Unit 3 Torts and Insurance Law

IN BRIEF...

U nder common law, Claimants may bring combined or alternative actions in contract or in tort
in any Civil Court. The word “tort” comes from the Latin tortum meaning twisted or wrong.
Many interests are protected by Torts and Negligence is by far the biggest source of litigation.
Negligence covers personal safety and interests in property. Other types of Torts include
Trespass, Nuisance, Occupier’s Liability and Employer’s Liability. Where a tort has caused
damage, the defendant will be ordered to pay damages to compensate for the loss suffered.

Not all interests are protected and the phrase damnum sine injuria, describes a situation where
the interest of a party is not protected, even though harm has been suffered. For example, where
Starbucks opens a café up the street, taking a good slice of customers away from the local café,
there will be a loss and less profits for the café but this loss is not actionable. Legal proceedings
cannot be filed against Starbucks as it has not committed any tort or actionable wrong against the
café.

The Court needs to balance many competing interests in tort claims and there is considerable
overlap with Contracts, Criminal law, and Human Rights.

The development of torts and especially negligence has led to an ever-increasing need for
insurance with almost 94% of tort cases being based in insurance.

WHAT’S IN THIS UNIT?

Negligences ►► learn about the neighbourhood principle, standard of care, causation,

remoteness, negligent misstatements and Best Practice

Other types of Torts ►► examine trespass to the person, land, product liability, occupiers
and employers liability

Defences, Limitations and Remedies ►► study contributory negligence, consent, illegality,

exclusions, limitations and the availability of injunctions and self help

Insurance ►► learn and understand the role of insurance, policies, Claims procedure and
rejection of claims

ANNEXURE ►► a business insurance claim form

Lesson 1 - Tort of Negligence

To establish negligence, a Claimant needs to establish that:

1. duty of care exists between the parties

2. t was breached by the Defendant and
3. that breach caused loss or damage to the Claimant.
1. Duty of Care
Duty of care was originally linked to contractual relationships, but this was widened by case law
during the 19th century. A duty of care applies to a relationship between the Defendant and the
Claimant, which must be of a type, that the law imposes an obligation on the Defendant to take
care to avoid causing injury to another party. This is called the established duty of care
situations and they normally arise when there is a special relationship between the parties. The
second is the neighbour principle.

Neighbour Principle In the iconic case of Donoghue v Stevenson [1932] AC 562, Lord Atkin
set out the neighbour principle which says that “you must not injure your neighbour”.
Examples of neighbours include employer to employee, manufacturer of goods to consumers,
doctor to patient, solicitor to client, and one road user to another.

WHAT IF…

... the victim is shot in the leg. He commences legal action against
the Defendant for the shooting but prior to the conclusion of the
trial, the victim is involved in a car accident and loses his leg. Can
the Defendant claim that he is not responsible for the damages of
the Claimant?

2. Breach of Duty
To determine whether the duty of care has been breached, the standard of care needs to be
determined first. The Court will then need to determine whether the standard was reached in the
circumstances of the case. To do this, the Court will use the reasonable man test, also called
the objective test, and examines how the Defendant should have acted in the circumstances.
This is a difficult answer, and it involves the judge looking at case law and precedents to
establish what the Defendant should have done. The Court also takes into account any standards
set by statute. The Court then compares the “What the Defendant should have done” with what
the Defendant actually did and what happened in the case.

If the Defendant is a child or a person exercising a special skill, the Court adjusts the reasonable
man test accordingly. For example, a child will be compared to a child of similar age and
abilities whereas a person with special skills, such as martial arts, will be compared to a person
with a similar skill set.

3. Causation in Law
Once the Claimant demonstrates that there is a duty of care and establishes the standard, they
will need to prove the breach of that duty. Proof is on the civil standard – on the balance of
probabilities. This means there must be a link between breach and damage. To recover damages
for loss and injury, a Claimant needs to show that the Defendant caused the negligence which is
also called the causation in law or legal causation.
 DID YOU KNOW?

When a Defendant has a special skill, experience, or professional

skills the standard that is expected of them is higher than a person
not possessing those skills or an unskilled person. For example, a
person piercing ears in a Department Store is not expected to have
the skills of a medical practitioner.

