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Criteria of Liability for Breach of Contract

Published online by Cambridge University Press:  12 February 2016

Ernst Livneh
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Extract

The Israel law on damages for breach of contract is contained in arts. 106–11 (112) of the Ottoman Code of Civil Procedure, 1879 (OCCP), and the law on damages for torts in the Civil Wrongs Ordinance, 1944, (CWO)— enactments from two different worlds, built upon different foundations. The tests of liability are as follows.

OCCP

art. 109. “If the non-performance of an agreement be not due to bad faith on the part of the person who has undertaken to perform it, the damages awarded against him shall be equivalent only to the direct and determinate loss suffered by the other party owing to such non-performance.”

art. 110. “If the non-performance of the agreement be due to fraud or bad faith on the part of the person bound to perform it, he shall be liable to pay damages which shall include both direct loss caused to the other party by such non-performance and also profits of which he may have been deprived owing to such non-performance.”

CWO

sec. 60, prov. (a), “…where the plaintiff has suffered damage, compensation shall only be awarded in respect of such damage as would naturally arise in the usual course of things and which directly arose from the defendant's civil wrong;…”

Among all the criteria of liability for damages (which will hereafter be analysed) one only is common to both laws—“direct” damage. But neither law is original; it will be more interesting, and more instructive for the elucidation of their meaning, to go back to the sources and to compare both sets of provisions with their source, and the sources with each other.

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Articles
Information
Israel Law Review , Volume 2 , Issue 1 , January 1967 , pp. 67 - 110
Copyright
Copyright © Cambridge University Press and The Faculty of Law, The Hebrew University of Jerusalem 1967

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References

1 The French translation speaks of dommages-intérêts, both in art. 109 and in art. 110, but the difference between the two provisions shows that that double term contains no hint at the question whether loss of profit is comprised therein or not. On that question see hereinafter under B and Part IIB.

2 Translation taken from Hooper, , The Civil Procedure of Iraq and Palestine (1930)Google Scholar.

3 Young, , Corps de Droit Ottoman (1906) Tome III p. 194Google Scholar.

4 See Tedeschi-Rosenthal, , Civil Wrongs Ordinance in the Light of the History of its Preparation and Amendments, pp. 131–32 (In Hebrew)Google Scholar.

5 Tedeschi-Rosenthal l.c. 99–107, esp. 103.

6 Malca v. A.G. (1956) 10 P.D. 1543, 1548–49.

7 This may be too wide. See the counter-examples in Leon v. Ringer (1964) vol. 4, 18 P.D. 701, 713; the intention is not to the law of torts as a whole, but to the tort of negligence.

8 Italics in original. But see as against this Cohn J. in Leon v. Ringer (1964) vol. 4, 18 P.D. 701, 709: “…if the legislator had wanted it, he could and should have expressed the test of foreseeability for the purpose of sec. 60(a) in clear and express language just as he did for the purpose of secs. 50(2) and 55B(1).”

9 9 Ex. 341, 345; 156 E.R. 145, 151.

10 Compare the subjective language of the judgment: “such as may fairly and reasonably be considered…; such as may reasonably be supposed to have been contemplated…” with the authoritative terms in the laws: “caused; resulting; of which the parties knew…”. Even the two colonial laws, which are not distinguished by succinctness of style, avoid the recital at the beginning of the Hadley quotation: “Where the parties have made a contract”.

11 Shimkin v. Shogarinski (1961) 15 P.D. 1009, 1012–13.

12 L'Unification du Droit: Annuaire, 1956. Tome I (Rome 1957) p. 70 (108)Google Scholar; Unification of Law: Yearbook 1956 Vol. I (Rome 1957) p. 71 (109).

13 The case of the contract being repudiated by the injured party is dealt with in another provision; in the question of damages there is no difference.

14 The English text says: “the loss, including loss of profit”.

15 Compare n. 13 above.

16 The words in parenthesis are missing in the English text.

17 A special provision on wilful breach of contract or fraud, similar to art. 94 of the Unidroit draft, is given in art. 89. (see below at p. 84.)

18 Lee, , Elements of Roman Law (3rd ed. 1952) p. 387Google Scholar; Kaser, , Römisches Privatrecht I (1955) p. 418, n. 17Google Scholar; et al.

19 Africanus, D. 19.2.33.

20 Paulus, D. 46.8.13. pr.

21 Professor Tedeschi's article “On the Distinction Between Damnum Emergens and Lucrum Cessans” (in his Studies in Israel Private Law (Jerusalem 1966) pp. 116–38) shows not only that the two kinds of damage do not lead to different legal consequences, but that there is in fact only a difference of shade and degree between them.

22 A hint at the difference may perhaps be seen in the twin-terms “loss or damage” which occur in the Indian and Cypriot codes. But I found no sign of any legal importance attached to that duplicity. Pollock, and Mulla, in their Indian Contract and Specific Relief Acts (6th ed. 1931)Google Scholar do not mention the problem. Nor do Cyprus cases, as far as here available, seem to deal with it.

