In tort duties are fixed by the law rather then the parties. However in contract this is different, only certain contractual obligations are fixed by statute e.g. Sales of Goods Act, ss12, 13, 14.
Tort protects the status quo, meaning the claimant position should not be worsened by the defendants conduct. This helps measure the extent of damages awarded to the claimant i.e. the claimant be restored to the position he would be in if the tort had not been committed. In contract the defendant is liable for not making the claimants position better, by not fore filling the claimant’s expectation of benefit from the contract.
Tort and contract are laws of obligation and duties. Tort law obligations are normally owed to a victim or a third party, the law sets the duties owed. Contractual obligations and duties are owed to the person in which has agreed upon the contract. However to help protect those people in less fortunate positions there are fixed terms by the law in statutes, such as The Unfair Contract Terms Act
In both contract and tort there are rules of limitation. These rules dictate the period of time, which a person can bring a claim for damages. Both contract and tort have different limitation periods. In contract the period of time begins from the moment the contract is made and in tort from the time the damage is caused.
Other rules are those on causation and remoteness.
Concurrent liability is where the parties have a contractual relationship and there can also be liable in tort.
There is no set precedent to indicate whether a person has to sue in tort or in contract. A quote from the case of Central Trust Co. v Rafuse ‘where concurrent liability…exists, the plaintiff has the right to assert the cause of action that appears to be most advantageous ho him in respect of any particular legal consequence.’
In the case of Junior Books v Veitchi Co Ltd the plaintiffs entered into a contract with A to build a warehouse. The defendants were nominated subcontractors for the flooring. It was alleged that the defendants had carelessly installed sub-standard flooring. It that was so, then the plaintiffs would normally have had an action in contract against A and in turn, would have had a contract action against the defendants. 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 reasoned by saying “there was revealed a sufficient proximity to give rise to a duty of care”.
It is suggested that the decision in this case is that every negligent breach of contract is a tort, the courts rejected this view and ever since the decision has confined Junior Books v Veitchi within narrow limits.
A case that supports this is Muirhead v Industrial Tank [1985] 3 All ER 705, this case limited the amount of people claiming in tort for economic loss, unless there was a ‘reliance on the manufacture.’ This shows that the courts are shifting towards contractual relations and away from concurrent liability, therefore causing confusion.
The decision in Hedley Byrne v Heller was profound as the change in the law gave 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 existence of concurrent duties. Example, Esso Petroleum Co Ltd v Mardon; Midland Bank Trust Co Ltd v Hett, Stubbs & KempThe court held, on appeal from this decision, that it was correct as the quoted words excluded liability, but that without them a duty of care and a liability in negligence for Co C’s financial loss might have arisen.
In the case of Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd, Lord Scarman giving the 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”.
In Tai Hing, the plaintiff was seeking to establish liability in tort which went further than the liability established by the contract between the parties. The case does not deal with the position between professional and client and is probably best interpreted as meaning that liability in tort cannot be imposed which contradicts the express terms of the contract. The case does not prevent a plaintiff from taking advantage of a tortuous duty which is the same as a contractual duty in order to use advantageous rules such as limitation periods.
In 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. This shows that from the 1990’s onwards the courts started to impose tortious remedies in contractual situations, under certain conditions. Changing the status of concurrent liability. The question of any tortious duty owed by the defendants required an examination of the Hedley Byren principle, the court said “an assumption of responsibility by a person rendering professional or quasi-professional services coupled with a concomitant reliance by the person for whom the services were rendered could give rise to a tortious duty of care irrespective of whether there was a contractual relationship between the parties.”
In Pacific Associates Inc. v Baxter, Purchas LJ said that “where the parties have come together against a contractual structure which provides for compensation in the event of a failure of one of the parties involved, the court will be slow to superimpose an added duty of care beyond that which was in the contemplation of the parties at the time they came together”. This approach has been adopted by the Court of Appeal even in respect of physical damage to property the negligence of a subcontractor.
In the case of Johnstone v Bloomsburry Health Authority, the plaintiff was employed by the defendant health authority as a junior doctor. His claim is about his contract, he was obliged to work 88 hours per week and that this was a breach of the employer’s duty to take reasonable care for the safety and well being. The two judges stated “that an implied contractual term in a contract of employment, such as the implied duty to take reasonable care for the health of employee, is subject to any expressed terms in the contract”.
If the approach of the majority were adopted on the point of express terms overriding implied terms, this would reduce the whole of the law of negligence on employer’s liability to a question of contract. It is unlikely to happen.
In the case of Ross v Caunters, the defendant solicitor acted negligently in the execution of a will, with the result that the plaintiff was unable to take a bequest under the will. The testator had a contract with the solicitor but the plaintiff did not, because of the contractual doctrines of consideration and privity. The court decided that the defendant was liable in the tort of negligence and the plaintiff was able to recover the value of his lost bequest from the solicitor.