In some cases, the Claimant may not have enough information to prove the breach. The doctrine
of res ipsa loquitur assists the Claimant in such cases. Res ipsa loquitur (“the thing speaks for
itself”), is used to demonstrate negligence by the Defendant if the accident is of a kind that does
not normally happen unless someone has been negligent.

The Courts have also developed the but-for test to determine whether the causation in fact has
been satisfied. The but-for test involves asking the question, “But for the Defendant’s breach of
duty, would the Claimant’s damage still have occurred?” If the answer is yes, then the
Defendant’s breach did not cause the damage. If the answer is no, then the Defendant’s breach is
at least one of the contributing factors causing the damage.

Once causation is established the Court will need to determine how much damage the Defendant
should be liable for. The Courts have said that a Claimant will be able to recover all damages
resulting from the breach of duty, as long as that loss was foreseeable and falls within the scope
of the duty of care and therefore within the reasonable contemplation of the Defendant.

Thin Skull Rule The Thin Skull Rule, also called the Eggshell Skull Rule, says that the
Defendant must take his victim as he finds them. If the Defendant knows that the Claimant has
vulnerability, the Eggshell Skull rule does not apply. It applies to a situation where the
Defendant will be liable for outcomes which are not reasonably foreseeable. Sometimes, a
Claimant has a pre-existing condition which makes them particularly vulnerable to suffering
some injury. This condition may be physical, psychological, or financial weaknesses. A
Defendant will not be excused from liability by arguing that the Claimant has a particular
vulnerability.

Negligent Misstatement
A negligent misstatement is especially important in commercial and professional relationships.
For a considerable period of time, negligent or unintentional statements, irrespective of how
inaccurate or misleading, did not allow the recovery of damages for financial loss caused by
reliance on that statement. For example, investors were not able to recover money they invested
in a company, even though they relied on negligently prepared financial and accounting records,
when making their investments.

In the landmark case of Hedley Byrne v Heller, the House of Lords established that liability in
tort could allow recovery of damages for a negligent misstatement. In Hedley’s case, the
Claimants (an advertising company) were approached by a new client. Hedley asked the new
client’s bank to provide a credit rating reference. Hedley relied on it. After completing the work
for the new client, it went into liquidation. The Claimants brought legal action against the bank
for negligent misstatement.

The Lords held that there will be circumstances where a person will be held liable for losses
caused by a statement where they make that statement without taking sufficient care to ensure
that the statement was accurate.
The Courts have decided that a duty of care will be imposed on a Defendant who has assumed
responsibility, and this justifies the imposition of a duty of care, most importantly if there are
special relationships. Examples of special relationships include an environmental health
inspector and the owners of a house, a bank clerk advising on a mortgage document, and any
other person professing to have some expertise where the other party has relied on that
representation.

Where the Defendant makes a statement which is communicated to the Claimant by a third party
(e.g. a solicitor) and the Claimant suffers loss, there still may be sufficient proximity for
liability on the part of the Defendant caused by the Defendant’s negligent misstatement, as long
as there is a special relationship between the Defendant and Claimant.

Pure Economic Loss Normally, pure economic loss which is not connected to some tangible
damage is not generally recoverable in negligence. Pure Economic Loss may result from
physical injury, death or property damage and may include the failure to make profits, or obtain
some other benefit, or a fall in the value of property due to the acts of some third party. For
example, if Christmas trees are delivered late, the Claimant may not be able to recover loss of
profits unless the Christmas trees are also damaged.

Best Practice Some professional Associations publish Best Practices which may be relevant
when the Court is deciding what the relevant standard of care should be. For example, the Court
may measure the standards against National Health Service (NHS) regulations.

CAN YOU REMEMBER?

What are the three essential elements for a claim in negligence?

What is the Eggshell Skull Rule?
 Lesson 2 - Other types of Torts
Trespass
Torts of Trespass are the oldest types of torts and are in relation to the person, land or goods.

