What is a Breach of Contract?
A breach of contract generally occurs when one party to the agreement fails to fulfill its obligations under the contract. The breach can be a minor or major "failure" to perform. Much depends upon the language and terms of the contract, i.e. whether time is of the essence or whether there is a specific performance requirement.
Some examples of breach of contract cases are:
-Kingstown Capitol Management, LLC v. Feraco Capital Partners, 149 F. Supp.3d 357 (S.D.N.Y. 2016) – holding that a breach of contract claim was not duplicative of a fraud claim where the "legal rights of the parties had been governed by a contractual agreement" but the contract did "not foreclose the possibility of a fraud claim" as fraud claims "seek a different kind of relief than breach of contract claims."
-A&R Body Specialty & Collision Works, Inc. v. Progressive Casualty Ins. Co., 15 N.E.3d 759 (N.Y. 2014) – finding, in a case involving insurance claims for collision repair, that the "plaintiff stated a cause of action for breach of contract by alleging that defendant wrongfully failed to pay the repair invoices covered by the Policy" . Plaintiff alleged that its services were covered under the policy, and therefore, defendant clearly had a duty to pay for them, which it failed to do, even though the ultimate issue as to whether the costs would be ultimately covered under the policy was a question of law for the court to determine at a later time.
-Detectives Endowment Ass’n Empowerment Fund v. Bratton, 30 N.Y.S. 3d 905 (Sup. Ct. N.Y. Cnty. 2016) – determining that the state law breach of contract claim against a city and its police department for failing to disclose requested documents based on the Freedom of Information Law (FOIL) was appropriate because plaintiffs, who were non-profits dedicated to improving the effectiveness of the police department, asserted their rights as citizens and not as private parties to the contract with regard to their FOIL request.
-Foody’s Total Landscape Care, Inc., v. Tri-State Management Div. Inc., 31 N.Y.S.3d 68 (2d Dep’t 2016) – holding that, where a landscaping company engaged to maintain condominium property prior to the establishment of its Condominium Association was compensated by the developer, it was not entitled, in a breach of contract action, to recover from the association for post-establishment work where the owner of the company failed to enter into a contract for those services with the association.
What is a Tort?
Simply put, a tort is a breach of duty that one party owes to another, and not one based on contractual obligation. While the types of obligations that can form the basis of a tort are varied, generally they relate to obligations not to commit a certain type of harm against others. However, in the United States, tort law does not categorically distinguish between each category of torts, but rather decides tort cases on the basis of the rules established for each particular tort.
Torts come in three different varieties: intentional torts, negligent torts and strict liability torts. In addition to the three categories of torts, some commentators also recognize other forms of conduct, such as misrepresentation, and misappropriation.
Intentional torts, as the name implies, require the actor to intentionally commit a certain type of harm, as opposed to a negligent action that results in the same or similar kind of harm. Examples of intentional torts include assault, battery, defamation, false imprisonment, infliction of emotional distress, trespass to land and trespass to chattels.
Negligence is the most well-known tort. Negligence is defined as a failure to act as the reasonable person would under the same circumstances, and is broken down into four parts: establishing that a duty of care is owed to the plaintiff, that a breach of that duty occurred, that the breach resulted in the injury suffered, and that the injury suffered was either foreseen or necessarily foreseeable to the reasonable person. Negligence can also be established under a theory of res ipsa loquitor, which does not require the plaintiff to establish all four elements of negligence. Rather, the doctrine of res ipsa loquitor applies where the harm is of the type that generally does not occur in the absence of negligence, the defendant in control of the thing causing the harm, and the plaintiff was not negligent.
Strict liability is another type of tort that requires no proof of negligence or fault, and can be established even though the defendant acted in accordance with the proper standard of care. Strict liability exists principally in products liability cases, where a product is found to be defectively designed or manufactured, or is unreasonably dangerous, or lacks adequate warnings or instructions, and results in personal injury. In some, but not all jurisdictions, the following types of strict liability are recognized in tort: manufacture defect, design defect and failure to warn.
Misrepresentation also constitutes a tort, and consists of several elements: a material misrepresentation of fact; knowledge or belief by the defendant that the statement is false and that it was intended to induce the plaintiff to act upon it. There are two forms of misrepresentation in tort: fraud and negligent misrepresentation. Fraud, or intentional misrepresentation stems from intentional conduct to defraud another, while negligent misrepresentation arises from unintentional conduct to mislead another.
