Contractual negligence: Difference between revisions

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An attorney eyes you wistfully and slides a draft across the table to you. It includes the following:
{{a|glossary|[[File:Contractual loss.PNG|450px|center|Damage against Wantonness. Mapped.]]}}An attorney eyes you wistfully and slides a draft across the table to you. It includes the following:
:''My client shall not be liable for any losses, howsoever caused, unless they arise directly from its own {{tag|negligence}}, {{tag|fraud}} or {{tag|wilful default}}.''
:''My client shall not be liable for any losses, howsoever caused, unless they arise directly from its own {{tag|negligence}}, {{tag|fraud}} or {{tag|wilful default}}.''


What to make of this?  
What to make of this?  


At a glance it seems reasonable: it is time-honoured boilerplate, thrown into contracts to close them out like chump change tossed into the bill platter at the end of an agreeable meal with passable company of whom one has now had enough.  
At a glance it seems reasonable: it is time-honoured [[boilerplate]], thrown into contracts to close them out like chump change tossed into the bill platter at the end of an agreeable meal with passable company of whom one has now had enough.  


But does it make sense to fritter away a contractual claim this way? In [[Jolly Contrarian|your correspondent]]’s opinion, no, except in one special case: under an {{tag|indemnity}}.
But does it make sense to fritter away a contractual claim this way? In [[Jolly Contrarian|your correspondent]]’s opinion, no, except in one special case: under an {{tag|indemnity}}.


==={{tag|Fraud}}===
==={{tag|Fraud}}===
[[File:Contractual loss.PNG|450px|thumb|right|Damage against Wantonness. Mapped.]]
You ''can’t'' exclude contractual liability for fraud: to do so is to step beyond the hermeneutic boundaries of the game one plays in entering a legal arrangement<ref>{{google|Gadamer}}</ref>. A contract where, by its terms, one could behave fraudulently would be an arch affair.  So it’s hardly a great concession to say so.
You ''can’t'' exclude contractual liability for fraud: to do so is to step beyond the hermeneutic boundaries of the game one plays in entering a legal arrangement<ref>{{google|Gadamer}}</ref>. A contract where, by its terms, one could behave fraudulently would be an arch affair.  So it’s hardly a great concession to say so.


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==={{tag|Wilful default}}===
==={{tag|Wilful default}}===
A heartily-bandied phrase<ref>see also “[[wilful misconduct]]”, a formulations which Americans seem to prefer, but which to [[Jolly Contrarian|these cloth ears]] carries even less legal meaning.</ref> which sounds like it ''ought'' to mean something. This fellow's best guess is something like a “deliberate refusal to perform one’s obligations under a contract”: not ''too'' far removed from [[fraud]] (it raises a presumption of fraudulence on the part of the actor in agreeing to the obligation in the first place) but, in any weather, a ''subset'' of the class of events comprising a “[[breach of contract]]”.  
A heartily-bandied phrase<ref>see also “[[wilful misconduct]]”, a formulations which Americans seem to prefer, but which to [[Jolly Contrarian|these cloth ears]] carries even less legal meaning.</ref> which sounds like it ''ought'' to mean something. Our best guess is something like a “deliberate refusal to perform one’s obligations under a contract”: not ''too'' far removed from [[fraud]] (it raises a presumption of fraudulence on the part of the actor in agreeing to the obligation in the first place) but, in any weather, a ''subset'' of the class of events comprising a “[[breach of contract]]”.  


Now [[breach]]es of contract, under the law of contract, entitle a wronged fellow to redress. That’s what it means to be a breach. So it ought not cause your heart to leap to have your counterparty offering to be responsible for ''wanton'' examples of this behaviour. It is hardly a mark of generosity. Indeed; you might wonder why he seeks to exclude ''less'' wilful “[[default]]s” - or even ''unwilled'' defaults - being, as they are, ''defaults''.
Now [[breach]]es of contract, under the law of contract, entitle a wronged fellow to redress. That’s what it means to be a breach. So it ought not cause your heart to leap to have your counterparty offering to be responsible for ''wanton'' examples of this behaviour. It is hardly a mark of generosity. Indeed; you might wonder why he seeks to exclude ''less'' wilful “[[default]]s” - or even ''unwilled'' defaults - being, as they are, ''defaults''.


