Tort Law vs. Contract Law

Both tort and contract laws are considered part of the civil law (as opposed to criminal law).  However, there are several differences between these two branches of civil law.

Contract law is designed to impose duties on the parties who enter into a contractual relationship.  Tort law, on the other hand, imposes duties on the members of a community as to socially-acceptable and responsible behavior.

Under contract law, the parties to a contract are expected to act reasonably vis-à-vis each other.  Under tort law, on the other hand, members of the community are expected to act reasonably vis-à-vis other members of said community.

Also, tort and contract laws generally have different statute of limitations.  Contract law generally provides for longer statute of limitations than tort law.

Finally, there generally are differences in the type of damages one could recover under tort law vs. contract law.  In general, one cannot recover punitive damages under contract law.  Such damages generally are recoverable under tort law.

Reference Desk

Erlich v. Menezes, 981 P.2d 978 (Cal. 1999) (quotations and citations omitted).

“The distinction between tort and contract is well grounded in common law, and divergent objectives underlie the remedies created in the two areas. Whereas contract actions are created to enforce the intentions of the parties to the agreement, tort law is primarily designed to vindicate social policy.”

Applied Equipment Corp. v. Litton Saudi Arabia Ltd., 869 P.2d 454 (Cal. 1994) (quotations and citations omitted).

“Contract and tort are different branches of law. Contract law exists to enforce legally binding agreements between parties; tort law is designed to vindicate social policy.  We have described the  essential difference between contract and tort law as follows: As Professor Prosser has explained: Whereas contract actions are created to protect the interest in having promises performed, tort actions are created to protect the interest in freedom from various kinds of harm. The duties of conduct which give rise to them are imposed by law, and are based primarily on social policy, and not necessarily based upon the will or intention of the parties.

“Conduct amounting to a breach of contract becomes tortious only when it also violates an independent duty arising from principles of tort law. The law imposes the obligation that every person is bound without contract to abstain from injuring the person or property of another, or infringing upon any of his rights. This duty is independent of the contract.  An omission to perform a contract obligation is never a tort, unless that omission is also an omission of a legal duty.

“The differences between contract and tort give rise to distinctions in assessing damages and in evaluating underlying motives for particular courses of conduct. Contract damages seek to approximate the agreed-upon performance. In the law of contracts the theory is that the party injured by breach should receive as nearly as possible the equivalent of the benefits of performance. For the breach of an obligation arising from contract, the measure of damages is the amount which will compensate the party aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result therefrom.

“Contract damages are generally limited to those within the contemplation of the parties when the contract was entered into or at least reasonably foreseeable by them at that time; consequential damages beyond the expectations of the parties are not recoverable. This limitation on available damages serves to encourage contractual relations and commercial activity by enabling parties to estimate in advance the financial risks of their enterprise.

“In contrast, tort damages are awarded to compensate the victim for injury suffered.  For the breach of an obligation not arising from contract, the measure of damages is the amount which will compensate for all the detriment proximately caused thereby, whether it could have been anticipated or not.

“Consistent with the distinctions just discussed, damages for mental suffering and emotional distress are generally not compensable in contract actions.  Similarly, punitive or exemplary damages, which are designed to punish and deter statutorily defined types of wrongful conduct, are available only in actions for breach of an obligation not arising from contract.  In the absence of an independent tort, punitive damages may not be awarded for breach of contract even where the defendant’s conduct in breaching the contract was wilful, fraudulent, or malicious.

“Within the different spheres of contract and tort, motivations for conduct are also treated differently. In an intentional tort action, motives amounting to malice, oppression, or fraud may justify punitive damages.  But the law generally does not distinguish between good and bad motives for breaching a contract.  In traditional contract law, the motive of the breaching party generally has no bearing on the scope of damages that the injured party may recover for the breach of the implied covenant of good faith and fair dealing; the remedies are limited to contract damages.  Varying personal or economic reasons motivate one to breach his contract, but the general rule is that motives are immaterial and cannot be inquired into on the question of compensatory damages. [See] Harris v. Atlantic Richfield Co. (1993) 14 Cal. App.4th 70, 82 [17 Cal. Rptr.2d 649] [“The imposition of tort remedies for `bad’ breaches of commercial contracts is a substantial deviation from the traditional approach which was blind to the motive for the breach.”].)

“The fundamental differences between contract and tort are obscured by the imposition of tort liability on a contracting party for conspiracy to interfere with the contract.  Whether or not a stranger to the contract induces its breach, the essential character of a contracting party’s conduct remains the same — an unjustified failure or refusal to perform. In economic terms, the impact is identical — plaintiff has lost the benefit of a bargain and is entitled to recover compensation in the form of contract damages. In ethical terms, the mere entry of a stranger onto the scene does not render the contracting party’s breach more socially or morally reprehensible. A party may breach a contract without any third party inducement because of personal, racial, or ethnic animus, or for other nefarious or unethical reasons. In contrast, a breach may be the product of naive or innocent misunderstanding or misperception created by the aggressive solicitation of an outsider. In any case, motivation is irrelevant. Regardless of the presence or absence of third party involvement, the contracting party has done nothing more socially opprobrious than to fall short in meeting a contractual commitment. Only contract damages are due.

“The imposition of tort liability in these circumstances also thwarts legal rules and policies limiting contract damages to those sums reasonably forseeable to the contracting parties. As a law review commentator observes: While the imposition of liability in tort upon the non-party interferer may be justified in all cases for his intentional disruption of the contractual relation, the party who merely breaches his contract should in all cases be exposed only to contractual liability as he has not assumed the role of an intentional interferer. To impose tort liability upon the contract breaker because of the involvement of a third person (when liability is limited to contract damages when the contract breaker is acting alone) undermines the policies which have developed limited contractual liability.”

Related entries