In contrast to the various forms of torts, there are several categories of breach of contract actions. These include breach of express contract, where the promise is actually stated, and breach of implied contract, where the terms are implicit from the conduct of the parties (e.g., an implied-in-fact contract). Implied contracts contain obligations to act in good faith and fair dealing, and impose duties on parties to act in accordance with those terms. Disgorgement of profits from breach of contract, also referred to as accounting of profits, allows the award of profits enjoyed by the breach as long as they were not directly caused by the breach itself.
Differences Between Torts and Breach of Contract
Fundamental legal differences exist between claims in tort and breach of contract. Let’s first discuss the essential nature of tort and contract claims. Torts are usually not adopted freely by agreement. A tort claim arises from the violation of a duty imposed by law. A contract is an agreement between parties that creates a duty which the parties have agreed to undertake. The key element to a contract claim is a breach of the duty that was assumed when the contract was formed. The key element of tort liability is a violation of a duty imposed by law. Torts are usually not contracted for, unlike contract claims. Despite the key distinction in terms of how the claims arise, the remedies for breaches of contract and torts are similar.
A key difference between torts and breach of contract also can be found in the degree of conduct that is required for liability to attach. For example, with certain tort claims, a plaintiff may not be entitled to recovery or may have their damages reduced if they did not act reasonably, themselves. This is not generally the case in a breach of contract action in Texas. In some cases, a plaintiff may recover the reasonable and necessary costs and attorney’s fees; however, in most cases the plaintiff is limited to recovery only for the damages that were caused by the breach. Thus, if a plaintiff takes actions that make the injuries worse or increases the damages to the plaintiff beyond the damages that would have been incurred without any mitigation, the plaintiff may not be able to recover for these damages, and any attorney’s fees may be reduced. Economic losses that are within the contemplation of the parties do not normally support other causes of action such as negligence or negligent misrepresentation claims. The economic losses rule, however, has limitations and exceptions, is not absolute, and continues to develop by case law.
The statutes of limitation for tort claims and breach of contract claims are different. Applying the wrong limitations period can be fatal to a client’s claim. In most cases, a plaintiff must bring an action for breach of a written or oral contract no later than four years after the claim or cause of action accrues. The statute of limitations for a fraud claim is generally four years after the claim or cause of action accrues. The statute of limitations for negligence is two years after the claim or cause of action.
Can a Breach of Contract be a Tort?
So, can a breach of contract also be considered a tort? The answer is both yes and no. If for example, a restaurant chef promises to prepare a certain dish for a customer and decides not to prepare that dish and serves the customer something else, then, the breach of contract claim by the customer is an action at law for damages and does not give rise to a tort. In that example, there was no intent on the part of the chef, if for example by accident and or mistake, to create a dish other than the one promised from the menu. A breach of contract is just that, a breach of contract (or violation of promise made). If however, the chef intentionally decided to make a different dish than the one ordered and secretly spit in it or put his own bodily fluids into the dish, then, a tort would exist there as well. Common sense says if you’re intentionally, even secretly putting your own bodily fluids into a dish and serving it to someone else, then, that will be an action for damages in tort. Of interest, the New Jersey Supreme Court, in the unreported case of Leimant (aka Sandomir) v. Santini, 2016 N.J. Super. Unpub. LEXIS 4091 (2016) addressed the issue of whether a breach of contract can be converted into a tort and the difference between the two concepts that are separately recognized by New Jersey law. The Court noted that: "in order to recover in tort, a plaintiff must show "a violation of a duty fixed by law for the protection of the interests of others" rather than "a duty arising merely from a contract." Burg v. Larsen, 89 N.J. 13, 28, 444 A.2d 1131 (1982) (internal citations omitted). We held in Burg that, where "the misfeasance of a party to a contract touch[es] upon the safety of person and property," a tort may lie against that party and recovery for economic loss may be advanced outside the contract. Ibid. (quoting Valehus v. Borough of Franklin, 49 N.J. Super. 65, 72-73, 139 A.2d 882 (App. Div. 1957)). Thus, "a plaintiffs damage resulting from an alleged negligent breach of contract by a defendant is actionable in tort if the negligence exposes the plaintiff to a risk of injury independent of the plaintiff’s expectations under the contract." Spring Motors Distributors, Inc. v. Ford Motor Co., 98 N.J. 555, 561, 487 A.2d 660 (1985). In other words, a breach of contract may be actionable as a tort "if it was attended by a willful disregard of the rights of plaintiff so as to evince a passing indifference to the rights of others. Id. at 566 (internal citation omitted); see also Dolis v. St. Johns, 85 N.J. 165, 167, 175, 425 A.2d 234 (1981) (citing Burlew v. American Cyanamid 174 N.J. Super. 204, 417 A.2d 57 (App. Div. 1980), aff’d o.b., 87 N.J. 1, 420 A.2d 1153 (1980)). "Negligence in the performance of a contract can constitute a tort where there is an independent duty of care." Spring Motors, supra, 98 N.J. at 561 (citing Burg, 89 N.J. at 28; Dolis, 85 N.J. at 168; Valehous, 49 N.J. Super. at 70). Additionally, "a defendant who commits an intentional and unlawful interference with a contract may also be liable in tort to a third party with whom he has interfered." Shapiro, supra, 224 N.J. at 150 (internal citation omitted). Appendix A, 2016 WL 10459261 (N.J. Super., 2016). Bottom line, a breach of contract can be a tort and can expose the breaching party to damages beyond the expectation damages of the breached contract.