For here's the point: The point of a contractual ''obligation'' is to have some means of making the person who owes it ''do'' it - or, failing that - compensating you for ''not'' doing it. Why else have one?
For here’s the point: The point of a contractual ''obligation'' is to have some means of making the person who owes it ''do'' it - or, failing that - compensating you for ''not'' doing it. Why else have one?


So is that what negligence is meant to do?
So is that what negligence is meant to do?


==={{tag|Negligence}}===
==={{tag|Negligence}}===
''See - {{casenote|Fardell|Potts}}. No, really. Go there. You won’t regret it.''
What about excluding liability for breach of contract where you haven’t been negligent? It sounds all right at first blush. But does negligence make sense in the context of a contract?


====[[Gross negligence]]====
Now [[negligence]] is all good fun: reasonable men (and [[Fardell v Potts - Case Note|women]]), [https://en.wikipedia.org/wiki/The_man_on_the_Clapham_omnibus Clapham omnibuses], [https://en.wikipedia.org/wiki/Donoghue_v_Stevenson snails, ginger-beer], escaping [[domestic animals]] and so on — but it evolved ''[[ad hoc]]'' to address a particular human dilemma ''that does not exist where you have a contract'': that is, the plight of an unseen neighbour: a person with whom you share the planet, the highway, or a boundary, but with whom you have no formalised framework of civil obligations. Outside the criminal law on one hand and the bounds of an enforceable legal contract on the other, the law would have nothing to say about how individuals should treat each other had the [[common law]] of tort not arisen to bridge that gap.
If you really must, see the article on [[gross negligence]]. But in short try saying this into a mirror and keeping a straight face:
:“All right your honour: I admit there’s been a loss. I admit I caused it. I even admit I was negligent in doing so. But I wasn’t ''very'' negligent, so I don’t think I should have to pay for it.”
See how far you get.
 
Strike out the word “gross” wherever you see it. Even in America.
 
====''Normal'' [[Negligence]]====
Is it reasonable to disclaim liability for breach of contract where you haven’t been negligent? It sounds all right at first blush. But negligence is the standard of behavior expected in [[tort]], where, by definition, ''there is no contract'' to which one can appeal for guidance on how one is meant to behave.
 
Now [[negligence]] is all good fun - reasonable men (and [[Fardell v Potts - Case Note|women]]), [https://en.wikipedia.org/wiki/The_man_on_the_Clapham_omnibus Clapham omnibuses], [https://en.wikipedia.org/wiki/Donoghue_v_Stevenson snails, ginger-beer], escaping [[domestic animals]] — but it evolved ''[[ad hoc]]'' to address a particular human dilemma that does not exist where you have a legal contract: that is, the plight of an unseen neighbour: a person with whom you share the planet, the highway, or a boundary, but with whom you have no formalised framework of civil obligations. Outside the criminal law on one hand and the bounds of an enforceable legal contract on the other, the law would have nothing to say about how individuals should treat each other had the [[common law]] of tort not arisen to bridge that gap.


There ''is'' no such gap when you have a contract<ref>Assuming your contract was competently drafted, of course.</ref>:  you know damn well who your neighbour is, having spent six months hammering out a legal agreement with the blighter. You know what you expect your neighbour to do, and what your neighbour expects of you. So it is a bit feeble to suddenly fall back on a standard devised by imaginative judges to look after the interests of contract-less folk who found themselves [[Fardell v Potts|struck by a punt being carelessly navigated the wrong way up a flooded avenue]].
There ''is'' no such gap when you have a contract<ref>Assuming your contract was competently drafted, of course.</ref>:  you know damn well who your neighbour is, having spent six months hammering out a legal agreement with the blighter. You know what you expect your neighbour to do, and what your neighbour expects of you. So it is a bit feeble to suddenly fall back on a standard devised by imaginative judges to look after the interests of contract-less folk who found themselves [[Fardell v Potts|struck by a punt being carelessly navigated the wrong way up a flooded avenue]].


