This article, “DAMAGES IN TORTS AND CONTRACT” is written by Vijetha Saishree Palle a 1st year Law student at Symbiosis.
INTRODUCTION
The award of damages is the most frequent remedy among the various accessible to an aggrieved party. Damages from a legal aspect are defined as the monetary compensation of loss or injury incurred due to the wrongful act of the other individual. Contract and tort law are the main domains in which damages are sought. The damages given under a contract and those awarded in tort are very different, even though both aim to offer remedy for the person who faced injury. Depending on whether the claim is for a contractual cause of action or a tortious cause of action, there are several methods for estimating damages. Liquidated and unliquidated damages are awarded under contract laws, while unliquidated damages are awarded under tort laws. In tortious cases, damages are often paid to put the plaintiff back in the same position as before the wrongdoing. The purpose of contract damages is to assist and indemnify the aggrieved party for damages incurred due to the breach by the other party.
TYPES OF DAMAGES:
In legal matters, damages are crucial in addressing harm resulting from wrongful actions and offering reparation to affected parties. Different categories of damages cater to diverse situations and goals within the legal system, as exemplified in significant court cases.
Contemptuous Damages are a form of minimal compensation granted when the court views a plaintiff’s claim as insignificant or unnecessary. This principle was highlighted in the case of Rookes v. Barnard, where the House of Lords ruled that such damages are suitable when a legal action is considered morally wrong despite being legally valid.
Nominal Damages, which are symbolic, are awarded when a civil right is breached without substantial harm. In the case of Ashby v. White, the court granted nominal damages of five pounds to the plaintiff for the wrongful rejection of their vote in a parliamentary election, even though no significant harm was incurred.
Compensatory Damages, commonly called Ordinary Damages, seek to return the plaintiff to their pre-injury condition by reimbursing actual losses suffered. In the case of Robinson v. Harman, damages were granted to indemnify the plaintiff for the damages resulting from the defendant’s contractual breach.
Aggravated Damages, given when the defendant’s actions worsen the harm inflicted, are illustrated in Thompson v. Commissioner of Police of the Metropolis. The court raised the damages because of the defendant’s malicious intent and oppressive conduct, highlighting the aggravating factors.
Exemplary Damages, also known as punitive or vengeful damages, are intended to penalise the offender and discourage similar misconduct. In Rookes v. Barnard, exemplary damages were granted to prevent future abuses of authority by public officials, establishing a standard for deterring oppressive behaviour.
Prospective Damages encompass current and potential future losses resulting from the wrongful act. This was demonstrated in Pickett v. Lloyd’s Banking Group, where the court awarded prospective damages to account for the plaintiff’s anticipated loss of earnings due to disability caused by the defendant’s negligence.
These various types of damages serve distinct purposes in the legal system, addressing different facets of harm caused by wrongful acts. The application of each type of damages is exemplified through notable cases, showcasing their significance in achieving justice and equity for injured parties.
DAMAGES IN CONTRACT:
A contract is a written or verbal agreement along with consideration, which is meant to be legally binding. Damages are a vital component of contract law in compensating parties for losses due to a breach of agreement or contract. When two or more parties sign a contract, they depend on one another to uphold their end of the bargain. However, if one party discontinues a promise and the other party is not guilty, the innocent person may sue for damages to put them back in the same position they would be in if the contract had been kept and obliged.
It is significant to note that liquidated damages provisions in contracts are accepted by Indian courts as well. These provisions indicate a fixed sum that shall be paid upon the violation and do not call for evidence of actual damage incurred. However, such provisions must not be punitive or immoral to be valid. Compensation for loss or damage brought on by a contract breach is provided under Section 73 of the Indian Contract Act of 1872.
Ordinary damages result directly from a violation of contract and those both parties might have reasonably anticipated during the period the agreement was made. On the other hand, special damages don’t originate from natural causes but from exclusive situations that only one party is aware of.
DAMAGES IN TORTS:
A tort is a civil wrong that discloses the perpetrator to legal responsibility and results in loss or injury to the claimant. Damages in tort law are denoted as compensation made to the plaintiff by the person who committed the tort. The individual must validate and demonstrate that he has been harmed and has faced legal injury to create an entitlement for damages, or else, he will fail to do so. Two maxims may be used to understand it:
Injuria sine damnum- [i]Without any physical harm, there is still a legal injury, which is known as injuria sine damnum. When a person’s legal rights are violated, they have the right to go to court to have those rights upheld. Even though he didn’t experience any losses, he can still sue for damages if his rights were violated.
Danum sine injuria – There is actual damage or harm but no legal injury; hence, the person cannot go to court to guard his claim because he has not been injured legally. [1]
DIFFERENCE BETWEEN DAMAGES IN TORTS AND CONTRACT
Unliquidated and liquidated damages are allowed in tort cases, but liquidated damages apply in cases related to contract violation. Depending on the specific facts and circumstances of the case, general, exemplary, or both types of damages may be granted in tort cases. In contrast, the judgment of exemplary or punitive damages is an exception rather than the rule where there has been a breach of contract. Due to their criminal nature, such exclusions only apply when breaking a marriage commitment and improperly dishonouring a check. Contractual damages are not punitive, and if the injured party has suffered no losses, the damages are deemed impossible to obtain, even if the guilty party has benefited from the breach and if it was willful. Punitive damages are classically not administered in contract cases. The law often recognises that parties or individuals should be permitted to breach a contract if it appears to be more economically beneficial. Hence, the legal system aims to reestablish the non-breaching party to a position or spot of equality as a substitute for punishing a party for an injury.
