INTERFACE BETWEEN

TORTS AND CONTRACTS

NAME: YOGESH BYADWAL

ID: LLB/2841/26

CONTRACTS 1

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 INTRODUCTION

Historically, the law of torts and contracts have been treated as separate areas of law. However, in
recent times there has been convergence in the two subjects. As such, the objective of this paper is
to assess whether courts have brought about this convergence or if the two subjects intrinsically
overlap.

In the first part of this paper, the traditional view- that the two subjects are different- has been dealt
with. After that, the paper addresses how and why the watertight distinction between the two sub-
jects has slowly been fading. To do this, I have detailed the various points at which these two
branches are in conjunction. After that, the paper has analysed one of the major and vibrant
branches of torts, i.e. ‘the tort of negligence, and has analysed how the tort of negligence has aided
in increased overlapping or interface between both the subjects. This phenomenon has been sub-
stantiated using case laws. Lastly, this paper analyses whether the interface has existed historically
or developed recently.

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 TRADITIONAL VIEW: TORTS AND CONTRACTS ARE SEPARATE BRANCHES OF
LAW

The idea of enforcing promises as such, which seems most natural to us, may not be an early one in
history of any legal systems1. Law at the outset treated covenant(medieval equivalent of contract) as
starkly different from trespass(medieval equivalent of tort). In 19th century, judges and writers un-
dertook to define contract as different field altogether about binding agreements. This was necessi-
tated due to juristic, commercial demand for certainty and sophisticated rules to deal with expand-
ing trade after industrial revolution. By 20th century, contract law was reshaped along with an ex-
pansion on non-contractual obligations in tort, particularly for negligent misrepresentation causing
economic loss2. Recently it could be observed that increasing regards is being given to substantive
fairness in matters involving economic loss. At present, broadly we can differentiate between the
two as mentioned hereunder.

The underlying principle suggests that tort law is more communitarian in nature and purpose3.
Therefore the duty under tort to not commit an action that will constitute tortious liability is owed to
the whole world. From a contractual view, this would imply that one has entered into a contract
with everyone within his proximity to act reasonably. The breach of this contract would make one
liable to pay damages. 
On the other hand, contracts rely largely on the notion that people should be free to contract with
whomever they choose4. Contracts attach to themselves a certain kind of individualism. The law
originated in the industrial revolution to protect the material interests of the parties contracting.
Therefore, the duty to abide by the contract is owed only to the entity with which one has entered
into a contract.

Moreover, Tort protects the rights vested in a person by law. It entitles a person to remedy damage
to their person or property. Its emphasis on "reasonable care" provides that every person should act
reasonably to not interfere in enjoying another person's legally recognised right. Any such interfer-

1 J. Beatson,A. Burrows, J. Cartwright, Anson’s Law of contract, (28th edition), 10

2 ibid 17
3 Thomas C. Galligan Jr., 'Contortions along the Boundary Between Contracts and Torts' (1994-
1995) 69 Tul L Rev 460
4 ibid 459
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ence or misfeasance and damages consequent thereof are met by restoring the plaintiff's damages as
if the defendant had not committed the tort in the first place- status quo ante. 
 
Whereas, contract law concerns itself majorly with "reasonable expectation". The expectation of
benefit arising out of a contract should not be disappointed. This "expectation benefit" arise out of
its purpose to protect economic interests. Any nonfeasance in performing the contract by one party
will mostly cause loss to the other party. Thus, to give effect to reasonable expectation, contracts
aim at putting the party in a position as if the other party performed the contract.

Under torts, the duty observed is recognised under the law. These duties are not negotiated among
parties but rather imposed by the society through the instrumentality of the law to regulate the soci-
ety. As opposed to freedom to contract, the freedom recognised here is to enjoy the rights recog-
nised by law without interference. The liability of loss arising out of it is decided ex-post the
breach.
In contracts, on the other hand, It is impossible to contract with everybody within one’s proximity
to decide all the responsibilities and liability of loss arising out of the breach. We substitute, in other
words, tort liability ex post for contracting ex ante 5. An high cost is imposed by the former in such
cases.
 Contracts impose a duty agreed by the parties to it. The duties, therefore, are assumed.  A contrac-
tual relationship is entered, assumed under law, by the volition of each party.  The nature of liability
is such that it is ex-ante decided. The parties account for every contingency foreseeable and take ac-
tions to guard against such a scenario. The cost of deciding such damages ex-ante is much less than
leaving it to a court to decide and decide costs ex-post, which the parties have not agreed to mutu-
ally. 