And what does “[[negligence]]” even mean, in the context of a [[contract]], where two merchants have looked each other in the eye and agreed precisely the duties they do owe one another? Would not ''any'' breach of those duties be “negligent”?
And what does “[[negligence]]” even mean, in the context of a [[contract]], where two merchants have looked each other in the eye and agreed precisely the duties they do owe one another? Would not ''any'' breach of those duties be “negligent”? Since we have a contract, we know exactly who our “[[neighbour]]” is – the [[counterparty]] – and we know exactly what our duty is: it is written in the {{t|contract}}. If we do not perform the contract according to its terms, we have fallen short of an express duty to our “[[neighbour]]”.


[[File:Contractual loss2.PNG|450px|thumb|right|Damage against Wantonness. Mapped. Seriousness pointed out.]] Consider the handsome table to the right. This charts all conceivable breaches of contract. The easiest cases are in the bottom right: not much loss, but the defaulting party has been gratuitous in its behavior and however paltry the claim, has no leg to stand on.  
[[File:Contractual loss2.PNG|450px|thumb|right|Damage against Wantonness. Mapped. Seriousness pointed out.]] Consider the handsome table to the right. This charts all conceivable breaches of contract. The easiest cases are in the bottom right: not much loss, but the defaulting party has been gratuitous in its behavior and however paltry the claim, has no leg to stand on.  
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The hard cases are in the top left: here there has been little culpable misbehaviour as such (but note our condition to entry: the contract ''has'' been breached), but a significant loss has come about nonetheless.  
The hard cases are in the top left: here there has been little culpable misbehaviour as such (but note our condition to entry: the contract ''has'' been breached), but a significant loss has come about nonetheless.  


Are these the examples an exclusion from liability for negligence is meant to cover? Surely not: a contractual obligation is a contractual obligation. Doing things this way betrays laziness or a lack of legal acuity from your [[mediocre lawyer|counsel]]. It is not that you wish to exclude contractual liability if a party hasn’t been negligent: what you mean to say is that your counterparty ''is only obliged in the first place to exercise a certain standard of care'', or perhaps should be excused should a [[force majeure]] come about. If you craft the contract that way, there’s no need to carve out liability for non-negligent behaviour, because that behaviour wouldn’t breach the contract in the first place.
Are these the examples an exclusion from liability for negligence is meant to cover? Surely not: a contractual obligation is a contractual obligation. Doing things this way betrays laziness or a lack of legal acuity from your [[mediocre lawyer|counsel]]. It is not that you wish to exclude contractual liability if a party hasn’t been negligent: what you mean to say is that your counterparty ''is only obliged in the first place to exercise a certain [[standard of care]]''<ref>Or, perhaps, should be excused should a [[force majeure]] come about.</ref>. If you craft the contract that way, you don’t ''need'' to exclude liability for prudent behaviour, because thast is all you had to do to comply with  the contract in the first place.


====But isn't this an easier catch-all?====
====But isn’t this an easier catch-all?====
“But”, yon lazy [[mediocre lawyer|attorney]] wails, “adopting that approach means we have to write in a standard of care to every obligation under the contract! As a plain English denizen you can't really want that? Surely it's easier to carve it out!”
“But”, yon lazy [[mediocre lawyer|attorney]] wails, “adopting that approach means we have to write in a standard of care to every obligation under the contract! As a plain English denizen you can’t really want that? Surely it’s easier to carve it out!”


But a contract is meant to stipulate what you are expected to do. For some obligations, a “reasonable standard of care” rider is not appropriate. The payment of money, for example.
But a contract is meant to stipulate what you are expected to do. For some obligations, a “reasonable standard of care” rider is not appropriate. The payment of money, for example.
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''But explicitly referencing a tortious standard in your contract hardly helps with that exercise''.
''But explicitly referencing a tortious standard in your contract hardly helps with that exercise''.
====[[Gross negligence|''Gross'' negligence]]====
If you really must, see the article on [[gross negligence]]. But in short, try saying this into a mirror and keeping a straight face:
:“All right your honour: I admit there’s been a loss. I admit I caused it. I even admit I was negligent in doing so. But I wasn’t ''very'' negligent, so I don’t think I should have to pay for it.”
See how far you get.
Strike out the word “gross” wherever you see it. Even in America.
====Did you say “navigating a punt on a flooded highway”?====
''See - {{casenote|Fardell|Potts}}. No, really. Go there. You won’t regret it.''


===The exception that proves the rule: {{tag|Indemnities}}===
===The exception that proves the rule: {{tag|Indemnities}}===