SIMILARITIES BETWEEN DAMAGES IN TORTS AND CONTRACT
Tort Law and Contract Law share several similarities as branches of civil law, primarily focusing on defining civil wrongs that can result in liability for injury or damage. Both areas of law entail breaches that may lead to financial compensation for the harmed party.
In contract law, breaches occur when a party fails to fulfil their obligations as outlined in a contract, whether written, oral, expressed, or implied. This breach of contract results in liability for damages, aiming to restore the injured party to the position they would have been in had the contract been upheld. Similarly, Tort Law involves breaches of duty, where one party’s failure to exercise reasonable care or diligence harms another. For instance, negligence, a common tort claim, requires demonstrating that the defendant breached their duty of care, leading to the plaintiff’s injuries or losses.
Furthermore, in Tort Law, claims like product liability hinge on proving that a defective product caused harm, holding manufacturers and distributors accountable for compensating the injured party. Similarly, breaches of contractual obligations or warranties in Contract Law may result in liability for damages suffered by the non-breaching party.
In all these instances, breach of contract, negligence, or product liability, the fundamental remedy typically involves the payment of monetary damages to the aggrieved party. These damages aim to compensate for the harm suffered, whether financial losses, physical injuries, or property damage.
In essence, both Tort Law and Contract Law operate within the realm of civil wrongs, offering legal recourse for individuals who have suffered harm due to the actions or omissions of others. Through the imposition of liability and awarding damages, both legal frameworks seek to address injustices and provide remedies to those wronged.
A Legal injury or wrong can be both a tort and a breach of contract.
Some civil wrongs involve both tort and contract violation. Under some uncommon circumstances, a single incident may give rise to contractual and tortious duties. For illustrative purposes:
A, the possessor or the owner of a cow, consciously and willingly consented to surrender his animal, a cow, to B for safekeeping. But because B didn’t nourish the cow, the animal perished. Here, there is a negligence component and a breach of his commitment, resulting in two civil violations: negligence as a tort and breach of the bailment contract.
Even if the defendant in the above case committed two civil wrongs, the affected party can only sue the condemned person once for negligence or breach of contract. This is so because unjust enrichment would be the suitable and similar remedy in both situations, i.e., compensation and claim. As a result, the wounded party has priority over the other.
CASE STUDY
The defendant engaged the plaintiff to run their company. The plaintiff’s income included commission-based compensation. According to the terms of his employment contract, the claimant was entitled to six months of notice before being let go. The defendant eventually handed the claimant a six-month notice. After that, they abruptly and obstructively stopped the claimant from working for those six months while refusing to pay him. Due to this, the claimant was denied the commission he would have made for those six months.
In this instance, the distinction between tort and contract had to be established. The court said a contract is an arrangement wherein a legal duty is presented and agreed upon between the parties.[3] The nature and outcomes of this legal and contractual relationship are predetermined and established by the parties’ agreement.
The House of Lords held the defendant under the breach of contract. The plaintiff had the right to work and try to earn a commission under the agreement, but the plaintiff’s right was not under access and was prevented from exercising this right. The plaintiff was, therefore, entitled to salary and the prospective commission he would have earned in 6 months. However, they held that the plaintiff would not be authorised for any other kind of damage.
Lumley VS Gye (1853)[4]
Lumley v. Gye is a significant case law establishing breach of contract as a tort. Miss Wagner signed an agreement with Lumley, the plaintiff, to perform at Plaintiff’s theatre for three months. Wagner was forbidden from singing or using her abilities elsewhere under the contract terms. Then Gye, [5]the defendant, struck a deal with Wagner to have her perform at his theatre in exchange for additional money. The plaintiff filed a lawsuit and demanded damages from the defendant for interfering with his contract with Wagner. Demur by the defendant was accepted. The plaintiff filed a notice of appeal.
In this case, the defendant was held liable for interfering with the contract between Wagner and the plaintiff, which was named ‘tort of inducing breach of contract’. The court established that the defendant is liable to pay the damages to the plaintiff for the losses incurred by her.
CONCLUSION
The cases mentioned above established and concluded that the damages of the torts and breach of contract vary in several ways. In the past and present, the courts have recognised the distinctiveness between torts and contracts and adopted separate methods to deal with them. The process of addressing must not be taken for granted and should not be confused, exclusively when the occurrence of both is established.
BIBLIOGRAPHY
Retrieved from https://www.law.cornell.edu/wex/damages
https://abbasilegal.com/the-law-of-damages-under-indian-contract-act-1872/#:~:text=When%20there%20is%20a%20breach,when%20there%20was%20no%20breach. (n.d.).
Kapoor, R. (n.d.). Avtar Singh’s Law of Contract & Specific Relief. Eastern Book Company.
McKendrick, E. (n.d.). Contract Law, Texts, Cases and Material (tenth edition). Oxford University Press, 2022.
[1] Garg, R. (2022) Drone laws in India, iPleaders. Available at: https://blog.ipleaders.in/drone-laws-in-india/ (Accessed: 29 July 2023).
[2] (1909) UKHL 1, [1909] AC 488
[3] Team, L. (2022) Addis v Gramophone Co Ltd [1909] AC 488 – case summary, lawprof.co. Available at: https://lawprof.co/contract/remedies-for-breach-cases/addis-v-gramophone-co-ltd-1909-ac-488/ (Accessed: 31 July 2023).
[4] [1853] EWHC QB J73, (1853) 118 ER 749, (1853) 2 Ellis and Blackburn 216
[5] Team, L. (2022a) Addis v Gramophone Co Ltd [1909] AC 488 – case summary, lawprof.co. Available at: https://lawprof.co/contract/remedies-for-breach-cases/addis-v-gramophone-co-ltd-1909-ac-488/ (Accessed: 31 July 2023).
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