1.Trespass to the Person includes battery, assault and false imprisonment. They involve some
interference from others, including physical and psychological harm, which restricts the
freedom or causes harassment to another. All these torts are committed intentionally, result
in direct harm and are actionable per se. Per se means that the Claimant does not need to
prove damages or any harm to succeed.
Trespass to the person also overlaps with offences in criminal law and this tort is commonly
used in situations of stalking, harassment, domestic violence, neighbourhood disputes and
protest situations. Commonly, trespass to the person can be heard in the Criminal Courts
and the victims can commence civil proceedings in the Civil Courts.
Battery involves the use of some force where the Defendant did the act intentionally and
voluntarily. It may involve Contact by a Third Person (where A throws an object into the
crowd, B in the crowd picks it up and throws it and strikes C, A will be responsible as well
as B), Contact made Indirectly (A throws water over B) and Direct Contact with the
Wrong Person (a policeman fires tear gas into the crowd misses and strikes a child
bystander).

2.Trespass to Land or Goods Land is defined as the surface and anything attached to the land and it
includes the subsoil and airspace down to and up to reasonable heights.
Trespass to Land involves unlawful interference with the possession of land. It must
be direct, voluntary, intentional, and unjustifiable. Trespass to land is actionable per
se which means that the Claimant does not need to prove damages or harm to succeed and it
does not matter whether the Defendant was aware that they were trespassing. This is
because trespass to land protects the land or property by giving the owner the right to
exclude other people rather than compensating any damage done to it.

WHAT IF…

... a person is pushed or thrown onto the property of another person.

Can they be liable for trespassing?

Additionally, once the tort arises, it continues as long as the tortious conduct of the
defendant continues. For example, if a person parks their car on their neighbours lawn
without the neighbour’s consent, they will be liable for tort at that time and the tort will
continue if they refuse to remove the car after being requested to do so. The tort ends when
the car is removed.
Defences available for trespass to land is the consent of the person in possession of the
land, contractual licence (payment of entry fee or tickets for entry), lawful
authority (Police, Bailiffs) and necessity (emergency workers).
The remedies available for trespass to land include damages, injunction, or a declaration
of rights (possession orders) by the Court. A possession order is an order by the Court
declaring that a party has the right to possess property. An owner may also exercise self
help (to expel trespassers or remove objects such as hanging branches from the neighbour’s
tree).
Product Liability
In common law, product liability is based in the law of negligence. Governments have also
introduced statutes which deal with product liability and in the UK, this is the Consumer
Protection Act 1987. Under statutes, the liability is strict liability.
If the Claimant is claiming damages for some defect in the quality of the product or its value,
they will need to bring an action in contracts law.

The Common Law

Donoghue v Stevenson (1932) is the most famous product liability case in English Common law
history. This case dealt with product liability on the part of manufacturers. The common law
liability has now expanded to cover repairers, fitters, makers of component parts, and even
persons who carry out post sales inspections or repairs. The liability relates to the safety of the
product and not the value or quality.

The Consumer Protection Act 1987 (Part 1)

The UK passed the Consumer Protection Act 1987, following the EU Directive of 1985.
The EU Directive aimed at bringing a uniform system of strict liability for defective products.
The Statute does not replace the common law but rather complements it. This means that a
Claimant will have both common law and statute rights available to them. This applies to
defendants also.

The CPA covers products such as goods, electricity, substances, growing crops, attachments
to land, ships, aircraft and vehicles and component products. However, buildings are exempt.

The possible defendants include importers of the product in the EU, a home brand supplier who
represents that he is the producer, the retailer in the course of business who is unable to tell the
consumer who the producer, importer or person behind the home brand is, within a reasonable
period of time.

The CPA relieves the Claimant from having to demonstrate fault on the part of the Defendant but
does not cover loss or damage to the product itself, loss or damage to property not ordinarily
intended for private use, occupation or consumption and loss or damage to property amounting
to less than £275.

The Defendant has a number of statutory defences available to them including

(i)that the defect was caused by the need to comply with any EU law or obligation that has not
been repealed.
(ii)the Defendant did not supply the product and the supply was not in the course of business
(prototypes) and was otherwise than with a view to make a profit (samples),
(iii)the defect did not exist at the time of the supply,
(iv)the state of scientific and technical knowledge at the relevant time of supply was not capable
of discovering the defects.
(v)the defect relates to a component part of the product, and was caused by the design of the
subsequent product or
(vi)was in accordance with instructions given by the producer or subsequent producer. An action
must be brought within three years from the date of damage under the Limitation Act
1980 or ten years from the date the product was first put into circulation.

