Droit constitutionel Irlandais

School of Law

Assignment Submission Form

Student Name:

Peter Mullan

Student ID Number:

17323221

Course Title:

Law and French

Module Title:

PLR

Assignment Title:

Is there a common thread or principle underlying remoteness rules in tort and contract? In particular, on this issue, should Irish law follow the dissent of Lord Denning MR in H Parsons (Livestock) Ltd v Uttley Ingham & Company Ltd [1978] QB 791, or the leading speech of Lord Reid in C Czarnikow Ltd v Koufos(The Heron II) [1969] 1 AC 350?

Lecturer(s):

Dr. Eoin O’Dell

Date Submitted:

24/01/2018

Word Count/Page Count:

2041 Words

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Signed: Peter Mullan Date: 13/02/2019

Is there a common thread or principle underlying remoteness rules in tort and contract? In particular, on this issue, should Irish law follow the dissent of Lord Denning MR in H Parsons (Livestock) Ltd v Uttley Ingham & Company Ltd [1978] QB 791, or the leading speech of Lord Reid in C Czarnikow Ltd v Koufos(The Heron II) [1969] 1 AC 350?

Introduction:

The starting point for any rule of remoteness of damage, be that contract or tort, is the familiar notion that a line must be drawn somewhere: it would be unacceptably harsh for every tortfeasor or contract breaker to be responsible for all the consequences which he has caused. We could, of course, just abandon any attempt to formulate rules for this area, and look to the judge's pragmatic discretion as to what is "fair" in the circumstances of the particular case: let it be simply a question of fact. Certainly, the question of where to draw the line on recoverability of consequential losses cannot be answered by a mathematically precise formula and occasionally the judges are quite explicit that they are drawing the line on the facts of a case because they regard that as a "fair" solution. However even the concept of “fairness” has strongly nuanced approaches depending on who you might ask. Therefore, it is necessary to discern guidance and principles from the existing corpus of law which allow for some uniformity and clarity of judgements.

Common Principles:

There is a ‘default rule’ which has developed in most common law jurisdictions. Cooke opined that such a rule should be that someone is responsible for all consequential losses of a breach of duty, be that in contract or tort. However, Viscount Simonds in the case of Overseas Tankship (UK) Ltd v Morts Dock and Engineering Co Ltd stated clearly that ‘it is a principle of civil liability, subject only to qualifications which have no present relevance, that a man must be considered to be responsible for the probable consequences of his act. To demand more of him is too harsh a rule, to demand less is to ignore that civilised order requires the observance of a minimum standard of behaviour.’ This comment was in relation to a breach of tortious nature but appears to reflect the general idea that the ‘default rule’ is that remoteness is limited by reference to the foreseeable consequences of one’s acts.

In a similar vein, Alderson B, in Hadley v Baxendale and Asquith L.J. in Victoria Laundry v Newman, sets out that the contract rule of remoteness is based on a degree of foreseeability at the moment of entering into the contract. The underlying logic present in Hadley and the cases which follow it is that, to be fair to the defendant, he should be responsible only to the extent of the risks which he could have realised he was undertaking when he agreed to the contract, and so the risk of loss is one which he can be held to have undertaken.

Hart and Honoré

point out that it is clear the Privy Council and the House of Lords had in mind a general principle that a defendant should normally be responsible only for the foreseeable consequences of his act. This is the ‘default’ rule which has already been discussed above, and is most clearly shown by the judgment of Viscount Simonds in The Wagon Mound, where he mentioned Hadley v Baxendale in his argument that there is a common principle in tort and contract, that a person is responsible "for the foreseeable consequences of his act".

Hence ‘foreseeability of consequences’ forms the basis of the common thread in the remoteness rules in both tort and contract.

Furthermore, this essay proposes that there is a second, more significant, common rule present in judicial rulings in relation to remoteness in contract and tort law.

In both contract and tort, the courts appear to take the view that remoteness and therefore the range of damages for which the defendant is responsible, is linked to the underlying policy pursuant to which the duty itself is imposed. The rules of remoteness between tort and contract stem from the shared principle that it is the reason for the creation of the duty, the very nature of the contract or tort, which ultimately gives rise to different rules in relation to remoteness.

The contract remoteness test is set quite differently from the tort test, and for different reasons of principle which are derived from the underlying purposes of contract law: it is because these underlying purposes for tort law are different, that the remoteness test itself is different. And the key difference which the House identified was that the relationship between the parties to a tort is different from that between contracting parties.

In contract, the defendant consents to be bound to an agreement which contains within it a particular balance of risks and rewards: in consequence, the limit to the losses for which he is responsible is set by reference to what he can be taken to have accepted at the time of concluding the agreement. In negligence, not only is a similar idea used, but the duty itself is defined, under the approach adopted in Caparo v. Dickman, by reference to particular kinds of loss. This suggests that to understand what is meant by ‘foreseeable consequences’, we have to look at the underlying basis for the imposition of the duty itself. In contract, there is an assumption of responsibility on the mode of contract which gives rise to a higher level of foreseeability required to impose damages. In tort, two persons, usually unknown to one another, find that the acts or utterances of one have collided with the rights of the other, and the court has to define what is the extent of liability for the ensuing damage.

The idea that the extent of liability in contract and tort depends on the policy underlying the relevant duty was stated explicitly by the House of Lords in South Australia Asset Management Corp. v York Montague Ltd, where Lord Hoffman stated ‘A plaintiff who sues for breach of a duty imposed by the law, whether in contract or tort, must do more than prove that the defendant has failed to comply. He must show that the duty was owed to him and that it was a duty in respect of the kind of loss which he has suffered… In the case of tort, it will similarly depend upon the purpose of the rule imposing the duty... In the case of an implied contractual duty, the nature and extent of the liability is defined by the term which the law implies.’ So in both tort and contract, the extent of liability in negligence is fixed by reference to reasons for the creation of the duty.

In summary, both the tort and contract rules relating to remoteness share; (i) the principle of ‘foreseeability of consequences’ which acts as the default rule upon which each respective test

is adapted, and (ii) the common thread of developing their own respective rules for remoteness from the principle which underpins itself, in contract, the prearranged agreement which governs relations, and in tort, the collision of rights between two possibly unknown parties in tort.

Divergence:

The current approach is to take the default rule and create two specific distinct strands of it and ground one in the nature of each claim, that being contract or tort. The contract strand is more restrictive and has a higher degree of probability necessary for a claim to succeed than the less stringent strand developed for tort. This is the approach adopted by Lord Reid in C Czarnikow Ltd v Koufos(The Heron II). The House of Lords stated

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