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Why is it the case that contractual liability is usually defined by basis of foreseeability rather than negligence (like in tort law)? I am looking a good explanation for that from economics. I understand that contract breach can be seen itself as negligent act. I also understand the economic reasons behind foreseeability doctrine (or Hadley-Baxendale).

  • I am trying to analyse these rules from economic perspective. What makes these rules efficient etc. – user3314 Nov 3 '15 at 14:42
  • Also I was not sure if I should have posted this question in economics section or here since mu topic deals with law and economics both – user3314 Nov 3 '15 at 14:48
  • I will add my question under economics. Thank you for your help! – user3314 Nov 3 '15 at 14:55
  • I'd expect this to get better reception here, because 1) economic analysis of law is conditional on some knowledge of legal theory, and 2) Law and Econ is more prevalent in law (integrated into many 1L curricula) than in econ (a subfield of applied micro offered at a handful of PhD programs). That said, it'll be interesting to see what result you get on Econ.SE – Pat W. Nov 3 '15 at 14:59
  • @feetwet: I think this question belongs here: economics.stackexchange.com – Alexanne Senger Nov 3 '15 at 18:45
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Why is it the case that contractual liability is usually defined by basis of foreseeability rather than negligence (like in tort law)?

I find this statement confusing; what liability?

Your liability under a contract is to do (or refrain from doing) those things that you contracted to do. Obviously, these have to be foreseeable (at least in a general sense) or you can't form a contract around them.

Your liability with respect to negligence is not to negligently breach any duty of care you have to people to whom you have a duty of care.

If you are instead talking about quantifying damages arising from a breach of contract or the tort of negligence then the foreseeability of those damages arising from the breach or the negligence is explicit in both doctrines. Unforeseeable damage is not recoverable under contract (see Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949]) or negligence (see Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd [1961]).

Edit in light of OP clarification

Breach of Contract

You have to prove there was a breach. The cause of that breach does not have to be negligent.

Negligence

You have to prove there was negligence. See Business sending personal info to a random email address for how to do this.

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  • My sense is that this is not a law question. But, rather, an economics question on the subject of law. – Alexanne Senger Nov 4 '15 at 0:31
  • I agree that the question is a bit confusing. I come from Finland where consequential damages in the trade law are compensated only if the other party has been negligent. So called direct damages are compensated under control liability which is pretty close to strict liability in "harsness". If I have understood right it is usually the case that you dont need to prove negligence when dealing with contract breach. So I am basically asking why is this so. – user3314 Nov 5 '15 at 14:28

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