In the case of Murphy v Brentwood District Council, a local authority is not liable in tort for negligent application of the building regulations, where the resulting defects are discovered before physical injuries occurs. The loss suffered is purely economic. In 1970, M bought one of a pair of houses built on a concrete raft foundation on an in-fill site. The raft was defective and differential settlement occurred. M was unable to repair the defect, and sold the house, sustaining a loss of GBP 35, ooo. He sued the council for negligent approval of the plans, claiming that there been an imminent risk to health and safety from fractured gas and oil pipes. The court held that the loss suffered was economic loss and the council were not liable in tort for negligent application of the building regulations where resulting defects had not cased physical injury. This shows the court is shifting towards contractual law.
In the case of Aktieselskabet de Danske Sukkerfabrikker v Bajamar Compania Naviera, D's vessel, T, was chartered to carry a cargo of Cuban sugar in bulk. She loaded some 10,000 tonnes at Guayabal. Two bills of lading were issued to the shippers. On April 4, 1979 the vessel set sail for Denmark. On April 13, she encountered heavy weather and on April 14, she started to list to port. Water was found in no. 3 hold port and no. 3 port deep tank. The entry of water increased and the vessel was abandoned on April 15. She sank on April 19. The consignees of the cargo, C, claimed the full value of the same for non-delivery. D contended that they had satisfied the burden of proof in showing that the contract had become impossible of performance and/or that perils of the sea had operated to cause the loss: it was for C to prove that the loss was caused by unseaworthiness. D further relied on The Hague Rules Art. IV and claimed that they were entitled to limit any liability under the Merchant Shipping Acts 1894 to 1958. The court held that that (1) where, as here, the facts disclose that the loss was caused by the concurrent causative effect of an excepted and a non-excepted peril, the carrier remains liable. It does not suffice for the carrier to merely prove under Art. IV, r. 2 of The Hague Rules that a cause of the loss was a peril of the sea; (2) the crack in the portside shell plating was not of itself sufficient to cause the vessel to founder: the vessel was lost due to the corroded bulkhead between lower holds 2 and 3 giving way. The vessel was unseaworthy both in this respect and in that her shell plating was corroded, and such unseaworthiness existed at the commencement of the voyage; (3) the unseaworthiness was not latent and nor was it incapable of discovery by due diligence, which in the event was not exercised. D was, therefore, liable; (4) on the facts, D had manifestly not discharged the burden of proving the absence of fault or privity, and could not, therefore, limit liability.
In the case of Punjab National Bank v De Boinville, PNB brought an action against two individual insurance brokers, B and D, and two Lloyd's brokerage firms, their original employer, FE Wright (UK) Ltd and a firm they were both later transferred to, Fielding Juffins Money & Stewart Ltd. PNB granted letters of credit on behalf of Esal (Commodities) Ltd. PNB claimed against the underwriters who alleged non-disclosure and misrepresentation on the part of the brokers. The preliminary issues arising from the action were: (1) who was the assured, PNB or Esal? (2) Whether PNB had a contractual or tortious relationship with B and D and/or the two brokerage firms? Four policies of insurance were at issue; two on FE Wright slips and the third and fourth on Fielding slips. The first two policies referred to the assured as "Punjab National Bank a/c Esal (Commodities) Ltd". The court held that (1) PNB was the assured party despite the ambiguous nature of the first two policies. The argument that the court should refer to the slips which evidenced the contracts was rejected. The intention of the parties made it clear that PNB was the assured. (2) It was established law that an insurance broker owed a duty of care to his client, Vesta v Butcher [1988] 1 Lloyd's Rep. 19 and subsequent cases. Thus, B and D as individuals owed PNB duties in tort and were personally liable for any carelessness in effecting the four policies. B and D's employers owed a corresponding duty in tort. D and B were not liable to PNB in contract; the contracts were between PNB and FE Wright and subsequently PNB and Fielding. That B and D's contracts with FE Wright had been terminated did not affect the contractual relationship between FE Wright and PNB because Wright failed to inform PNB of the change in B and D's status.
Conclusion
I think that it would be a fair and reasonable to say that over the past forty years the decisions reached at court have profoundly changed in tort, contract and concurrent liability. There are many possible reasons why this has happened. One possible reasons it that, you can say the norms and values of society has changed, therefore reflecting changes on the economic structure and infrastructure.
Bibliography
Furmston M, Cheshire Fitfoot and Furmstrones law of contract
John Cooke, Law of Tort, 7th edition
J.C. Smith, Smith and Thomas: A case book on Contract, 11th edition
Turner C, Contract Law, 1st edition (Oxford: Hodder and Stoughton, 2004)
Cheshire, Fifoot and Farmston’s, Law of Contract, 15th edition, Michael Farmstone
[1975] 3 All ER 776 at 777
[1989] 2 All ER 514 at 516
Unfair Contract Terms Act 1977
[1983] 1 AC 520, [1982] 3 All ER 201
Leigh and Stilivan Ltd v Aliakmon shipping Co Ltd [1985] QB 350, [1985] 2 All ER 44
Financial Times, February 1, 1991
