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Why Put Torts into Business Deals, and How Can Disclaimers and Releases Stop the Practice?

 

Law students learn that contracts, and breaches of contracts, occur among marketplace participants that know one another, and that torts occur among participants that are strangers to one another.  Use contract law, if the parties know each other.  Use tort law, if they are strangers.

Image 1The teaching is that when people or businesses have a history of interaction, they likely have become members of a contractual relationship; therefore, a lawyer should look to contract law in order to “regulate” their ongoing business relationship.  But when people  or businesses have no prior history or a very limited one – making them virtual strangers – they probably haven’t entered a contractual relationship; therefore, a lawyer should look to tort law (e.g., fraud, tortious interference with relationship, and negligence) in order to regulate the parties’ interaction.

In the real marketplace, contract law doesn’t stay in its proper place – and tort law, with promises lucrative extra-contractual remedies like punitive damages – certainly doesn’t stay in its proper place.  Lawyers will assert that strangers have entered contracts – specifically, oral (unwritten) contracts – in order to find ways for one side to sue the other.  More commonly, however, lawyers seeking to increase a case’s value will assert that contractual parties have tort claims against each other.

Holmes PLLC handles numerous breach-of-contract cases and tort cases – with a specialization in the space in between contract law and tort law.  It frequently advises clients on how to avoid tort liability, or how to emphasize the tort aspects of a business relationship – in the event a client seeks extra-contractual remedies (that is, legal remedies above and beyond the remedies provided by the underlying contract).

First and foremost, business participants wish to limit their legal exposure to another business participant to only contract law.  Businesses do not want to incur tort liability, if they can avoid it.  Such businesses utilize “disclaimers” in their writings with other businesses in order to make clear that neither side owes tort-style duties to the other.  For example, a disclaimer that neither side is the other’s “fiduciary,” “partner,” or “agent” helps to prevent the various tort claims than can attach to fiduciaries, partners, and agents.  These sorts of disclaimers are helpful provided that, first, they appear prominently in writing and, second, there is a written acknowledgment of understanding of the disclaimer.  It is very difficult for a party that subsequently wants to ignore the disclaimer – in order to pursue lucrative tort claims – to avoid the disclaimer’s effect if that party earlier had acknowledged understanding the disclaimer.

To be continued.