Convergence of Contract and Tort: Damages in the Age of Concurrent Liability

• Author: Bryan Finlay, Q.C., Marie-Andree Vermette, and Brydie Bethell
• Pages: 379-406

Convergence

of

Contract

and

Tort:

Damages

in the Age of

Concurrent

Liability

Bryan

Finlay,

Q.C.,

Marie-Andree

Vermette,

&

Brydie

Bethell*

A.

INTRODUCTION

The

convergence

of

contract

and

tort

is a

reality. Concurrent liability

is

generally

accepted

and

regularly

effected

both

in

Canada

and

England.

However,

the

convergence between these

two

areas

of the law

appears

to go

beyond

the

concept

of

concurrent liability.

Thus,

the

manner

in

which loss

is

measured

in

contract

and

tort

is

becoming less conceptu-

ally

distinct than

it

perhaps once was,

or so it

would seem upon

a

super-

ficial

review

of the

recent case law. However,

a

more rigorous analysis

is

required.

In

contrast

to

recovery

in

tort law, which

is

characterized

by

incre-

mentally

expanding heads

of

damages,

the

rules governing recovery

of

damages

for

breach

of

contract have been relatively stable. There

has

traditionally

been

one

measure

of

damages

and one

type

of

recoverable

loss,

with restrictive exceptions. Nevertheless, over

the

last decade

and a

half,

a

distinctive trend

in

contract

law has

emerged. Damages

for

non-

pecuniary loss, punitive damages,

and

disgorgement, which have been

available

remedies

in

tort

for

some time,

are now

available

for

certain

breaches

of

contract.

The

trend,

thus,

is

towards

the

expansion

of the

measures

and

recov-

ery for

breach

of

contract along lines that resemble tort principles. While

Bryan

Finlay,

Q.C.,

Marie-Andree Vermette,

and

Brydie Bethell

of

WeirFoulds LLP.

379

*

380

BRYAN FINLAY,

Q.C.,

MARIE-ANDREE

VERMETTE,

&

BRYDIE BETHELL

the

analogy appears

at

times irresistible, there

may be

other explanations

for

this development.

What,

then,

is the

basis

on

which this expansion

is

occurring?

This issue

is

currently

the

object

of a

lively academic debate.

On the one

hand, some argue that

the

trend merely represents

a

prac-

tical,

and

discretionary,

development

of the

rules governing damages

that allows

the

courts

the

flexibility

required

to do

justice

in a

particular

case.1

On the

other hand, others argue that

the

development goes fur-

ther, reaching well beyond

the

traditional bounds

of the law

governing

breaches

of

contract,

and

presenting

a

direct challenge

to

what damages

are

supposed

to be

about:

compensation.2

What

does this trend

signify?

Are the

courts simply reabsorbing

contracts

into torts?

Or is it

just that they

are

more willing

to

give

fuller

protection

to the

plaintiff's

interest

in the

defendant's

performance

of the

contract

by

adapting principles

as

necessary

to do

justice

in the

circum-

stances?

We

believe that

the

second suggestion

is the

correct one.

We

will discuss

two

aspects

of the

"trend"

described above which

we

believe

are

reflective

of the

courts attempting

to do

justice

in a

particular

case.

The two

aspects

are:

(i)

the

recovery

of

non-pecuniary

damages;

and (2) the

granting

of

non-compensatory remedies such

as

punitive

damages

and

disgorgement.

Before

turning

to

these developments

in

the law of

contract, however,

it is

important

in

order

to

understand what

is

happening

to

briefly

review

the

main

differences

between

the

general

principles applicable

to

tort

and

contract damages.

For the

same reason,

we

will also examine

briefly

the

general principles governing concur-

rent liability

in

tort

and

contract.

B.

DIFFERENCES

BETWEEN

CONTRACT

AND

TORT

DAMAGES

Tort

and

contract have

not

always been

two

distinct regimes

of

liability.

In

fact,

the

modern

law of

contract historically grew

out of and

devel-

E.

McKendrick, "Breach

of

Contract,

Restitution

for

Wrongs,

and

Punishment"

in

A.

Burrows

& E.

Peel, eds.,

Commercial

Remedies:

Current

Issues

and

Problems

(Oxford:

Oxford

University

Press,

2003);

E.

Adjin-Tettey,

"Measurement

of

Damages

for

Interference

with

Property Interests

in

Torts

and

Contracts"

(2003)

26

Advocates'

Q.

391;

C.

Mitchell,

"Remedial Inadequacy

in

Contract

and the

Role

of

Restitutionary

Damages" (1999)

15 J.

Contract

L.

133.

J.

Edelman,

Gain-Based

Damages:

Contract,

Tort,

Equity,

and

Intellectual

Property

(Oxford:

Hart,

2002);

L.

Smith,

"Disgorgement

of the

Profits

of

Breach

of

Contract:

Property, Contract

and

'Efficient

Breach'"

(1994-5)

24

Can. Bus. L.J. 121.