THE LOOSENING OF COMPARTMENTALISATION

I further argue how the differences mentioned above break down when closely examined. As such,
these differences are superficial. However, new points of convergence between the two subjects
have emerged in recent times.

5 JulesL. Coleman, Law and Philosophy , Feb., 1993, Vol. 12, No. 1 (Feb., 1993), 74

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Countering the first distinguishing feature, we have begun to see the distinction between the liabil-
ity under tort and contracts converge. Historically, this can be traced to novel ways of interaction
among people in the late 19th century with the advancement of industries.
Today we can see a duty not to commit tort owed to a certain class of people and groups. For in-
stance, the "Law of negligence," where I owe the duty to act reasonably only to the people who, us-
ing foreseeability test, are likely to incur harm by my negligent act. Similarly, in contracts, we see
instances where the duty not to breach the contract is owed to the world at large. One can argue how
one would owe a duty to everyone in the world to uphold the contractual promise made to each of
them if one chooses to enter into such a relation. Also, apart from contracting parties, a duty is
owed to everyone like to get affected by the breach to it as held by courts, circumventing the privity
of contract6
 
On "the kind of interest protected" feature, We are gradually seeing a trend where torts are shifting
towards protecting economic interests and failing to receive the expected benefit by one party. This
was recognized in Hedley Byrne & Co. Ltd v. Heller & Partner7, which opened the avenue for re-
covering purely economic losses under the tort of negligence. Any negligently made statement upon
which the plaintiff relies to his detriment and suffers economic loss would be entitled to damages.
Contracts on the same lines, even though there is economic loss, the aim in certain cases is to re-
store the status quo ante by awarding reliance damages to the plaintiff for relying on the other
party's promise. Restitution damage also works by restoring the plaintiff's benefit conferred on the
defendant. These actions are decreed regardless of the doctrine of expected benefit.
 
On the third consideration, we see a major backlash from different quarters. In torts, duties aren't al-
ways imposed in that we assume the duty by choosing whom to enter into a relationship with. We
choose whom to allow into our property or who to employ as our employee(vicarious liability). We
choose who to hire to avail of professional services that give rise to a duty. In the same vein, Con-
tracts are at times constructed by implications by judges, which are imposed upon parties. Innova-
tion is the standard form of contracts where the negotiations are absent, and terms are imposed by
one party onto another, absent the voluntary will.
 
In essence, what we have witnessed is the traditional distinctions melting away. In it, we see the
spheres of intersection and that convergence has existed for quite some time. As we further analyze,

6 MacPherson v. Buick Motor Co., 217 N.Y. 382, 111 N.E. 1050
7 Hedley Byrne & Co. Ltd v. Heller & Partner [1964] A.C. 465.
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this convergence is accelerated by the expansion of the scope of the law of negligence in the late
19th to early 20th century.

LAW OF NEGLIGENCE-
TORT OVERLAP ON CONTRACT
The courts in the 19th century viewed the two branches as mutually exclusive. "Contract fal-
lacy" thus emerged, which meant that if a suit was lying in contracts for damages, one could not
concurrently claim damages under Torts. Before this, nevertheless, tort and contract were covered
under the "Law of obligations." They had common origins in "action on the case”8. 
Donoghue V Stevenson9  This case unravelled the contract fallacy. We need to know that this case
broadened the ambit of Law of negligence for this project. Consequently, the neighbour principle
laid down that an action in tort lies with the party that has suffered from the other party's negli -
gence; even so, the defendant owed no duty of care under contract. This was significant because a
person could concurrently sue under the tort of negligence and breach of contract for obtaining
damages. This marked a new era in broadening the remedies available to the aggrieved party.
 
