Concurrent Liability in Tort and Contract

It has been questioned whether or not concurrent liability should exist both in contract and in the tort of negligence. Furthermore, it is clear that in those circumstances where claims in contract and in the tort of negligence exist concurrently, the nature and extent of the duty of care in the tort of negligence is affected by the terms of the contract. It is submitted that it is not always easy to reconcile the numerous decisions relating to this area of law.

There is no bright line rule for defining the difference between a surveyor’s contract and tort although the distinction is certainly one of substance. For example, contract can oust any tort duties under right circumstances. Contractual duties can also be significantly reduced by agreement. On the other hand, only tort law squarely provides for contribution. Chartles M. Davies commented:

“ Because negligent performance of services is normally a breach of warranty of workmanlike service, the distinctions between causes of action based on trot theories and contract theories have often been blurred by counsel and courts, though the theories are discrete. Because third parties may enjoy the benefits of joint and several liability of joint tortfeasors and the rights of the parties to contribution or indemnity may turn on the theory of law on which recovery is based the distinctions between tort and contract theories should be preserved” (1994)

The relationship between tort and contract in the context of surveyor liability was explored in Sundancer Cruises Corp. v. American Bureau of Shipping.[1994] 1 Lloyd’s Rep 183. The Plaintiff’s claims based on tort were also barred by virtue of the East River 476 U.S. 858, 1986 AMC 2027 (1986) doctrine, which states that when claims are based on contract, no tort claims under certain more specified preconditions are possible Incidentally, East River doctrine does not bar tort claims based on personal injuries.

Yet, it appears that courts have not come to a consensus in this area. For instance, in

Montgomery Ward & Co. v. Scharrenbeck, 204 S.W.2d 508, 510 (Tex.1947), the court held that where a party’s breach of contract results in damage beyond the loss of the benefit of the bargain, the injured party may have causes of action in tort and contract. The court found not only that an insufficient repair (which led to even greater damage) not only violated a duty to repair found in the contract, but also that the failure to use reasonable skill and diligence breached a common law duty, providing a basis for plaintiff’s tort action.

In author’s opinion, with reference to Lord Sarman’s judgement in Tai Hing Cotton Mill Ltd v. Liu Chong Hing Bank Ltd [1986] 1 AC 80, any tortious duty of care, if it exists, will have been defined by the scope of those contractual rights and liabilities which the relevant parties have agreed. Thus the contract between the parties is seen as being the issue which is of primary importance whereas the duty of care in tort of negligence is at best relegated to a position of secondary importance.

If it is accepted that claims for breach of contractual duties and duties of care in the tort of negligence are capable of existing concurrently, one may well question the significance of existence of any tortious claim if it is governed by the primary contractual relationship between the parties and thus cannot confer any greater benefit/liability than that which the parties have contractually agreed. The importance of the existence of a concurrent duty of care is clear in the following two instance:

(1) The most obvious of these must be where the contractual cause of action has become time barred. In most instances, the limitation periods for causes of action in the tort of negligence will expire later than those limitation periods for the contractual causes of action even though they may arise from the same facts. This situation really could raise complex issues for any court to consider. But from the public policy point of view, the continuation of

causes of action in the tort of negligence following the expiration of contractual causes of action should be enhanced. Because major function of classification societies involve safety of life and prevention of pollution of environment.

(2) The existence of a concurrent duty of care is of importance when deciding issues of contributory negligence. It has already been seen that the contractual relationship is responsible for limiting the scope of a duty of care. Conversely, by reference to contributory negligence, the existence of a duty of care can limit or reduce the potential contractual liabilities of the parties. The issue about contributory negligence will be discussed at length in Contributory Negligence of Chapter Six.

Actually, the existence of a concurrent duty of care will be more complex when deciding issues of contributory negligence. In Forsikringsaktieselskapet Vesta v. Butcher & Others [1988] 1 Lloyd’s Rep 19, the Court of Appeal considered the power to apportion blame under the Law Reform (Contributory of Negligence) Act 1945. The court identified three categories of cases when the question could be asked in each of the categories as to whether or not the Law Reform (Contributory of Negligence) Act 1945

applied:

(a) where the defendant’s liability arose from some contractual provisions which did not depend upon negligence on the part of the defendant;

(b) where the defendant’s liability arose from a contractual obligation which is expressed in terms of taking care (or its equivalent) but does not correspond to a common law duty to take care which would exist in the given case independently of contract;

(c) where the defendant’s liability in contract is the same as his liability in the tort of negligence independence of the existence of any contract.

The court held that facts giving rise to claims falling only within the third category could give rise to a finding of contributory negligence under the 1945 Act. The principal judgement of the Court of Appeal was delivered by O’Connor LJ. He considered that he had to consider in detail the wording of the 1945 Act. Section 1 of Law Reform (Contributory of Negligence) Act 1945 provides:

“1. Where any person suffers damage as a result partly of his own fault and partly of the fault of any other person or persons, a claim in respect of that damage shall not be defeated by the reason of the default of the person suffering the damage, but the damages recoverable in respect thereof shall be reduced to such extent as the court thinks fit and equitable having regard to the claimant’s share in the responsibility for the damage…”

In his judgement, O’Conner LJ indicated that he was of the view that concurrent liability in contract as well as in tort existed, he stated as follows:

“…this is but a recognition of what I regard as a clearly established principle that where under the general law a person owes a duty to another to exercise reasonable care and skill in some activity, a breach of that duty gives rise to claims in tort notwithstanding the fact that the activity is the subject matter of a contract between them. In such a case the breach of duty will be a breach of contract….” ( see id. [1988] 1 Lloyd’s Rep 29 )

The crucial portion of this statement which needs to be analyzed is his Lordship’s reference to “general law”. He proceeds to argue that there is power to apportion in contractual cases but only in the third category, as cited above, where liability in contract is the same as in tort independent of the existence of any contract. Therefore, one should assume that he is, by specifying the term “general law” making reference to a contractual duty to exercise all reasonable skill and care which arises irrespective of the existence of any express contractual provision to this effect. However, it is surprising

that his Lordship did not consider other circumstances further, that is, 1945 Act could apply to the first and second category as well.

His approach reveals a contrast and distinction from the views of Lord Scarman in Tai Hing [1986] 1 AC 80. If the view of Lord Scarman were to be applied to these facts, the finding would surely have been that duties of care in the tort of negligence exist in the first and second category as well, albeit that the scope of that duty of care is governed and limited and is secondary to the scope of the contractual duty itself, However, even upon the basis of the reasoning of O’Connor LJ, the necessity for the existence of the duty of care in the tort of negligence may be clearly seen.