Fault at the contract-tort interface.

• Author: Kreitner, Roy

The formative period in the history of contract and tort (in the second half of the nineteenth century) may be characterized by the cleavage of contract and tort around the concept of fault: tort modernized by moving from strict liability to a regime of "no liability without fault," while contract moved toward strict liability. The opposing attitudes toward fault are puzzling at first glance. Nineteenth-century scholars of private law offered explanations for the opposition, reasoning that alternative ideas about fault account for the different character of state involvement in enforcing private law rights: tort law governs liabilities imposed by law on nonconsenting members of society (and thus, it should limit itself to fault-based conduct), while contract law governs bargained-for duties and liabilities of parties who exercise freedom of contract (and thus, liability voluntarily undertaken need not consider fault). These theories are problematic, especially because they cannot offer a complete account of contract or tort. Tort retains too much strict liability to be thought of as a regime of no liability without fault, and contract has too many fault-based rules to be conceived of through strict liability. While these justifications for the distinction between contract and tort were questioned in ensuing generations, they still structure much of the debate over the current boundary between contract and tort.

INTRODUCTION

Despite a number of notable exceptions, the concept of fault has not been central to contemporary contracts scholarship. (1) I would like to suggest that this is no simple oversight. Indeed, fault may be a good prism through which to understand the modernization of contract and tort--or, in other words, the making of modern private law. Moreover, an enhanced role for the analysis of fault in contract might go some way in clarifying persistent puzzles that revolve around the relationship between contract and tort.

Telegraphically, my thesis is as follows: the second half of the nineteenth century was a formative period for contract and tort, during which the understanding of these categories modernized by shifting and, in a sense, switching positions regarding fault. Tort modernized by moving from causality-based liability to a regime of "no liability without fault," while contract modernized by abandoning the relevance of fault and adopting, at least rhetorically, a theory of strict liability. While this shift vis-a-vis fault was never complete and never represented a truly adequate account of the working rules of contract or tort, it was important for the conceptualization of the different aspects of private law. That conceptualization was powerful and long lasting, but in important ways misleading, particularly because it implied a strict separation between public regulation and private ordering. Further, it is precisely that misconception that haunts our current attempts at making sense of the contract-tort boundary, particularly with respect to the range of problems that reach courts under the guise of warranty products liability.

The Article comprises three parts. I begin in Part I by describing the modernization of contract and tort, concentrating on the crucial role that fault played in that development. Part II offers an explanation for the way classical legal theorists conceptualized (and modern theorists continue to understand) the modernization of tort and contract. It also claims that the conceptualization was problematic because it sketched the border between tort and contract along the border between public regulation and private ordering. Part III investigates the current boundary between contract and tort in the context of products liability and suggests that elements ingrained in private law thinking since the last third of the nineteenth century continue to exert a damaging influence on our thinking about current problems.

1. MODERNIZING TORT AND CONTRACT AROUND FAULT

   The familiar part of the story of modernization and fault deals with the development of tort law. While the level of historical nuance may be increased nearly indefinitely, the dominant narrative holds that prior to modernization, the common law was concerned chiefly with the causation of damage and not with the fault of the actor. James Barr Ames's articulation of the shift remains cogent a century after he wrote:

   The early law asked simply, "Did the defendant do the physical act which damaged the plaintiff?" The law of today, except in certain cases based upon public policy, asks the further question, "Was the act blameworthy?" The ethical standard of reasonable conduct has replaced the unmoral standard of acting at one's peril. (2) Tort scholars from the late nineteenth century until today have squabbled about the details, (3) but most would agree in summing up that, "It is most likely that theories of strict liability were dominant during the formative years of the common law. But during the nineteenth century ... there was a decided and express shift towards the theories of negligence." (4)

   Two points bear emphasis in this account of the modernization of tort law. First, it is only a generalized historical hindsight that can locate the shift in the basic background assumptions that organized the field, or that created "classical legal thought." The accounts of such a shift are persuasive, but only when one acknowledges that the shift took place over the course of decades (rather than, say, through one key judgment of an individual court) and that it solidified quite late in the nineteenth century. The evidence lies not only in the new framework for thinking about torts, visible in treatises and scholarly articles, but also in the development and refinement of particular doctrines, most notably contributory negligence, assumption of risk, and damnum absque injuria. (5) Second, the importance of the shift in background assumptions about liability could hardly have been imagined early in the nineteenth century, when the number of serious injuries from industrial activity was miniscule in comparison to what would emerge in the last third of the century. By the last two decades of the nineteenth century, the question of the extent to which injuries from industrial accidents could go uncompensated had become a major economic battleground in ways that would have been difficult to appreciate early in the century. (6)

   So much for the familiar story in tort. The distinctly less familiar aspect of the story deals with the modernization of contract. Everyone is familiar with the idea that contract rests on a species of strict liability, namely the claim that in general "duties imposed by contract are absolute." (7) While a few scholars have challenged this view on both descriptive and normative grounds, (8) it remains an ingrained aspect of mainstream understandings of contract. What generally escapes appreciation is that the understanding of contract as a strict liability regime is anything but an age-old phenomenon. In fact, such a regime emerged in the United States only at about the same time as the solidification of the no-liability-without-fault regime in tort, during the final decades of the nineteenth century.

   During the first half of the nineteenth century, although receding slowly in the decades following, contract was understood as a fault-based regime. The most important reason for this is that contract as a category was understood in direct reference to the typical contractual relationships that constituted it. This world of contract was inhabited by people in relational pairs: bailor and bailee, principal and agent, master and servant, principal and factor, landlord and tenant, vendor and purchaser, husband and wife. (9) Within those relational pairs, actors had standardized duties, whose contours were shaped by the relation itself. (10) Individual agreement tailored these duties only on the margins. And while some of the relations included duties we could characterize as absolute, it was far more typical for duties to be framed in terms of reasonable skill, reasonable diligence, or reasonable care. It was a failure to meet the standard of care, often phrased directly in terms of negligence, that triggered contractual liability. (11) Thus, the basic standard of liability was one of fault, even if fault of an objective variety." (12)

   Only late in the nineteenth century did the strict, or almost absolute, version of contractual liability come into its own, and then only through a thorough reworking of the framework for thinking about contract. (13) The transformation in the concept of contract entailed a reevaluation of the source of contractual obligation as well as its basic purpose. In terms of the source of obligation, the parties were conceived as making private law for themselves, rather than entering into preexisting standardized relations; in terms of contract's basic purpose, there was a decline of the view of parties entering into a type of cooperative endeavor and a rise of the vision of parties allocating particularized and accountable risks. (14) A simple comparison should render this claim intuitive. Early nineteenth-century lawyers saw bailment as a paradigmatic contractual relationship, and they understood the content of the duties as part of the relationship itself. The level of care required by the bailee was a function of the type of bailment. The bailee was responsible for his behavior and liable only for failing to exercise the proper level of diligence in caring for the bailed property. Compare this with a transaction that late nineteenth-century--or for that matter, early twenty-first-century--observers of contract might think of as paradigmatic: (15) mutual promises for the future delivery of an agricultural commodity. Even if we assume that the parties contemplate actual delivery, (16) the observer of their contract does not need to imagine anything but minimal...