Occupiers’ Liability

Occupiers’ liability is based in negligence and is also regulated by two statues – Occupiers’
Liability 1957 (the 1957 Act) and the Occupiers’ Liability Act 1984 (the 1984 Act).
The law treats lawful guests differently from those of trespassers. The Court will first classify the
status of the entrant onto the land when determining the duty of care. The Defendant is usually
the party that controls the land. The duty is owed to visitors who have the express or implied
consent to enter the premises. For example, a fireman, the postman and the police.

There are limitations to the permission or consent given to visitors and once this permission is
withdrawn, the visitor becomes a trespasser. The standard of care is that which is reasonable in
all circumstances.

DID YOU KNOW?

A and Others v National Blood Authorities (2001) established that

blood products are covered by the Consumer Protection Act.

CAN YOU REMEMBER?

What are some defences to Trespass to Land?

What products does the CPA cover?
Lesson 3 - Defences, Limitations and Remedies
Introduction
When a claimant suffers damage partly due to the Defendant’s conduct and partly due to their
own failure to exercise care, the Courts will reduce the amount of damages for the Claimant. The
amount of the reduction will depend on how much the Claimant contributed to their own
damage. Types of fault that may reduce the amount the Claimant will recover
include negligence, a breach of statutory duty or an act or omission. The conduct of the
Claimant must directly contribute to the loss. For example, a person getting in a car knowing that
the driver is drunk, may not have contributed to the accident per se, but they did put themselves
in a situation where harm is more likely. Failure to take precautions for one’s own safety
including the failure to wear safety equipment, or failure to wear a seatbelt or a crash helmet,
will reduce the amount of damages awarded.

There are three main general defences which apply to all torts such as contributory
negligence, consent, and illegality. A specific defence is self-defence which applies to the tort of
trespass to the person.

1. Contributory Negligence
Contributory Negligence is defined as where a Claimant suffers damage or loss as a result of
partly their own fault and partly because of the fault of a Defendant. The Plaintiff’s claim will
not be defeated but the amount of damages awarded will be reduced by the extent the Court
thinks the Claimant is responsible for their own damage. Therefore, contributory negligence is
not a complete defence but a partial defence that reduces the amount of damages the Defendant
is liable for. This is because in some careless way, the Claimant contributed to or caused their
own injuries.

2. Consent – Voluntary Assumption of Risk

The defence of volenti (volenti non fit injuria) says that the Claimant accepted the risks and the
consequences of the Defendant’s conduct (even if unreasonable). To succeed, the Defendant will
need to show that the Claimant made an agreement voluntarily with full knowledge of the
risk.

For example, two friends (a pilot and passenger) are having drinks in the pub before taking a
light plane out on an excursion. If the plane crashes, the defendant pilot may be successful in
arguing that the Claimant knew of his drunken state but accepted the risk of flying with
him. Volenti is a common defence in contact sports such as boxing and rugby.

3. Illegality
The Latin term ex turpi causa non oritur actio translates into No action can be founded upon a
shameful act. This means that the law will not assist a Claimant in bringing action in relation
to illegal activity.

For example, three men commit a burglary (robbery) and whilst driving away from the scene of
the crime have a car crash. The thieves would not be able to bring an action in negligence since
they were involved in an unlawful enterprise.

WHAT IF…

... the Warning sign excluding liability was not in a visible position,
can the Defendant still rely on it?
Exclusion or limitation of liability
A defendant will probably try to rely on an exclusion or limitation of liability clauses in
contracts as well as any notices such as “Warning, No Liability or Responsibility Accepted”.
This is a highly complex area of law and there are many rules and exceptions from case law. If
the claimant is a consumer, then these clauses will also be governed by section 65 of
the Consumer Rights Act 2015.

LIMITATION PERIODS
The Limitation Act 1980 regulates limitation periods. A limitation period is the time within
which a Claimant must bring legal proceedings against a Defendant. In tort, a Claimant must
bring an action within six years of accrual but if the action is for personal injury, then it must be
brought within three years. Legal action for defamation must be commenced within 12 months.

