Although the laws of tort and contract both deal with obligations, it is possible to distinguish between them on the basis that in the case of a contract the parties are voluntarily assuming obligations whereas tortious liability is compulsorily imposed by law. Thus, for example in respect of the “general” tort of negligence, the law imposes an obligation not to breach the duty of care as defined in the leading case of Donoghue v Stevenson. Poole opines that “it is ironic that a marked distinction is maintained between contract and tort since the action for breach of contract was originally a sub-species of an early form of action for tort”. At the beginning of the thirteenth century, the royal courts did not hear actions arising from breaches of contract preferring to leave resolution of such issues to specialist or local jurisdictions such as those maintained by the merchants in the instances of early forms of insurance contracts. When the royal courts began to assume contractual jurisdiction, they did so not by developing the law in relation to contracts themselves but by relying upon an early form of tort (said to be the forerunner of the modern law of negligence) known as “trespass on the case”.
The distinction between tort and contract can often become blurred especially where somewhat artificial analysis is used to justify the inclusion of a particular obligation under one heading as distinct from another. A classic example of this is Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd. Misrepresentation is a leading category of action giving rise to liability in tort. The case concerned a misrepresentation as to the mileage of a car. The plaintiffs claimed and were awarded damages for breach of contract. The difficulty with this decision is that the statement was made before the conclusion of the contract and it is by no means certain that it became a term of the contract. Salmon LJ somewhat disingenuously argued that the representation, although not a term of the contract, became in effect a collateral contract. Markesinis & Deakin comment that contract theory was here advancing into the pre-contract stage achieving results almost identical to those of a negligence action.
There is a strand of judicial reasoning which militates against a finding that liability can exist simultaneously in both jurisdictions. For example, in Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd , Lord Scarman asserted that there was nothing “to the advantage of the law’s development in searching for a liability in tort where the parties are in a contractual relationship. However, in Henderson v Merrett Syndicates Ltd , the view was expressed that “the common law is not antipathetic to concurrent liability.” He concluded:
“I do not find it objectionable that the claimant may be entitled to take advantage of the remedy which is most advantageous to him subject only to ascertaining whether the tortuous duty is so inconsistent with the applicable contract that…the parties must be taken to have agreed that the tortious remedy is to be limited or excluded.”
(But note however, the interrelationship between tort and contract regulated by the statutory provisions relating to contractual exclusion clauses such as the Unfair Contract Terms Act 1977.)
Despite such blurring of the distinction, substantial differences remain which will bear upon the choice by a prospective claimant between jurisdictions. The traditional example given as to why contract might be preferred over tort concerns the issue of recovery of pure economic loss. In cases of contract, damages might be recovered for loss of profit whereas in tort the assessment of damages involved a calculation oif what was required to restore the claimant to the position in which he found himself before the tort occurred. However, even here there can be difficulty in distinguishing the operation of the tort jurisdiction from that of contract in relation to a specific set of facts. Just as in Dick Bentley Productions (supra) a contractual resolution was reached to a problem which would appear to have been more at home within the tort jurisdiction, in Hedley Byrne & Co Ltd v Heller and Partners Limited (economic loss caused by negligent misstatement) , Lord Devlin referred to special relationships which are “equivalent to contract” where there is “an assumption of responsibility in circumstances in which, but for the absence of consideration, there would be a contract.”
A significant factor influencing the choice of jurisdiction may be the operation of the Limitation Act 1980. Under this Act, a standard limitation period of 6 years applies in both tort and contract (save personal injury cases in which it is 3). However, there is a profound difference in that in contract the time begins to run from the date of the breach whereas in tort it only begins to run from the date on which the damage is suffered. Of course, in many cases, these dates will be identical but there will be instances in which the inconsistency may operate to the disadvantage of the defendant. In Société Commerciale de Reassurance v ERAS (International) Ltd , Lord Mustill condemned this principle as offensive to common sense:
“In most if not all cases a plaintiff will be better off framing his action in tort whereas, in our judgment, if a contract is in existence this is the natural vehicle for recourse.”
A final consideration which may influence claimants is the distinction between the respective tests for establishing whether damage is too remote to be recoverable. In contract, the test is one of “reasonable contemplation” whereas that in tort is one of “reasonable foreseeability”. Thus it has been traditional to assert That the test in contract is the more stringent. However, doubt was cast upon this in H. Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd in which the Court of Appeal was unable to agree upon a distinction in relation to remoteness stating that the appropriate distinction was not between contract and tort per se but between losses based upon expectation and (physical) losses based upon reliance.
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