Contract and Tort Law for Engineers Christian S. Tacit Tel: 613-599-5345 Email: ctacit@tacitlaw.com
Canadian Systems of Law There are two systems of law that operate in Canada Common Law and Civil Law Common Law operates in all Canadian Provinces and territories other than Quebec and is based on the British approach to law Civil Law operates in Quebec and is based on the European continental approach to law
The Common Law System Judge made law legal principles develop incrementally through successive cases In modern society many areas of the law are codified into statute, rather than just being left to develop purely through case law, but even the interpretation of those statutes develops incrementally based on the case law Statutes are also used to alter the common law where it is found not to meet current social norms
The Civil Law System The Quebec Civil Law system is based on the French legal tradition The main source of the law is the Quebec Civil Code and takes precedence over interpretations arising out of individual cases
Civil Law as a Type of Law The term civil law is also used to distinguish all areas of the law other than criminal law
Areas of Law of Potential Professional Liability for Engineers Contract Law Tort Law
What is a Contract? A contract is an exchange of promises between two or more parties to do, or refrain from doing, an act which is enforceable in a court of law A contract is a binding legal agreement The law provides remedies for breaches of contracts
Elements of a Contract Offer and acceptance Consideration An intention to create legal relations Legal capacity Legality Formalities
Offer and acceptance One party must make an offer and the other party must accept that exact offer for a contract to be formed The evidence on which contract formation is assessed is objective (i.e., would a reasonable person conclude that an offer and matching acceptance had occurred?) Some contracts can be oral and others can not
Consideration The price of the promise both parties to a contract must bring something to the bargain Can be either conferring an advantage on another party or incurring some kind of inconvenience or detriment towards oneself A common law requirement Consideration must be real, but need not be adequate Consideration must not be from the past
Intention to be Legally Bound There is a presumption for commercial agreements that parties intend to be legally bound (unless the agreement says otherwise) Some types of agreements are unenforceable as a matter of public policy Privity of contract typically it is only the parties to a contract who can enforce it
Legal Capacity Persons contracting must not be under a legal disability, such as being minors or being adults who are mentally incapacitated
Legality In order to be enforceable, the purpose of a contract cannot be illegal or against public policy
Formalities and writing Most contracts can be formed orally, but some cannot For example: Contracts in consideration of marriage Contracts which cannot be performed within one year Contracts for the transfer of an interest in land Contracts by the executor of a will to pay a debt of the estate with their own money Contracts for the sale of goods above a certain value Contracts in which one party becomes a surety (acts as guarantor) for another party's debt or other obligation Various jurisdictions have changed some of these rules
Elements of a Compensable Breach of Contract Existence of a contract Breach of the contract Damages to the plaintiff caused by the breach Damages resulting from the breach were foreseeable at the time that the contract was made
No contract Defences to Claim of Breach of Contract No breach either no actual breach occurred or a breach occurred but liability is limited by a disclaimer clause Limitation period has expired Breach did not result in damages Damages not foreseeable at time contract was made
Objective of Damages for Breach of Contract To restore the plaintiff to the position in which it would have been if the contract had been performed
Damage Awards for Breach of Contract General damages compensation for actual losses suffered that flow from the breach and were in the contemplation of the parties when the contract was formed Consequential damages compensation for damages that although not naturally flowing from a breach, were within the contemplation of the parties when the contract is formed (e.g., economic harm) Aggravated damages awarded for the manner in which the contract was breached causing additional harm (e.g., contract breach occurs in manner that causes mental distress) Punitive damages awarded to punish certain types of behaviour (e.g., fraud or bad faith) Plaintiffs have a duty to mitigate their damages
Contractual Determination of Damages Liquidated damages are a pre-estimate of loss agreed in a contract should the contract be breached A penalty clause that seeks to deter breaches by requiring the payment of a steep penalty in the event of a breach where the amount of the penalty does not constitute a genuine preestimate of damages will not be enforced, even if it is called a liquidated damages clause
Definition and Purpose of Tort Law A tort is a civil wrong other than a breach of contract Tort law defines what constitutes a legal injury and establishes the circumstances under which one person may be held responsible (i.e., liable) for another s injury
Categories of Torts Intentional torts torts against the person (assault, battery, false imprisonment, intentional infliction of mental suffering, malicious prosecution, libel and slander, and fraud) and property torts (trespass to property, trespass to chattels and conversion) Negligence covers the full scope of human activity (e.g., product liability, slip and fall, negligent misrepresentation, professional negligence, etc.) Strict liability torts nuisance
