Contract v. Negligence (a difference in damages)

In many jurisdictions (Pennsylvania for example) there are no punitive damages in a straight forward breach of contract case. Nor is there fee shifting unless provided for in the contract itself. Therefore, absent contractual provisions that bear directly on the quantification of damages, the most any party can recover in a typical contract case is the amount that they lost as a reasonably immediate and foreseeable result of the breach of the contract—their attorney fees not counting as a part of that loss. In other words, any win, by either side, is at best a loss equal to the value of their legal costs.

In a negligence case, however, a winning plaintiff can also receive punitive damages which, of course, can be viewed as defraying litigation expenses. To win punitive damages, one has to prove negligence (the existence of a duty on the part of the defendant, a breach of that duty, and resulting damages) plus some aggravating factor, typically recklessness, such that the offending party should not only make the plaintiff whole, but pay an extra amount as punishment and to dissuade others from doing a similar despicable thing in the future.

This, of course, led plaintiffs to assert that not only did the defendant breach its contract, it breached the contract negligently and recklessly. In this way, plaintiffs hoped to tap into the world of punitive damages to increase the size of their recoveries in contract actions. The tactic worked for a while, but has been largely derailed by what is called the “Gist of the Action Doctrine.” That doctrine is a rule, made up and enforced by the courts, that says that if the matter complained of is essentially an action for breach of contract, then a plaintiff cannot seek a recovery through tort remedies such as negligence actions.

The express purpose of the Gist of the Action Doctrine is to keep punitive damages out of most traditional contract disputes. There are, however, certain recognized exceptions where actions are essentially both contract and tort—and a grey area—where the question is debatable. If you can fit into one of those exceptions as a plaintiff (or as a defendant through a counter-claim or cross-claim), you can still assert a claim for punitive damages and possibly recover some or all of you attorney fees. Future entries in this blog will discuss those exceptions and grey areas.


The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.