DID YOU KNOW?

It is often very difficult to determine when the limitation period

starts to run for latent defects. The Courts generally allow an action
to be filed even if the limitation period has expired if it is in the
interests of justice to do so, such as asbestos claims or passive
smoking actions.

Remedies and Compensation

The main remedies available in tort are damages and injunction. Damages in tort
are compensatory and are intended to put to give the claimant what they have lost. These
compensatory damages may be pecuniary and non-pecuniary (compensatory damages that
cannot be clearly quantified in monetary terms such as pain and suffering). In personal injury
claims, damages may even be awarded as a lump sum. Legal proceedings to recover damages
may also be brought by the estate should the Claimant die and against the estate of the
Defendant should they die. Family members who have lost the financial support because of the
death of the victim may also bring an action to recover that financial support under the Fatal
Accidents Act 1976.

NON-COMPENSATORY DAMAGES
Contemptuous or Nominal Damages may be awarded where the claimant has brought legal
action to vindicate a breach of their rights but have not suffered any real loss. In such cases, the
Courts will award a nominal sum (£2) but may not necessarily award the Claimant their costs.

EXEMPLARY OR PUNITIVE
Exemplary damages are also called punitive damages, and these are awarded in addition to
compensatory damages to punish the Defendant for their conduct. The tort system is aimed at
being a deterrent and punitive damages are more common in defamation where the tort is
typically aimed at making a profit from the reputation of another.

COMPENSATORY DAMAGES
Compensatory damages are also called restitutio in integrum meaning to be restored to the
original condition. That is, back to their pre-tort position as far as damages can restore them back
to their original position. For example, a damaged car can be financially replaced, though an arm
or eyesight becomes a little more difficult to assess and the judge will make a decision based on
evidence from financial and medical experts.

PROPERTY LOSS, DAMAGE AND DESTRUCTION

When personal property is lost or destroyed, the Defendant will be liable for the cost of replacing
the property at current market prices and any consequential losses caused by the destruction
of the personal property, on the condition, that these consequential losses are not too remote.
This may include the cost of hiring a replacement car or machine. If the property is damaged
instead, then the Court is likely to award an amount which represents the amount by which the
property has diminished in value. This may be in addition to any foreseeable consequential
losses and even the cost of repairs.

INJUNCTIONS
Injunctions may be a suitable remedy where the Claimant needs to stop the ongoing nature of the
tort. For example, ongoing noise in your apartment block. There are three different types of
injunctions. These are quia timet injunctions (to stop an anticipated tort from being committed),
an interim or interlocutory injunction (to keep the status quo until the Court makes a final
decision) and a final injunction (where the judge has heard all the parties and facts and believes
that damages alone are not a sufficient remedy).

SELF HELP COMPENSATION

The injured party may decide to take their own steps to resolve the wrong. For example, if a tree
is overhanging into a yard, one of the owners may decide to cut off the branches. Another
example may be to expel a person trespassing on property. Self help should always be
approached with caution.

CAN YOU REMEMBER?

What are some of the general defences available for torts

committed?

What type of remedies are available to a Claimant who has suffered

loss or damage as a result of a tort?
Lesson 4 - Insurance Law
Background to general contracts and differences with insurance
contracts

The rules for the formation of insurance contracts are very similar and yet different to the general rules
of contract formation. In general contract law, the contract will be binding when there
is Intention, Offer, Acceptance and Consideration.

However, in insurance contracts, the parties are bound by the duty of utmost good faith and
must make disclosure of all material facts, even where that disclosure may be adverse to the
disclosing party’s interest. For example, if a person is insuring a new car they will need to
disclose if they have had any accidents in the past and if so, whether they claimed any insurance
for those accidents. Failure to do so, may give the insurance company the right to refuse
payment or to rescind the contract.

The Law of Insurance Contracts

English law does not define insurance but rather speaks of:

those who are generally accepted as being insurers.

In the US, insurance is defined as:

a contract whereby one undertakes to indemnify another against loss, damage, liability
arising from a contingent or unknown event.

The primary aim of insurance is to shift risk from one party to another or spread and distribute
risk amongst parties.

