore It is possible a Court may decline to find a duty in tort where the parties are in a contractual relationship,( Tai Hing Cotton Mill Limited v Liu Chong Hing Bank Limited [1986] AC 80)or may hold that a term of a contract has excluded or limited what would otherwise be a tortious duty, pre-contractual events, such as misrepresentation, may give rise to an action in tort. Misrepresentation is perhaps the area in which contract and tort overlap the most, as it has roots in both. Misrepresentation is frequently dealt with speculatively in contract, however it is impossible to understand misrepresentation without regards to tort. Misrepresentation is part of the law of contract in the sense that it deals with the remedy for statements of fact made to encourage the representee to enter into a contract. It is only concerned with statements that do not form part of that contract.

In the case Holt v Payne Skillington [1996] PNLR 179, 31 (subsequent to the Henderson case), the courts allowed a tortious liability to be wider than that under the contract, in doing so the position in Henderson was extended. In Holt, Hirst LJ said that: '…if the same parties enter into a contractual relationship involving more limited obligations than those imposed by the duty of care in tort. Such circumstances, the duty of care in tort and the duties imposed by the contract will be concurrent and not co-existent'

In contract, as in tort, the law distinguishes the situation where the representor presents himself as having specialist skill or knowledge and in actual fact he does not. Facts misrepresented are more likely to become terms of the contract so that on discovery the representor will be liable for breach of contract. Where the representation is fraudulent and induces a party to enter the contract or becomes a term of the contract then the remedy lay originally in tort not contract – the tort of deceit. Undeniably, law damages in common were only available if the misrepresentation was fraudulent. The development of the law of negligence stemming from Hedley Byrne v Heller, to impose liability for negligent misstatements, led to the extension of misrepresentation in contract. However, the measure of damages, even if the action is brought in contract, is in tort and is governed by the rules of remoteness.

After analysing the interests that both tort and contract law protect and the possible overlap in both areas of law it is then worth considering why a claimant may opt to take advantage of a tortious claim, rather than a contractual claim by having a look at the similarities and differences of the two areas of law. In some senses both areas of the law are significantly similar as they both rise to obligations. However tort obligations are imposed by the law; it is not normally a choice one makes whereas contracts are made by people that voluntarily create obligations upon themselves. Another similarity of both contract and tort is that breach of both types of law rises to an action in damages. Furthermore both contract and tort are apart of civil law, it is the Civil courts that have jurisdiction to hear contract and tort claims.

Despite the similarities between contract and tort, it is easy to identify ways in which contract and tort remain separate.

The main reason perhaps a claimant may choose to claim in tort rather then contract is the difference in the rules for the limitation periods. This is the time period within which a claimant must bring an action. The limitation period for both contract and tort law begins to run with the accrual of the cause of action, accrual, is a common law concept, and can be is defined differently for contract and tort. In contract, the cause of action accrues on breach whereas in tort, the cause of action accrues when the damage occurs. If the damage coincides with the breach then the breach may occur when the duty occurs or it may possibly be sometime after. The basic rule for both contract and tort is that the limitation period is six years (Limitation Act 1980) however claims for personal injury are limited to a period within three years of the date of knowledge of the damage (Limitation act 1980 s 11 (4).) Cartledge v E Jobling & sons Ltd [1963] AC 758. The relevant knowledge required is of fact not of law (s 14 (1)) In contract the time limit for commencing an action is within 6 years by virtue of s 5 of the act or 12 years for specialty contracts by s 8(1). The later period is if the contract is executed as a deed. Thereafter any action will be statute barred.

The method by which damages are assessed under tort and contract is also different. For instance damages in contract are awarded to the claimant for the lost bargain Cassell & Co Ltd v Broome [1972] Ac 1027] That is, he is entitled to be put in the position he would have been in had the contract been performed properly. On the other hand tort will put the individual, back in the position he would have been in had the tort not been committed (Livingstone v Rawyards Coal Co (1880) 5 App Cas 29, 39. In other words, tortious damages are backward looking whereas contractual damages are forward-looking. In most cases in which concurrent liability is pleaded there will be no difference, but in those rare cases where there is a difference, it is the contract measure that will normally produce a higher award. For example, in a negligent advice case, in tort the claimant would be awarded the amount lost in reliance on the negligent advice, whereas in contract he would be awarded any amounts lost on the transaction, as well as the profits that he would have made had the advice been given with due care.

Another factor a Claimant may consider when he has the right to sue in both tort and contract are the rules respecting remoteness of damage, as they may lead to different results under each. In fact, in most cases the remoteness principles in tort are often more favourable than those in contract.

In both contract and tort there is an objective element in judging remoteness. The standard of forseeability in tort is judged by that of the reasonable man. ‘what was foreseeable at the time of the negligent act?’ In contract, the test of remoteness is whether the loss flows naturally from the breach or is otherwise within the reasonable contemplation of the parties at the time the contract was entered into ‘is what was within the reasonable contemplation of the parties at the time of contracting?’ the imputed contemplation is judged by the standard of the reasonable man. In both cases, this objective assessment may be modified by the particular ability of the defendant to foresee or contemplate the type of loss in the circumstances. It has been suggested that the test of remoteness in contract is stricter than it is in claims in tort, in that the test in contract is that of reasonable contemplations of the parties to the contract at the time the contract was made. Whereas the test in tort is reasonable foresee ability, the test takes the reasonable man in the circumstances at the time the tort occurred.

