When we talk about liability (RC), we sometimes come across terms more commonly used in the legal field but which we need to understand because they may affect us at a specific point in life.
What is contractual liability? In this post we explain what it consists of, how this type of liability works and the nuances that distinguish it from non-contractual liability. The latter is closer to the idea of liability most people have in mind: the obligation to compensate damage we have caused.
Contractual liability is the set of legal consequences that the law assigns to obligations arising from a contract. It is important to clarify that, where contractual liability exists, there is a previous link between the parties through the document they have signed. When the liability arises outside that contractual framework, we would be talking about non-contractual liability.
Elements of Contractual Liability
To understand contractual liability better, it is useful to look at each element that describes it: act, fault, causal link and damage.
Act
For contractual liability to arise, an act must occur that obliges one person to compensate another for damage caused. The act may be intentional or may involve negligence, but it must always take place.
Fault
When we talk about contractual liability, fault is always involved. Here it is useful to distinguish fault from intent.
Intent exists when a contract is breached deliberately, knowing that the obligations contained in the contract are not being fulfilled. In contractual liability, there may or may not be intent. For example, an employee who falls asleep during working hours does not do so voluntarily or intentionally. In this case there is no intent, but there is fault.
By contrast, in non-contractual liability there is not always fault, because this type of liability may require us to answer for our own acts or for those of third parties. When we respond for acts carried out by a third party, such as a child or a dog, we may not personally be at fault.
Causal Link
There is a causal link or relationship between the act and the result. A situation occurs where there is causality, whose origin is fault and whose consequences prove the existence of that fault. In the causal link between the person’s conduct and the damage produced, the imputability of that person and their obligation to repair the damage can be seen.
Damage
When there is an obligation to compensate for contractual liability, there is always damage or loss that can be repaired and quantified. The damage may be material or financial, but also moral. In financial terms, it is not only necessary to value the loss suffered by the injured party, but also the profit they stopped obtaining as a consequence of the act.
The Fine Line Between Contractual and Non-Contractual Liability
There are clear examples of contractual liability. A company and its employees, or a contractual relationship between partners, are cases where liability clearly arises from signing a contract.
There may also be situations where it is not entirely clear whether liability is contractual or non-contractual. Imagine we have hired painters for our home and they accidentally damage the living room carpet. Is the painters’ liability contractual or non-contractual? In this example there is a contract, but the specific event may not have been contemplated in the contract.
Now that you know more about contractual liability, we invite you to learn about other liability insurance covers or to contact us if you need a quote or consultation.