23 Victoria Laundry (Windsor) v. Newman Industries [1949] 2 K.B. 528, 536–37.

24 Ringer v. Leon (1963) vol. 4, 17 P.D. 1662, 1670 (para. 8 of the judgment).

25 Traité Pratique de Droit Civil Français (2me éd. 1954 VII p. 189–90); Traité Elémentaire de Droit Civil (3me éd. 1949) II pp. 255–56.

26 My italics. Most English cases deal only with the first proposition of Pothier's moot case: liability not only for loss of the cow sold, but also for those infected by it; consequential damage is not usually claimed. Moreover, while French law (and Continental law generally) always holds the seller liable for such a defect, English law requires an express, or at least an implied warranty: Mullet v. Mason (1866) L.R. 1 C.P. 559; Smith v. Green (1875) L.R. 1 C.P. 92.

27 Planiol, & Ripert, , Traité Pratique (see n. 25) at p. 190Google Scholar.

27a In the recent English case The Wagon Mound (No. 2) a similar meaning is suggested for the word “natural”. See the quotation in n. 35a below.

28 Liesbosch v. Edison [1933] A.C. 449, 460.

29 “[A]n independant cause”: i.e. the inability of the owners of the lost dredger to replace it. In the House of Lords' view this inability was not the effect of the tortfeasor's delay in paying damages, but of the owners' lack of available means over and above those invested in their enterprise. From this viewpoint that part of the claim appears as based on a damage-causing factor which falls outside the event which caused the loss of the vessel. But where is it written that the party injured, in addition to the loss suffered, has to advance the amount of damages due from the tortfeasor?

30 In Leon v. Ringer (1964) 18 P.D. 701, 720 Sussman J. refers to this passage and adds: “I am not of the opinion that the directness of the damage can ‘be derived from the rules of causality’.”

31 Weld-Blundell v. Stephens [1920] A.C. 956, 983–84.

32 Overseas Tankship (U.K.) v. Morts Dock Engineering Co. (The Wagon Mound) [1961] A.C. 388, 423.

32a It is interesting to note that in Wagon Mound (No. 2) the Privy Council (Lord Reid) raises similar criticism against the use of the term “natural” [1966] 2 All E.R. 709, 713 C–E.

33 (8th ed. 1950). See pp. 816–26, 953–79.

34 Traité Elémentaire… (see n. 25 above).

35 [1926] A.C. 956, 983.

35a More recently Lord Reid in The Wagon Mound (No. 2): “The word ‘natural’ is found very often, and it is particularly ambiguous. … [O]r it can mean the result at the end of a chain of causation unbroken by any conscious act…”. [1966] 2 All E.R. 709, 713C.

36 The distinction between intervening act of man and of God is now rejected in the Privy Council judgment Goldman v. Hargrave [1966] 2 All E.R. 989, 994–95.

36a See nn. 32 and 32a above.

37 In Israel views are divided on such blurring of distinctions. While Berinson J. seems to accept it: Leon v. Ringer (1964) vol. 4, 18 P.D. 701, 714, Cohn J. sees therein “the source of much of the complication, perplexity and doubts” found in this field: ib. at 709.

37a The Wagon Mound (No. 2) at 716A.

38 British Columbia Saw Mill v. Nettleship (1868) L.R. 3 C.P. 499, 508.

39 I.e. the rule of civil law under the ancien régime.

40 Cf. Cal v. Stoffer (1965) vol. 2, 19 P.D. 556, 560, even in respect of driving too near the dividing line.

Cf. etiam The Wagon Mound (No. 2) at p. 718F:

“If the activity which caused the injury to Miss Stone had been an unlawful activity there can be little doubt that Bolton v. Stone would have been decided differently” (i.e. by awarding damages).

41 Roe v. Ministry of Health [1954] 2 All E.R. 131.

42 Ib. at p. 139 C.

43 Hancock v. Brazier (Anerley) [1966] 2 All E.R. 1, 4E; 1 W.L.R. 1317, 1322D.

44 (1956) 10 P.D. 1543, 1548.

44a l.c. at 717 I.

45 Cass. Civ. 9.7.1913 (Sirey 1.460). Dalloz, Nouveau Répertoire de Droit (1948) “Dommages-Intérêts” No. 9.

46 Planiol, & Ripert, Traité pratique p. 192, 193 No. 862, 863Google Scholar.

47 Victoria Laundry (Windsor) v. Newman Industries [1949] 2 K.B. 528, 537–38.

48 Ib. at p. 539 (No. 3).

49 British Columbia Saw-Mill v. Nettleship (1868) L.R. 3 C.P. 499, 508–09.

49a In Germany this is prescribed by law: § 16 of the Law on the Insurance Contract (1908); similarly for maritime insurance: § 806 of the Commercial Code (1897).

50 In a recent case Steiner v. Bar-Hai—(1966) 50 P.M. 300, 317—explanation of the danger inherent in the operation was declared a requisite of consent necessary in order to convert the act from “assault” into legitimate treatment, but not in connection with the question of negligence. (The judgment has now been confirmed on appeal: (1966) vol. 3, 20 P.D. 230.)

