The Differing Principles of Assessment of Damages in Tort and Contract

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The Differing Principles of Assessment of Damages in Tort and Contract By Raphael Kok

1. Introduction

For those in the legal fraternity, the question of whether a legal wrong has been committed in various situations predominantly occupies their concentration. This holds true, even purely in the civil context. When confronted with a problem, the question that immediately blazes in their mind is this: “Is there a breach of tortious duty or a breach of contract here?”

However, the layman’s perspective is a stark contrast. He is not interested in knowing whether it is a case of breach of tortious duty, or a breach of a contractual duty, or both. He is not interested in knowing how does a tortious or contractual liability arises. Instead, he is only interested in a single thing: compensation. His mind is only focused on a single question: “How much can I get out of this?”

This is why the law of damages deserves meticulous analysis in any given civil case. And why any legal practitioner, wishing to serve his clients’ interest best, must command a firm grasp of the principles of assessment of damages in tort and contract. More importantly, he must appreciate the reality that there are essential theoretical and practical differences between the two. As Scrutton L.J. noted in The “Arpad” : “It is often said that the measure of damages in contract and tort is the same; I do not think that this is strictly accurate”. Indeed, such differences affect both the question of recoverability and quantum.

Conveniently, the approach in assessing damages in tort and contract are mainly identical. Thus, any differences in their principles can be analysed in parallel. Such principles can be divided into three categories i.e. (1) basis of compensation; (2) principles limiting compensatory damages; and (3) types of loss. They are by no means mutually exclusive, but instead may overlap each other. They are merely categorised as such to ease understanding to the law of damages and arguably, provide a practical step-by-step methodology for legal practitioners to approach the question of “How much can I get out of this?”.

Next, the issue of concurrent liability arises. This issue has become more pertinent in light of the recent House of Lords decision of Henderson v Merrett Syndicates Ltd, where Lord Goff stated that ‘the common law is not antipathetic to concurrent liability, and that there is no sound basis for a rule which automatically restricts the claimant to either a tortious or a contractual remedy’. Also, concurrent liability cases are becoming more prevalent, due to the recent liberalisation of the tort of negligence to allow the recovery of pure economic loss (which has traditionally been confined to the contract realm) in not only situations of negligent misstatement, but also for negligent acts (particularly in cases of defective building liability) across the Commonwealth including Malaysia, but for the notable exception of England.

In light of the progressive expansion of concurrent liability cases, the question of practical differences between assessment of damages in tort and contract becomes crucial. This is because understanding such differences would enable legal practitioners to determine how best to recover maximum damages i.e. either through an action in tort or contract.

In short, this assignment analyses the different legal principles of assessing damages in tort and contract, and the resulting practical differences when such principles collide in concurrent liability cases.

2. Basis of Compensation

Generally, the basis of awarding damages, in both an action in tort or contract, is ‘to give the claimant compensation for the damage, loss or injury he has suffered’ or alternatively, ‘to put the claimant in the position that he would have occupied if the wrong had not been done’. Such an overarching proposition is not wrong. However, it overlooks the fundamental premise of all contractual claims...
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