Chapter 9 - Liability Law
Liability refers to responsibility. In a legal context, liability refers more specifically to being
held responsible or answerable by law i.e., legally obligated.
May emerge from non-performance/breach of contract and the resulting damage
(contractual liability) or because of harm inflicted outside the scope of a contractual
relation (non-contractual liability).
Damages: Award (usually money) provided to the innocent party by the non-
performing/breaching party to make up for not fulfilling their part of the contract.
i) Compensatory Damages: Meant to essentially reimburse the innocent
party. E.g., Specific and General (directly related to non-performance,
specific damages- related, but not resulting in breach e.g., reputation)
ii) Punitive Damages: Damages paid specifically to punish a breach of
contract.
Contractual liability
Contracting parties don’t always go through with their agreements.
This is referred to as non-performance (civil law) / breach of contract (common law):
i) Failing to perform their obligations in whole or part ii) Contract becomes impossible due to
the non-performing/breaching party.
The consequence is that one party is disadvantaged i.e., their half of the agreement has not
been fulfilled, and a legal solution is required to settle this.
Civil Law Common Law
Primary approaches to legal Emphasis on enforcing the Emphasis on damage
remedy (solution): fulfillment of contractual compensation rather than
obligations (i.e., performance). demanding the specific
performance that was agreed
upon.
Approaches to Non- i) Must send formal notice - Breach of contract notice
Performance/ Breach of (written form) to inform the usually sent to inform the
Contract: other party that they are in other party that they are in
breach of contract. breach of contract. May include
time limit (reasonable amount) or
In the letter: Demand the fulfilment can’t get any damages (e.g., USA)
of the obligation within a certain
period (reasonable time). If the non- i) Damage compensation is
performing party does not fulfil this,
then legal action is taken.
awarded for any loss or
damage caused by the breach.
(Not performing is not performing;
ii) Legal action: The personal motives or reasons for
breach of contract irrelevant).
Focus on enforcing obligation.
, - If performance is impossible: - Damage compensation may
still be required to be paid
Damage compensation awarded even when the other
to disadvantaged party that contracting party did not suffer
reflects value of agreed any real damages.
performance + any additional
damages caused because of non- A clause in the contract is usually
performance (additional costs, included that determines the sum
reputational damage etc.) of money (or a maximum
amount) to be paid in case of
In Japan: If nature of obligation breach of contract beforehand as
doesn’t allow the performance, a
a penalty.
third party should perform on the
debtor’s behalf, and the non-
performing party must pay for it.
- If performance still possible:
Performance can be demanded
within reasonable time.
In simple cases in which payment was
overdue, or goods not delivered on
time, simply paying or delivering will
settle the issue most of the times.
Damages caused by delay in
performance can be demanded
afterwards and when justified
additional damage compensation
can be awarded.
If performance still doesn’t
occur:
Contract is terminated, and all
damage compensation may be
demanded - caused by delay and
non-performance.
Exceptions: Force Majeure: Force Majeure clause usually
Contract is terminated: no included in contract.
Unforeseeable events that result more obligations from any
in the contracting party not being party. Example: ‘Neither party to this
able to perform. e.g., Natural agreement shall be liable for failing
disasters, terrorist attacks etc. to perform or delay of performance, if
i.e., Can’t demand damage delay is caused by circumstances or
compensation from non- events outside their reasonable
“Was the event in control of the non-
performing party?”
performing party. control.’
Examples: Japanese Civil Code, German Civil English Contract Law, Indian
Code, French Civil Code. Contract Act.
Liability refers to responsibility. In a legal context, liability refers more specifically to being
held responsible or answerable by law i.e., legally obligated.
May emerge from non-performance/breach of contract and the resulting damage
(contractual liability) or because of harm inflicted outside the scope of a contractual
relation (non-contractual liability).
Damages: Award (usually money) provided to the innocent party by the non-
performing/breaching party to make up for not fulfilling their part of the contract.
i) Compensatory Damages: Meant to essentially reimburse the innocent
party. E.g., Specific and General (directly related to non-performance,
specific damages- related, but not resulting in breach e.g., reputation)
ii) Punitive Damages: Damages paid specifically to punish a breach of
contract.
Contractual liability
Contracting parties don’t always go through with their agreements.
This is referred to as non-performance (civil law) / breach of contract (common law):
i) Failing to perform their obligations in whole or part ii) Contract becomes impossible due to
the non-performing/breaching party.
The consequence is that one party is disadvantaged i.e., their half of the agreement has not
been fulfilled, and a legal solution is required to settle this.
Civil Law Common Law
Primary approaches to legal Emphasis on enforcing the Emphasis on damage
remedy (solution): fulfillment of contractual compensation rather than
obligations (i.e., performance). demanding the specific
performance that was agreed
upon.
Approaches to Non- i) Must send formal notice - Breach of contract notice
Performance/ Breach of (written form) to inform the usually sent to inform the
Contract: other party that they are in other party that they are in
breach of contract. breach of contract. May include
time limit (reasonable amount) or
In the letter: Demand the fulfilment can’t get any damages (e.g., USA)
of the obligation within a certain
period (reasonable time). If the non- i) Damage compensation is
performing party does not fulfil this,
then legal action is taken.
awarded for any loss or
damage caused by the breach.
(Not performing is not performing;
ii) Legal action: The personal motives or reasons for
breach of contract irrelevant).
Focus on enforcing obligation.
, - If performance is impossible: - Damage compensation may
still be required to be paid
Damage compensation awarded even when the other
to disadvantaged party that contracting party did not suffer
reflects value of agreed any real damages.
performance + any additional
damages caused because of non- A clause in the contract is usually
performance (additional costs, included that determines the sum
reputational damage etc.) of money (or a maximum
amount) to be paid in case of
In Japan: If nature of obligation breach of contract beforehand as
doesn’t allow the performance, a
a penalty.
third party should perform on the
debtor’s behalf, and the non-
performing party must pay for it.
- If performance still possible:
Performance can be demanded
within reasonable time.
In simple cases in which payment was
overdue, or goods not delivered on
time, simply paying or delivering will
settle the issue most of the times.
Damages caused by delay in
performance can be demanded
afterwards and when justified
additional damage compensation
can be awarded.
If performance still doesn’t
occur:
Contract is terminated, and all
damage compensation may be
demanded - caused by delay and
non-performance.
Exceptions: Force Majeure: Force Majeure clause usually
Contract is terminated: no included in contract.
Unforeseeable events that result more obligations from any
in the contracting party not being party. Example: ‘Neither party to this
able to perform. e.g., Natural agreement shall be liable for failing
disasters, terrorist attacks etc. to perform or delay of performance, if
i.e., Can’t demand damage delay is caused by circumstances or
compensation from non- events outside their reasonable
“Was the event in control of the non-
performing party?”
performing party. control.’
Examples: Japanese Civil Code, German Civil English Contract Law, Indian
Code, French Civil Code. Contract Act.
