TOPIC 1:

Introduction to Torts and Contract

25th July 2016

Contract v Tort: Liability imposed

Contractual liability arises by consent (i.e. privity).

Tortious liability is imposed by operation of law based on some conduct of your part.
o But: not 100% right. There isnt really a clear division. You dont only have
contractual liability on terms of agreement. It is what a reasonable person
would impute to you in contract. Can be bound in contract even without
subjective intention to enter into a contract. i.e. enter into memorandum of
understanding: Masters v Cameron
o Also implied terms in contract i.e. Sale of Goods Act, fitness for purpose of
goods. It is what youre presumed to agree upon, not only what you actually
agreed upon.
o For torts, i.e. in medical battery, theres no cause of action with consent but
yes if there is no consent.
o Tort duty to prevent economic loss by ones negligent acts is owed only to the
individual members of a determinate class of whom one has knowledge or
the means of knowledge that an individual is likely to suffer such harm.

Contract v Tort: Purpose

Contract is about assigning risk, or to make economic activity possible. Ensuring
promises are kept. Encourage particular types of commercial behaviour? Keeping
legally enforceable agreements.
Torts is about a compensatory function. Retributory function (exemplary or punitive
damages).
Law is often thought to have a normative operation: promotes and support certain
values and norms of conduct.

Concurrent Liability:

The fact that there is a contract relationship between the parties which may give rise to an
action for breach of contract, does not exclude the co-existence of a right of action founded
on negligence as between the same parties, independently of the contract, through arising out
of the relationship in fact brought about by the contract. Donoghue v Stevenson [1932]
AC 562

i.e. duty of care as a professional, rendering services pursuant to a contract (lawyers,

doctors, dentists). Or manufacturer of goods
You can sue in 1, or the other, or both. If you bring action in both, doesnt mean you
can recover twice.

Windeyer J in Voli v Inglewood SC (1963) 110 CLR 74

Neither the terms of the architects engagement, nor the terms of the building contract, can
operate to discharge the architect from a duty of care to persons who are strangers to those
contracts. Nor can they directly determine what he must do to satisfy his duty to such persons.
That duty is cast upon him by law, not because he made a contract, but because he entered
upon the work. Nevertheless his contract with the building owner is not an irrelevant
circumstance.

Contract can expressly curtail tortious liability to which a party to that contract would
otherwise be exposed. Can be effective.
 Theres also equitable field of liability, which isnt a contract or tort. There is also
statutory liability.

Contracts v Torts: Damages

Mason, Wilson and Dawson JJ in Gates v City Mutual Assurance Society Ltd
In contract, damages are awarded with the object of placing the plaintiff in the position in
which he would have been had the contract been performed he is entitled to damages for
loss of bargain [expectation loss] and damage suffered, including expenditure incurred, in
reliance on the contract [reliance loss]. In tort, on the other hand, damages are awarded with
the object of placing the plaintiff in the position in which he would have been had the tort not
been committed.

Contract damage is putting you in the position had the obligation between performed

Nominal damages: Recognise breach of right but havent suffered substantial loss. .
i.e. minor assault. This is uncommon. Cost would outweigh nominal damages.
i.e. suffered loss, but on point of law, not compensable. May award nominal damages.

o In torts, damage is the gist of the action (for non-actionable per se like
negligence). If you fail to prove damages, no award of damages.
o In contracts, if you prove breach of contract, youre entitled to damages.

Compensatory damages/ substantial

o Legally recognised, damages that are compensatory.

Punitive damages/ exemplary: To punish you, for bad behaviour

o Not available in contract per Addis Gramaphone
o Sometimes is available in tort. Disregard for plaintiffs right.

Statute of Limitation

Actions in contract and negligence are both subject to a 6-year general limitation
period, and a three-year limitation period in personal injury cases (irrespective of how
it is pleaded: contract or negligence).
But in negligence, time starts to run when damage/loss is suffered, whereas in
contract time starts to run at the date of breach. In actionable per se trespassory act,
limitation period commences when the act occurs.
o No limitation period for torts, only particular torts.
o Plead a case in one way rather than another where statute barred.

Choice of Law

Choice of law (or private international law) arises where private/civil disputes have
an international dimension
In tort, an action will be governed by the law of the place where the tort was
committed
o Questions of foreign law is proven by question of fact (need evidence).
In contract, an action will be governed by the proper law of the contract this can be
specified in the contract expressly, or it can be decided by the court.

The Damages Process (Contract):

1. Causation: was the damage claimed by the plaintiff caused by the breach?
2. Remoteness: is the damage within the bounds of remoteness or scope of liability?
Compensable?
Theres difference in remoteness of damage in tort as opposed to contract. Tort is
more generous to the plaintiff, recoverable damage in negligence claim extends
to damage of a kind of person in the position of the defendant ought reasonably
to have foreseen. Overseas Tankship v Morts Dock.
In situations where there a breach of contract also involves the commission of
the tort of negligence, the plaintiff will not, it seems, be prejudiced by the choice
of cause of action and can normally recover under the wider concept of
remoteness even if action is framed in contract.

3. Assessment issues: measures of damages reliance v expectation.

Do not conflate causation and remoteness.

In contract, damage must have been of a kind which arises in the usual course of
things, or which was in the usual course of things, or which was in the contemplation
of the parties as the probable result of a breach. Hadley v Baxendale.
Whether the P frames the action in C or T, damages assessed on more favourable test.

H Parsons.
o Distinguish between claim for loss of profit consequent on breach (strict
criteria) and claims for compensation for physical damage caused by breach
(criterion for tortious claims application: any loss of expense which he ought
reasonably to have foreseen at the time of the breach as a possible
consequence).

Contributory Negligence
In contract, if Ps own carelessness breaks the chain of causation between the breach
and the loss or damage the P will fail. The common law did not recognise CN as a
defence in an action for breach of contract.
o Statute now permits award for breach of contract reduced on basis of CN in
some circumstances.

1. Contractual duty of care owed (express/implied)

2. Contractual duty of care must be coexistent and coextensive with tortious
duty of care. Must mirror tortious duty of care owed by same person.

In torts, a P will fail completely in relation to any claim relying on loss or damage
resulting in part from Ps own carelessness. CN is a complete defence