Hedley Byrne & Co. Ltd v. Heller & Partners Ltd 10. This case following on the trend went a step
ahead and laid down, essentially, that an action in the tort of negligence would lie if a party has suf-
fered purely economic losses relying on a carelessly made statement which was acted upon to is a
detriment. Thus, one could claim compensation for economic losses, hitherto under contracts only,
also under torts. 
The purpose of quoting these cases is to stress that through Law of negligence, torts have been grad-
ually creeping upon contracts. Further encroachment would depend upon the courts' extension to
the Law of negligence as a remedy for economic losses. The consequence thereof has been critics
questioning the existence of contract as a separate branch11.

EFFECTS

One consequence of such a fading line is questioning the application of consideration doctrine in
cases that bring unjust results. Promises made without consideration are not contracts. A party to
such a contract cannot claim damages. Hedley principle provides a remedy on this account by pro-

8 Hedley Byrne & Co. Ltd v. Heller & Partner [1964] A.C. 465.
9[1932] A.C. 562.
10 1941 A.C.465.
11 P. S. Atiyah,"Contracts, Promises & the Law of Obligations" (1978) 94 LQ.R 193
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viding damages for the economic losses suffered based on the reliance interest of one party, essen-
tially nullifying the doctrine of consideration.

One other significant effect is that one is provided with concurrent remedies. These remedies differ
according to the degree of foreseeability required to prove a case. In Koufos V C. Czarnikovw
Ltd.12 the court held that contract rule entailed a higher degree of foreseeability-"within the contem-
plation of parties" than tort rule-"reasonably foreseeable"-to successfully bring the suit because, in
contract, the parties near inform the other of the occurrence of an untimely event whereas in torts
parties are stranger to each other. This provides alternative remedies to the party at the detriment ac-
cording to the test's satisfaction. 

 
MEASURE OF DAMAGES

Where contracts attempt to put a party in position had the contract not been breached but per-
formed. In torts, the plaintiff is placed in a pre-tort position; it is difficult to determine which dam-
ages method to apply in an overlap. The view that one may choose b/w claiming lost profit(con-
tract) or wasted expenditure(tort) has been under critique as the plaintiff could claim greater dam-
ages if he knew that the performance of the contract would be unprofitable and claim under torts
would be brought. It places him in a better position to sue another party for greater damages if the
defendant had never performed the contract.

CONCLUSION
The overlap b/w these two branches of law has come up within the last century as we have seen. As
such, this overlap does not harm the legal right and economic interests of the affected parties. The
effect is that the party suffering has an alternative position to seek damages according to conve-
nience.
In this process, the party in breach is at a disadvantage for being vulnerable on both fronts- con-
tracts and torts. Today’s industrial economy creates instability regarding transactions between par-
ties for action on the other party’s party. The parties would never know under what branch of law a
plaintiff would sue them. This impinges upon the freedom to contract as the sum the contracting

12 [1969] I A.C. 350.

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parties arrive at as damages to be paid in consensus is rendered irrelevant if one party sues under
torts where the Judges arrive at the extent of damages.
Having noted the disruptive potential this convergence has over business transactions, it is not con-
ducive to a robust economic environment.

BIBLIOGRAPHY
Books:
1. Beatson, J. Burrows, A. Cartwright, J. Anson’s Law of contract, (28th edition), 10
Articles:
2 Galligan Jr, Thomas C. 'Contortions along the Boundary Between Contracts and Torts' (1994-
1995) 69 Tul L Rev
2. L. Coleman, James, Law and Philosophy , Feb., 1993, Vol. 12, No. 1 (Feb., 1993
3.Bridge M, "The Overlap of Tort & Contract" (1982) 27 McGill LJ.
4. Atiyah P.S.,"Contracts, Promises & the Law of Obligations" (1978) 94 LQ.R
Cases:
5. Koufos v. C. Czarnikow, Ltd. (The Heron II), [1969] 1 A.C. 350
6. Donoghue v Stevenson, [1932] AC 562
7. Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] A.C. 465
8. MacPherson v. Buick Motor Co., 217 N.Y. 382, 111 N.E. 1050