50a A view similar to that expressed above seems to me to be found now in The Wagon Mound (No. 2), esp. at 718 H–I.

51 Smith v. Leech Brain & Co. [1962] 2 Q.B. 405; [1961] All E.R. 1159.

52 Diaz, , “Remoteness of Liability and Legal Policy” (1962) Cambridge L.R. 178, 180Google Scholar; Dworkin, , “Risk and Remoteness—Causation Worse Confused” (1964) 27 Mod. L.R. 344, 347Google Scholar.

53 [1953] 1 Q.B. 429 (440).

54 Ib. 441.

55 Esp. by the Privy Council in The Wagon Mound (No. 1) [1961] 1 All E.R. 404, 415 G; [1961] A.C. 388, 426 at note 42.

56 Ringer v. Leon (1963) 17 P.D. 1662; Leon v. Ringer (1964) vol. 4, 18 P.D. 701.

57 Smith v. Leach Brain [1962] 2 Q.B. 405; [1961] 3 All E.R. 1159 and Warren v. Scruttons (1962) 1 Lloyd's Rep. 497; (1962) C.L.Y.B. No. 2047.

58 [1921] 3 K.B. 560.

59 [1933] A.C. 449.

60 Exodus xxi 19.

60a Ib. v 18.

61a Doughty v. Turner Manufacturing Co. [1964] 1 Q.B. 518; [1964] 1 All E.R. 98 (CA.).

62 Hughes v. Lord Advocate [1963] A.C. 837 (H.L.).

63 Leon v. Ringer (1964) vol. 4, 18 P.D. 701, 707–08.

64 Ib. at 708.

65 Dworkin, l.c. (n. 52 above) at the top of p. 347.

66 In re Polemis [1921] 3 K.B. 560.

66a [1961] A.C. 388, 425–26; [1961] All E.R. 404, 415 D–F.

66b The Wagon Mound (No. 2) while of course not contradicting this doctrine, suggests a different approach: the foreseeability of some damage—in this case even of loss to the damage-causing party itself—ought to have caused that party's servants to desist from the dangerous act: l.c. at 718 H–I.

67 Delahite v. U.S. 346 U.S. 15.

68 Ib. at 42.

69 Ib. at 53.

70 Republic of France v. U.S. (The Grandcamp), reported (1961) Lloyd's Rep. 504.

71 Ib. at 509. (see also p. 507).

72 Dworkin (see n. 52 above) at 349–50.

73 [1963] A.C. 837, 850.

74 [1961] A.C. 388.

75 Quoted [1961] A.C. 388 at 424.

76 Miller (Steamship Co.) v. Oversea Tankship (U.K.) The Wagon Mound (No. 2) (1963) 1 Lloyd's Rep. 402, 406.

77 Ib. at 404–05.

78 Ib. at 426 (below) till 436.

78a [1966] 2 All E.R. 709. Two members of the Board took part in both decisions. Lord Reid, who gave judgment in Wagon Mound (No. 2), and Lord Morris of Borth-y-Gest.

78b Ib. at 716A.

78c The Wagon Mound (No. 2) at 717 D-F.

79 [1961] A.C. 388, 425–26.

79a If I rightly understand the paragraph on p. 718 H–I in the second case, a similar view seems to lie behind Lord Reid's remarks there. But the case was decided on another ground (see section (c) below).

80 (1870) L.R. 6 C.P. 14 (21).

81 At the same page.

82 Weld-Blundell v. Stephens [1920] A.C. 956, 984.

82a My italics.

83 Wagon Mound (No. 2) l.c. at 717–18.

84 [1951] A.C. 850; [1951] 1 All E.R. 1078.

85 Ib. at 866 and 1086.

86 I.e. the plaintiff, Miss Stone.

87 Ib. at p. 867 and 1086.

88 [1951] A.C. 850, 867; [1951] All E.R. 1078, 1086 continuing the preceding quotation.

89 [1966] 2 All E.R. 709, 718F.

90 Ib. at 719 D–E.

91 Ib. at 718 F–G.

92 Ib. at 718 H.

93 [1966] 2 All E.R. 989, 996.

94 See Landon's Excursus A. pp. 43–44 of his 15th (1951) ed. of Pollock's Law of Torts.

95 1783–1870; Lord Chief Baron 1844–66.

96 Rigby v. Hewitt (1850) 5 Exch. 240, 243; 115 E.R. 103, 104.

97 Greenland v. Chaplin (1850) 5 Exch. 243, 248; 115 E.R. 104, 106.

98 The Holmes-Pollock Letters, vol. II p. 88.

99 [1966] 2 All E.R. 989 (996).

100 (1963) 17 P.D. 1662, 1670.

101 At 1683.

102 Cf. Leon v. Ringer above at n. 63.

103 In the article quoted in n. 52 above at pp. 188 and 189–90.

104 In the article quoted in n. 52 above at p. 350.

105 See n. 93 above.