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How Negligence v. Contract Breach Can Mean Winning or Losing


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5/30/2018
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For nearly a century, New York's courts have continued to grapple with the question of which legal theory governs when a plaintiff contends that the defendant acted negligently in failing to uphold its end of a contract - negligence or breach of contract?

Why the Distinction Between Negligence and Breach of Contract Matters

The primary answer to this question is rather straightforward, and can be summed up in three (3) words:

Statute of Limitations.

Simply put, while breach of contract claims typically may be brought for six (6) years post-breach [see, CPLR §213(2)], negligence causes of action usually must be brought within three (3) years post-incident [Ibid. at §214]. To be sure, there are exceptions to the three-year limitations period, and the exceptions cut both ways. In some cases involving professional liability, or in legalese, "malpractice," for example, that three-year window has been reduced to 2-1/2 years. On the other hand, when the claims involve an infant, a person who has been judicially declared incompetent, or a party who has died, the statute of limitations may be tolled for a period of time.

Where the Lines Have Been Blurred

In Sommer v. Federal Signs Corp., et al., the Court of Appeals laid out, in rather plain terms, the cases where the cut-off is clear-cut:

"Some claims plainly sound in tort--for example, the case of a pedestrian struck by a careless driver. Others are clearly contract, like the case of the merchant who fails to deliver goods as promised. In the former case, the duty breached--to drive carefully--is one not imposed by contract but by law as a matter of social policy (see, Prosser, The Law of Torts [4th ed], p 613.) In the latter, the duties arise solely from the parties' consensual undertaking (id.)."

The Sommers court also set forth those instances where the point of demarcation was less clear, noting:

"This case partakes of both categories, and thus falls in the borderland between tort and contract, an area which has long perplexed courts ... These borderland situations most often arise where the parties' relationship initially is formed by contract, but there is a claim that the contract was performed negligently."

How New York's Courts Determine Whether It's Breach of Contract, Negligence, or Both

The Sommers court provided further guideposts for making this determination, including the following:

  •  "[A] contracting party may be charged with a separate tort liability arising from, or in addition to, the breach of contract. [But while] a tort may arise from the breach of a legal duty independent of the contract,  merely alleging that the breach of a contract duty arose from a lack of due care will not transform a simple breach of contract into a tort."
  • A legal duty independent of contractual obligations may be imposed by law as an incident to the parties' relationship. Professionals ... for example, may be subject to tort liability for failure to exercise reasonable care, irrespective of their contractual duties ... In these instances, it is policy, not the parties' contract, that gives rise to a duty of due care (see, Prosser, The Law of Torts, supra, p 613).
  • Both breach of contract and negligence claims may lie where the failure to perform the service carefully and competently can have catastrophic consequences, because in those instances there is a duty of reasonable care that is independent of the parties' contractual obligations.

The Takeaway

If nothing else, the takeaway from this line of cases by New York's courts is this:

This area of the law can prove especially tricky, and is not for novices. If you are facing a potential lawsuit with significant economic consequences that turns on a breach of contract/negligence analysis, you would be well advised to seek the guidance of a lawyer that is intimately familiar with this area of the law.



Category: Breach of Contract

Jonathan Cooper
Non-Compete, Trade Secret and School Negligence Lawyer

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