In the case of The Wagon Mound [1961] AC 388 it was held that “if some damage, even minor damage, of a particular kind was foreseeable, then D would be liable for all such damage irrespective of the foreseeability of its extent and its immediate cause.” This therefore provides that all damages, however extensive (even if unforeseeably so) are recoverable so long as they are of a reasonably foreseeable type. The 'thin skull' rule would even allow recovery where the type of damage was not reasonably foreseeable, so long as some foreseeable harm was caused and the unforeseeable harm came about as a result of the plaintiff's vulnerability Smith v Leech Brain [1962] 2 QB 405. When the extent of the harm is considered there appears to be little distinction between tort and contract. If the harm is not too remote then the extent of it does not have to be foreseen so long as it is of a type which could have been foreseen. This has been established for some time in tort. These remoteness rules seem to provide for a broader recovery of damages than the generally accepted rule in contract law that restricts recovery to those damages naturally arising, or within the reasonable contemplation of the parties.

In many cases where liability arises in tort, concurrent liability may be disadvantageous to the claimant and benefit the defendant as he may by plead the defence of contributory negligence. However the defence of contributory negligence is generally not available to the defendant in an action for breach of contract. Its availability very much depends on the fact whether the defendants breach of contract would also rise to liability in tort without the existence of the contract. In the case of Barclays Bank Plc v Fairclough Building Ltd [1995] 1 All ER 417. a claim for a breach of contract under a standard form JCT contract, the Court of Appeal confirmed that: 'a defendant to a claim for damages for breach of a contractual term was entitled to the benefit of apportionment of blame and liability under section 1(1) of the Law Reform (Contributory Negligence) Act 1945 if the liability for the breach is coextensive with a similar liability in tort independent of the existence of the contract'. It was decided that contributory negligence could not be applied on the facts of the case, as the contract required strict performance of the obligations and there could therefore be no possibility of the other party contributing to any negligence.

Under The Law Reform (Contributory Negligence) Act 1945 claimants bringing an action in negligence may, therefore, be liable to having their damages reduced by a percentage of the same amount that was possibly contributed to the damage, generally this would not the case in a contractual claim.

However, the courts have been reluctant to allow the avoidance of contributory negligence for a contractual claim based on a breach of a duty of care where, if the claim was framed under tort, contributory negligence would apply. This is a necessary exception as otherwise workers suing employers for negligently caused injuries would plead the case in breach of contract only, in order to avoid a plea of contributory negligence. This of course leads to the irony that in some cases it is the defendant who will insist on the principle of concurrent liability.

Judging by the above it can be suggested that the current position of the law on concurrent liability is that tortious liability can arise even when a contractual relationship exists between the parties. However, the party wishing to rely on the tortious remedy can only do so if it does not lead to inconsistency with the express or implied terms of the contract. Also Contractual and tortious remedies can be excluded and/or restricted by contractual terms provided such terms do not, to the extent applicable, breach the test of reasonableness contained within the Unfair Contract Terms Act 1977. Furthermore Depending on the facts of the case, it may be possible for the tortious duty to extend further than the contractual duty. Concurrent liability allows the claimant to bring a claim in the area of law which he feels with benefit him more. However this would not be fair on the defendants therefore to balance the rights of the parties defendants are able to raise the defence of contributory negligence in tort law. Another difficulty in concurrent liability is the question of limitation which usually favours the defendant, as the claimant may possibly be past the limitation period and the claim is stattued barred. If the plaintiff brings concurrent claims he or she may take advantage of whichever is the more favourable time period. For example, in the case of Midland Bank Trust Co. Ltd v Hett Stubbs and Kemp, where a negligent solicitor had failed to register an option to purchase, if the plaintiff had been restricted to suing in contract the six year limitation period under the Limitation Act 1939, would have effectively barred any claim before the harm occurred and before the victim could have taken any steps to prevent it. There is much to be said for removing unfair time periods. One method of removing these limitations could be by modest legislative reform. Alternatively to include in limitation statutes provision for the exercise of judicial discretion. All in all it can be suggested that there is a significant overlap on both areas of law and in most cases concurrent liability which to be fair can be advantageous to either the claimant or defendant.

Bibliography

John Cooke and David Oughton The Common Law of Obligations 3rd Edition Butterworths

Jill Poole Textbook on Contract Law 7th Edition

J .Beatson Anson’s Law of Contract 28th Edition Oxford Press

Settling concurrent liabilities

Solicitors Journal SJ Vol.143 No.35 Pages 862-863 Jonathan Goodliffe (Simmons & Simmons)

Paul Richards Law of Contract 7th Edition

John Cooke Law of Tort 7th Edition

Sweet & Maxwell Chitty on Contracts Volume 1 General Principles

Electronic resources: