Compare and contrast torts liability with contractual liability and examine the appropriateness of the former in business operations.
This assignment will compare and contrast torts liability with contractual liability and examine the appropriateness of tortuous liability in business operations. This will be achieved by considering in detail the differences and similarities between contract and tort. The assignment will then discuss whether or not it is appropriate to impose tortuous liability in business operations. It will be concluded that whilst it may not always be appropriate tortuous liability is an area that pervades every area of life and thus has necessarily become a part of business operations.
It has been argued in recent years that the distinction between the law of contract and tort is no longer as great as it once was. It has been said that: “by now it is, well understood that the distinction between contract and tort is not that simple, and that it does not line up neatly with any distinction between voluntary and involuntary obligations” (Craswell: 2000) This said it is important to consider some of the distinctions which have been made in relation to tort and contract liability. The law on contract and tort can be considered together under the category of the law of obligations.
Perhaps the primary difference between contract and tort is that liability in tort arises from the breach of an obligation that has been fixed by the law whereas in contract the extent of liability is fixed by the parties themselves. (Winfield: 1931) This distinction however has become somewhat outdated as the two concepts often arise in the same situation. For example liability can arise as a result of particular professional relationship and this can create concurrent liability in relation to both contract and tort. Case law has shown that an obligation in tort can exist co-extensively with an obligation in contract. In Henderson v Merret Syndicates, the Agent was held to liability in both contract and tort for failure to take care to protect the interests of the Lloyds Names. Lord Goff concluded that the duty in tort was imposed by general law, and the contractual duty was imposed by the will of the parties.
Nonetheless Chitty on contracts states that “contractual obligations are voluntary and particular to the parties, whereas liability in tort is imposed in law as a matter of policy and affects persons generally” (Beale: 1999) This view was echoed by Lord Denning in the case of Froom v Butcher  in which he said: “in determining responsibility the law eliminates the personal equation. It takes no notice of the view of the particular individual or of others like him. It requires everyone to exercise all such precautions as a man of ordinary prudence would observe”
Fried (1981) refers to tort law as “involuntary transactions” although this point has now become controversial and it is asserted by many that an individual puts himself into a situation where he may incur a tortuous liability and thus it cannot be said to be involuntary. Examples of this can be seen such as we choose whether or not to drive a car or we decide whether or not we may enter a particular profession. By making these choices we consent, it is argued to the consequences of negligence behaviour. The House of Lords in Hedley Byrne & Co Ltd v Heller & Partners Ltd (1963) 2 All ER 575 established that a person can of your own accord acknowledge or undertake a duty of care, and by assuming this responsibility he has entered into a relationship, which is “equivalent to contract”. This position was further entrenched in the case of Henderson v Merret Syndicates (1995) 2 AC 145 where the courts held that the agent in question had “assumed responsibility” to the plaintiff, and Lord Goff stated that the duty to exercise care and skill was both the same in contract and tort. The agent held himself out to be competent and so freely consented to the obligation to display care and skill, just as he willingly entered into the contract
A further distinction that can be made between contract and tort is that tort duties can be owed to the world at large whereas a contract will mean that duties are owed to a specific person. Although this is slightly controversial as a tort will only come into being where there has been a breach of duty and this breach of duty is likely to be in respect of one person only.
A distinction can be made between the aims of the two types of law. Tort law is generally reluctant to impose any liability for omissions and or impose liability for pure economic loss. The main aim of the tort system is to protect life and property whereas the law of contract has been created specifically to promote the further development of an individual’s interest (Deakin at el: 2003). “Contract is productive, tort law protective. In other words, tortfeasors are typically liable for making things worse, contractors for not making them better” (Weir: 1976)
A final distinction that is made is that in Tort liability cannot be limited whereas in contract it can. This distinction is not strictly true. A party can at least make an attempt to limit or exclude their obligations in tort and this can be achieved by creating exemption clauses. These are of course subject to certain rules and regulations and will be tested on their fairness. An example of a situation where a party successful used an exclusion clause is the case of Canada Steamship Lines Ltd v R (1952) AC 192, in which the Court held that if a clause expressly exempts a party from liability for negligence, the effect must be given to the clause and liability excluded. A further example of a situation where liability for tort can be exclude is s2 (1) of the Occupier’s Liability Act 1957 this section allows an occupier to “exclude his duty to any visitor or visitors by agreement or otherwise”
It is clear that there are many more similarities between the law of contract and the law of tort then there are perhaps differences. This has been demonstrated by the use of case law. Contract does not always ensure that the parties intentions are recognised and the court can in some instances interpret clauses in ways not intended or foreseen in situations. Equally as we have seen tortuous liability cannot correctly be said to be involuntary and we as actors take on particular tasks which necessarily come with certain assumptions of responsibility. Reasonableness applies to both contract and tort and therefore further indicates that these two branches of the law have some very common features. There are still some distinctions and the main distinction is that whilst it cannot be said that tortuous liability is not voluntary the Defendant will still be at the mercy of the law whereas in contract law the parties do have a greater amount of autonomy. It is suggested that the High Court of Canada went too far when they asserted that there was no distinction between contractual obligations implied into a contract and obligations in tort and that both amounted to “an objective expectation defined by the Courts of the appropriate obligation and the correlative right”. Whilst there may be some areas that overlap considerably it is argued that it is not desirable to create a single law which encompasses both aspects. It would be impracticable and it would remove the perceived autonomy of parties to agree to contract on terms personal to them. Both contract and tort create obligations that are particular to their own individual branch of the law and to blur the distinction would simply be inappropriate.
Having discussed the differences and similarities between contract and tort it is necessary to give some consideration as to whether or not tortuous liability is desirable in business. It is undesirable in some respects because it places additional liability on businesses in a number of (unlimited) situations. This makes risk assessment difficult and it means that businesses may find it difficult to foresee which risks they may be liable for. However at the other end of the scale the law of tort will also protect them from a variety of situations and in this respect is extremely beneficial. It may be of more practical assistance for businesses to create contracts in respect of these liabilities, however the reality is that tortuous liability is a very important and real part of English law, pervading every aspect of daily life and thus something which cannot be avoided.
Books & Journals
Allan V & Riches S, (2009) “Keenan and Riches Business Law”, Pearson, 9th Edition
Beale H, (1999) “Chitty on Contracts”, Sweet and Maxwell, London
Craswell R, (2000) “Against Fuller and Perdue”, University of Chicago Law Review 99, 129
Deakin S, Johnstone A & Markesinis B, (2003) “Markesinis and Deakins Tort law”, Fifth Edition, Oxford University Press, Oxford
Weir J, (1976) “Complex Liabilities” in Zweigert K and & Droknig U, (Eds) “International Encyclopaedia of Comparative Law”
Winfield P, (1931) “The Provision of the Law of Tort”,
Canada Steamship Lines Ltd v R (1952) AC 192
Froom v Butcher 
Hedley Byrne & Co Ltd v Heller & Partners Ltd (1963) 2 All ER 575
Henderson v Merret Syndicates (1995) 2 AC 145