A Comparative Fault Defense in Contract Law – Part 1

This week’s posting considers whether culpability should be considered in a claim for breach of contract.  The traditional answer in the U.S. (traditional at least since 1900) is No.

As discussed in a recent symposium, “In terms of the Restatement of Contracts conception, then, contract law is strict liability without a contributory negligence defense . . . The core of contract law as applied in the courts is a no-fault regime.”

“Among the many debates about fault in contract law, one principle remains unchallenged: a promisor is strictly liable for defective performance or nonperformance despite her exercise of due care.”

“Even the most fervent adherents of fault in contract law concede that the law always applies this rule strictly.  Thus, the promisee does not have to prove that the promisor failed to take cost-effective precautions against breach.  Nor, for that matter, can the promisor escape liability by showing that the breach was caused by exogenous factors beyond her control.”

(Robert E. Scott, In (Partial) Defense of Strict Liability in Contract, in Michigan Law Review (June 2009), Vol. 107, No. 8, p. 1381.)

Which means that contract law is applied as a binary system – either you perform the contract or you do not.  If you do not perform (i.e., if you breach), then you are liable for damages.

This system is effectively 180 degrees different from tort liability, in which culpability is always an issue.  Another commentator notes that,

“The main puzzle that emerges from the discussion is why contract law puts the burden on the wrongdoer to show that he was not at fault in order to avoid paying damages, while tort law puts the burden on the victim to show that the wrongdoer was at fault in order to obtain damages.”

(Eric A. Posner, Fault in Contract Law, in Michigan Law Review (June 2009), Vol. 107, No. 8, p. 1431.)

Thus, one of the issues is whether society is better when contract law is treated as a binary system of liability, without consideration of fault by either party.  A third commentator considers whether the non-breaching party contributed to the loss.  Prof. Ariel Porat proposes that “the comparative fault defense should be available to a breaching party against an aggrieved party when the latter’s fault has contributed to his own losses.”

In this scenario, “the promisee should be considered ‘at fault,’ and should shoulder part of the loss, when he fails to meet a legal burden to reduce his potential losses by cooperating with the promisor or avoiding overreliance.”

Next week’s posting further examines comparative fault as a defense to a breach of contract claim.

(Ariel Porat, A Comparative Fault Defense in Contract Law, in Michigan Law Review (June 2009), Vol. 107, No. 8, p. 1397.)

Randy Krbechek posted at 2010-3-7 Category: Law Reviews

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