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San Diego Business Law: Three Key Differences Between Breach of Contract and Tort

There is often much confusion about the difference between legal liability based on breach of contract and liability based on tort. In this article, we offer a brief discussion of three key distinctions.

Obligations Founded on Different Principles

In simple terms, contract and tort law are different branches of the law both involving breaches or violations of obligations. However, the obligations are founded on different principles. With contracts, the obligations are entered into voluntarily via the making of a contract. Breach of contract liability is based on a violation of some obligation that is set forth in the contract. A person or entity that suffers a loss because of a breach of contract is entitled to sue and recover money damages. Because contract obligations are voluntary, it is essential to have an experienced San Diego corporate attorney draft any contract that you are proposing and analyze any contract that is being presented for signature.

With respect to tort law, the obligations are imposed by the law and public policy. As such, tort liability in a lawsuit is based on a violation of one or more of those duties imposed by the law. Often, an automobile accident is an example of a tort. The law imposes upon each of us the duty to be careful while driving. If there is crash or a wreck, typically, one driver or another has violated the duty to be careful while driving. A person who suffers a loss ā€” damage to their car or injured to their body ā€” by a violation of a duty is entitled to sue and recover money damages.

Because entering into a contract is voluntary, the law treats breach of contract in a less severe manner than breach of duties that are imposed by public policy. In addition, the two branches of the law treat intentional violations differently.

Damages

Because the obligations arise differently, contract and tort law also have distinct approaches to damages. With respect to breach of contract, damages are intended to give the parties the benefit of their bargain. That is, damages are intended to approximate or replicate the economic result of the contract as though the contract had been properly and duly performed. Thus, for breach of contract, the nonbreaching party can recover out-of-pocket expenditures and losses that are reasonably foreseeable and/or within the contemplation of the parties when the contract was entered into. But, in general, no punitive damages are allowed since the purpose of contract law is to encourage performance and to compensate for nonperformance; not punish.

With respect to tort law, the purpose of awarding damages is to both compensate victims for their losses and to vindicate public policy. So, one the one hand, tort damages are about “making the victim whole” and, on the other, about enforcing the expected norms of behavior with respect to the duties imposed by the law. Continuing our example involving automobile drivers, tort law wants us to take seriously our individual duties to drive carefully. As such, tort damages will be compensatory and can be punitive if the circumstances show recklessness or willful violation of the duties owed to others. Other types of well-known torts include medical malpractice, slip and fall property cases, and products liability.

Intent

Finally, contract and tort law treat intentional violations differently. In general, a party to a contract is allowed to intentionally breach a contract. A breaching party should expect to be sued and should expect to lose the lawsuit, and should only do so with the advice and counsel of an experienced corporate attorney. But commercial reality says that, sometimes, breaching a contract and paying the damages is actually less expensive and is more commercially rational than performing. Within limits, contract law allows this.

This is not the case with respect to tort law. An intentional violation of your duties will lead to severely increased damages, punitive damages, and might even be criminal. If you intentionally cause a wreck with your car, very likely, you will be liable in a civil lawsuit for punitive damages and you will be arrested for vehicular assault and maybe attempted homicide.

Contact San Diego Corporate Law

For more information, contact Michael Leonard, Esq., of San Diego Corporate Law. Mr. Leonard focuses his practice on business law, transactional, and corporate matters, and he proudly provides legal services to business owners in San Diego and the surrounding communities. Mr. Leonard can be reached at (858) 483-9200 or via email.

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