Legal Implications and Remedies
When a contract is breached, the legally accepted remedy is for the "innocent" party to sue for damages or equitable remedies. In business, damages are measured by general money damages for actual losses sustained with consequential damages. If expected profits were lost as a result of the breach, those profits could also be included. An exception to this rule is where the loss of profit is uncertain then no consequential damages are available. Equitable remedies are only granted when money does not compensate the injured party. They may include: rescission, reformation, restitution, restitutionary damages, specific performance or impossibility of performance .
Generally there are no damages for emotional distress but on rare occasions, such as for intentional infliction of mental distress, may be a viable option.
Torts allow the injured party to bring a cause of action for the actual damages suffered. The damages are compensatory and may include punitive damages and consequential damages. Punitives punish the tortfeasor (an entity committing a tort) to deter others from similar conduct. Cases involving fraud, assault, wrongful death or malice can be a basis for an award of punitives.
Examples and Case Studies
The classic example of a breach of contract is one involving a sale of goods. In 1983, the Corn Products Refining Company agreed to supply P. Lamandia, Inc. with 4,000 pounds of the food ingredient glucose per week. They also agreed that Lamandia would be able to purchase 1,000 additional pounds of glucose in certain circumstances. Lamandia needed these 1,000 pounds of glucose to accommodate its customers, such as Frito-Lay and Nabisco, who kept increasing their orders for its snacks, cakes and pastry products. But in 1984 Corn Products refused to supply that additional 1,000 pounds even though Corn Products had already increased its glucose production. Corn Products defended its refusal to sell because it claimed that the prices of glucose were declining and Lamandia’s customers were buying less glucose. But the Court found that Corn Products’ decision not to sell the 1,000 pounds of glucose was not required by statute.
In a well-known case involving a tort action in property damage, the plaintiff, an adjoining landowner to the defendants’ fertilizer factory, lost 900 chickens in a fire that spread from the defendants’ fertilizer storage building. The plaintiffs filed suit alleging damage to their property under the theories of negligence, strict liability and trespass. At trial, the jury returned a verdict for the plaintiffs for $325,000 in compensatory damages and $500,000 in punitive damages.
The law usually distinguishes negligence and strict liability as tort actions. However, now courts will not apply pure strict liability to environmental tort actions. An example of an environmental tort case is that in 1989, in the case of an oil spill into the ocean, the Fifth Circuit Court of Appeals ruled that punitive damages were recoverable under Section 29 coverages against an insurance company; even where there was no showing of gross negligence or wilfulness on the part of the insured.
Choosing to Speak with a Lawyer
If you find yourself lost in a tangle of contractual obligations or legal negligence, it is best to gain insight from a legal professional. No discussion on the proper definition of a breach of contract can account for every possible nuance of your particular case. An experienced lawyer who is familiar with the relevant case law will be able to identify solid grounds for pursuing a claim. An attorney can not only provide the sound legal analysis needed to help you make decisions going forward , but can also represent your interests in litigation or arbitration, should it come to that. Catching common pitfalls and obtaining evidence in a timely manner is crucial to a favorable outcome, so delay can sometimes prove fatal to your case.