An insurance contract is a contract where one person (the insurer) agrees to pay an amount of
money on the occurrence of an uncertain or adverse event. In return the insured party pays a
sum called a premium. Usually the premiums are paid in advance.

The insurance contract commonly takes the form of a policy. If the event that is covered by the
insurance policy happens, the insured will either receive monetary compensation or the
equivalent (repair or replacement).

Usually, insurance contracts cover events which are fortuitous and adverse. Fortuitous in the
sense that they are uncertain at the time of the contract. It is not necessary a question
of whether the event will occur but rather when it will occur (e.g. death).

To be insurable, the event must be one that is adverse to the interests of the insured but just like
contract law it must not be against public policy.

Other instances where the insurance contract may be vitiated are where a party is induced to
make a contract of insurance or settlement under economic duress, or undue influence.

Essential elements for a valid insurance contract include the notion that the insured must have
an insurable interest or pecuniary interest. Normally employers do not have an insurable
interest in the lives of employees unless that employee is a key employee. The same applies for
property insurance, the insured must have an interest in the insured property.
Insurance Contract Formation
Generally speaking, an application for insurance begins with a proposal. Normally this is drafted
and signed by the applicant with the assistance of the insurer’s agent on pre-formulated forms
issued by the insurer. This is called an invitation to treat.

The applicant has a duty not to make misstatements on this application as this may affect the
validity of the contract. The acceptance is done by the insurance company when it approves the
application.

To be valid, insurance contracts must be certain in content, unambiguous and complete. The
essential terms must be agreed, the parties must be identified, the subject matter of the risk must
be clear, the type of risk insured and the amount of the insurance should be stated. Other terms
may include the duration of the cover.

The insurer issues interim insurance also called a cover note, while the insurer assesses the risk
and decides whether to provide cover. This is temporary cover.

Once the insurer agrees, the insured makes premium payments. These payments commence
either when the cover starts or in instalments during the period of cover.

The Policy
There are standard terms in a typical policy. The rules for interpretation under the common law
system are vital. Most insurance contracts are written into an insurance policy. The applicant
must understand the contents of this policy, its terms, their meaning, any questions of evidence
and the interpretation of the clauses. Normally words are assumed to have
their natural and ordinary meaning in thecontext of the

insurance contract. Some terms may have also acquired a special usage such as general
average or the language of the London Insurance market.

WHAT IF…

... there is some ambiguity in the meaning of terms in an insurance

policy?

There are many kinds of insurance and they may cover:

 Loss (whether destruction, damages, death, or injury),

 Subject matter of the insurance (person or property),
 Specific risks insured against (fire, accident, death, disability).

Claims Procedure
Claims need to be submitted to the right person or office, in the correct format, containing
truthful and correct information.

Most claims need to be sent in writing to start the claim process. Claims at Lloyds London are
submitted by the relevant Lloyds broker by an electronic claims file and through the Claims
Loss Advice and Settlement System (CLASS).
 DID YOU KNOW?

When Gianni Versace was murdered, Lloyds paid life insurance of

more than £20m to the Versace Company.

Indemnity is the amount of money the insurer is obliged to pay, and to which policy holders are
entitled to, under valid insurance policies. In the case of non-indemnity insurance, such as life
insurance, claimants are able to recover the amount stated in the policy. In indemnity insurance,
such as property insurance, the claimants can recover the amount of their actual loss, which has
to be assessed by a valuer or claims assessor.

Exclusion and Limitation clauses in insurance contracts may also exclude liability for specific
categories of damage. Sometimes, an insured person is asked to contribute to the loss. This is
called an excess payment. For example, when you claim on your car insurance for damages
caused to your car in an accident, you may be required to pay the first €500 of that damage and
the insurance company will pay the rest of the claim.

Rejection of Claims by Insurers

Some claims may be rejected by insurers where there has been a breach of Notice
Requirements. The insurer may also refuse to pay a claim where they suspect it is fraudulent.
A fraudulent claim is where the insurer proves a substantially false and material statement that
was made knowingly or without belief in its truth. The statement needs to be intentionally
false and not just careless. For example, where the insured who has suffered the loss tries to
improve or embellish, or exaggerate the facts surrounding the claim, hoping to get more money
from the insurance company.