The Evolution of Tort Law Tort law has evolved over time based on case law Additional torts have also been created by statutes (e.g., occupiers liability, competition law) Perceived failures of the common law to address the needs of society through tort law have led to additional statutory reforms (e.g., workers compensation and negligence legislation)
Elements of a Negligence Claim Duty of care owed by defendant to the plaintiff according to the proximity (i.e., neighbour ) principle Breach of the duty of care by a failure to meet the required standard of care, which is that of the reasonable person in the circumstances Causal link between the defendant s act or omission and the plaintiff s loss (i.e., damages) Damages were reasonably foreseeable at the time of the breach
The Duty and Standard of Care Owed by Engineers Engineers have a duty to exercise the skill, care and diligence that may reasonably be expected of a person (i.e., engineer) of ordinary competence, measured by the professional standards of the time
Negligence and Economic Harm Negligence can involve compensable harm that is purely economic in nature This is often, though not exclusively, the situation in cases involving negligent misrepresentation
Defences to Negligence Claims No duty of care owed the duty of care can only arise in circumstances involving reasonably foreseeable harm and proximity sufficient to establish a duty of care and where there are no policy reasons that would negate the establishment of the duty of care No breach of the standard of care No damages were caused by a breach of the standard of care Damages were not reasonably foreseeable Limitation period has expired
Elements of Negligent Misrepresentation Duty of care exists based on a special relationship (e.g., professional person and lay person who may reasonably rely on the professional person s professional expertise) Professional person makes representation that is untrue, inaccurate or misleading The representation is made negligently Person receiving the representation relies on it in a reasonable manner The reliance is detrimental and damages result
Defences to Claims for Negligent Misrepresentation No duty of care is owed (e.g., plaintiff is not a member of the class of individuals that professional knew would rely on the misrepresentation) Plaintiff s reliance is not reasonable (e.g., the representation was part of a discussion and not a formal opinion or the professional limited liability through a disclaimer clause) Professional s negligent misrepresentation did not cause damages Limitation period has expired
Objective of Damages for Commission of Tort To restore the plaintiff to the position in which it would have been if the tort had not been committed
Damage Awards for Commission of Tort General damages compensation for non-monetary loss or harm suffered as a result of the commission of the tort that was foreseeable when the tort was committed (e.g., pain and suffering, mental distress or damage to reputation) Special damages compensation for the quantifiable monetary losses suffered by the plaintiff that include direct losses (such as amounts the plaintiff had to spend to try to mitigate problems), consequential or economic losses (such as lost profits in a business) Punitive damages awarded to punish certain types of behaviour (e.g., fraud or bad faith) Plaintiffs have a duty to mitigate their damages
Vicarious Liability In certain cases, one person can be liable for the harm cause by another One example relevant to professional liability is an employer s liability for the actions or omissions of its employees
Limitation Period Prior to 2004 For claims against engineers arising before January 1, 2004, a one-year limitation period ran pursuant to the Professional Engineers Act (Ontario) from the date that services were or ought to have been performed A court had the discretion to extend the limitation period if there were apparent grounds for the action and there were reasonable grounds for the extension considering all the circumstances
Limitation Period After 2003 Subject to certain exceptions set out in the Limitations Act, 2002 (Ontario), a proceeding shall not be commenced after the second anniversary of the day on which a claim was discovered Generally speaking a claim is discovered when the claimant knew there was damage, or when a reasonable person ought to have known there was damage There is also an absolute limitation period that applies after the 15 th anniversary of the day on which the act or omission on which the claim is based takes place
The Role of Insurance Professional liability insurance policies are available for engineers Occurrence policies cover incidents that take place during the policy term, whereas claims made policies cover claims made during the policy term The scope of indemnification by the insurer is described in the policy and it may or may not include legal fees Such policies are subject to specified deductibles and exclusions
The Role of Insurance (continued) Some typical exclusions include: Errors and omissions outside the insured party s area of professional practice Taking on an unreasonable risk relative to the responsibility that the common law normally imposes on a contract
The Role of Insurance (continued) An insured party owes the following duties to its insurer: To complete the insurer s insurance application fully and honestly To notify the insurer immediately when a claim is made against the insured party To co-operate fully with the insurer in the investigation and resolution of the claim
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