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Contract and Tort Law for Engineers

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					Contract and Tort Law for
       Engineers
        Christian S. Tacit,
        Barrister & Solicitor
          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
             Defences to Claim of
              Breach of Contract
• No 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 pre-
  estimate 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), and punitive damages, where applicable

• 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 15th 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
THANK YOU!

				
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