Insurance contracts may be set aside if, at the time of formation, one party did not make full and
frank disclosure. In other words, silence in insurance law can also constitute misrepresentation
and the contract is void for non-disclosure.

The remedies for misrepresentation may be damages, rescission or both.

CAN YOU REMEMBER?

How are insurance contracts different from normal contracts?

On what basis may an insurer reject a claim?
CASE STUDY: GINGER BEER WITH A DASH OF SNAIL
A LANDMARK CASE IN TORTS LAW

Donoghue v Stevenson
In English common law, liability of manufacturers had been based in contract. The Courts
applied contractual concepts to determine whether a party had breached an essential term
of the contract and if so, whether that breach had caused the damage suffered by the
Claimant. Where there were third parties who were not part of the contract, this created
problems in privity. This all changed with the most famous of all cases in English common
law – Donoghue v Stevenson [1932] AC 562 (HL).

The Facts

Mrs Donoghue and her friend visited a café and ordered some drinks. Mrs Donoghue’s
friend ordered her a ginger beer (a popular beverage at the time). The ginger beer bottle
was opaque making it difficult to see what was inside. When refilling Mrs Donoghue’s glass,
the remains of a decomposed snail floated out. It was not known how the snail found its
way into the bottle when the manufacturer bottled the beverage at the factory. Mrs
Donoghue developed gastroenteritis and brought legal proceedings to recover damages.

The problem that Mrs Donoghue faced right from the outset is that she had not paid for the
bottle of ginger beer and therefore she could not bring an action for breach of warranty in a
contract. Her solicitor therefore formulated a claim against the manufacturer of the ginger
beer and the Lords had to decide whether a duty of care existed from the manufacturer to
Mrs Donoghue as a matter of law.

The Lords held that despite Mrs Donoghue not having a contract with the manufacturer,
they owed her a duty of care as the final user and that duty included making sure that the
bottle did not contain anything that might cause her harm.

PIT STOP

Answer the following questions related to the text you have just read.

1. What did Mrs Donohue drink?

2. What was also in the bottle of ginger beer?
3. Did Mrs Donohue suffer any harm?
4. Had Mrs Donohue paid for the ginger beer?
5. Why was whether she had paid for it an issue?
6. What was the new precedent that this case created?

Why does this case matter?

This case laid down the foundation for manufacturer’s liability in torts. The Lords held
that a manufacturer owned a duty of care to their ultimate customer even if they did not
have a direct contract with them. This case also established the neighbour principle, which
has been used subsequently to determine the circumstances in which a defendant will owe
a duty of care.
Reavis v Toyota Motor Sales, USA, Inc
(Cause no. DC -16-15296) 216 Dallas County, Texas District Court

A Jury in the Texas state court awarded $242.1 million, including $143.6 million in punitive
damages to the Plaintiff (in the US, the Claimant il called the Plaintiff). The matter involved a
defect in the front seats of the Claimant’s Lexus ES300 which caused injury to the two
youngest children after a rear-end collision with another car. The seats allegedly collapsed
backwards onto the children sitting in the back seats, severely injuring the children aged 5
and 3, causing permanent traumatic brain injuries. The plaintiffs filed legal action against
Toyota who manufactured the Lexus car and its appointed seller, Toyota Motor Sales USA
Inc. They also joined the driver of the other car as a third defendant. Against Toyota, they
alleged inter alia, strict product liability, negligence, gross negligence, breach of
warranty, malice and gross neglect. They claimed both compensatory and punitive damages
for the injuries sustained by their two children.

The case continued for two weeks and at the end of the trial, the jury of twelve found that
the front seats were unreasonably dangerous and that Toyota failed to warn its customers
about the dangers. In awarding the compensatory and punitive damages, the amounts were
apportioned between three parties (Toyota Manufacturer, Seller of the Vehicle and the
driver of the other car) in that ninety per cent to Toyota Motor Corp, five percent to Toyota
Motor Sales and five percent to the other driver. On appeal in 2018, the verdict was upheld
but the punitive damages were reduced so that the final total figure was $213 million.

OVER TO YOU!

What do you think of the outcome of the two torts cases?

Did the Courts come to a fair and just conclusion in each case?