Law of Torts and the

Construction Industry

Mohit Saraf
Partner

Luthra & Luthra Law Offices

New Delhi and Mumbai
Email: msaraf@luthra.com
 Structure of the Presentation
 Torts: Overview
 Torts: Relevance for Construction
Contractors
 Torts: Basic Principles affecting
Construction Contractors
 Torts: Defenses and Strategy against
Tortious Liability
 Tort: Meaning and Overview
 Denotes a breach of duty imposed by law
 Nature of the Duty: To act as a reasonable
person exercising reasonable diligence
 Tort exceeds the obligation of a party under
contract: the duty could be to the other party
in a contractual relationship, as well as to
any third party who, it is reasonably
foreseeable, would get affected by the
actions of a person.
 Constituents of Tort
 There must be a wrongful act committed by
a person.
 The wrongful act must give rise to a legal
damage or actual damage.
 The wrongful act must be of such nature as
to give rise to a legal remedy in the form of
an action for damages.
 Tort: Relevance for
Construction Contractors
 Construction Contracts should be watertight
to provide complete framework for liability
between the parties.
 Tortious liability would therefore be limited
to the category of liability to a third party.
 Badly drafted construction contracts can
open tortious liability between the parties,
since there can be concurrent liability under
both tort and contract.
 Tort: Relevance for
Construction Contractors- (2)
 Types of Tortious  Other relevant legal
actions relevant for principles under Tort
Constr. Contractors: law:
 Negligence  Absolute Liability
 Nuisance  Strict Liability
 Trespass  Vicarious Liability
 NEGLIGENCE
 Breach of legal duty to take care which results in
damage.
 Three constituents: (i) legal duty to take care on
part of a party to the injured party, within the
scope of duty of the said party, (ii) breach of this
duty to take care and (iii) consequential damage.
 Existence of legal duty to take care is determined
on basis of general principle of “proximity and
foreseeability”. Established in case of Donoghue v.
Stevenson [1932 AC 562(HL)].
 NEGLIGENCE: Principle in
Donoghue v. Stevenson
 “You must take reasonable care to avoid acts or
omissions which you can reasonably foresee
would likely to injure your neighbor. Who then
in law is my neighbor?…persons who are so
closely and directly affected by my act that I
ought reasonably to have them in contemplation
as being so affected when I am directing my
mind to the acts or omissions which are called in
question.”
 STANDARD OF
DUTY TO TAKE CARE
 The degree of duty of care is that of an ordinary
prudent person.
 Exceptions: (i) if a person is highly skilled about a
particular business , the law would hold him guilty
of negligence in failing to use such expert skill,
(ii) if a persons holds himself out as being
specifically competent to do things requiring
professional skill, he will be held liable for
negligence if he fails to exhibit the care and skill
of one ordinarily an expert in that business.
 Conformity with the general and approved
practices could generally lead to an inference in
favor of the defendant.
Foreseeability Principle as applied by
Courts to Construction Contractors
 A builder of defective premises may be liable in
negligence to persons who thereby suffer injury
 A designer or builder owes a duty of care to all
persons who might be reasonably be expected to
be affected by the design/construction of the
premises. The duty is to take reasonable care that
such persons would not suffer injury as a result of
the faults in the design/construction of premises.
(Anns v. London Merton Burough; Rimmers v. Liverpool Council)
 Owner’s duty to ensure that the premises are safe
can be discharged by appointment of competent
persons to undertake the task of doing so.
 TORTIOUS LIABILITY FOR
NEGLIGENCE
 Depends on facts of the case. Courts can
take cognizance of new fact situations.
 Junior Brooks v. Vetichi:Owner’s remedy
under tort law against sub-contractors for
laying down defective floor. Damage to the
floor was a direct and foreseeable result of
sub-contractor’s negligence.
 NUISANCE:
Meaning and Relevance
 “Nuisance” is anything done to the hurt or
annoyance of the lands or tenements of another
and not amounting to trespass. It is an old cause of
action that is losing its relevance in light of
developments in Environment laws which impose
greater and more certain liability in relation to
damage to adjoining lands/property.
 Nuisance are of two kinds: (i) public nuisance and
(ii) private nuisance.
 PUBLIC AND PRIVATE
NUISANCE
 Public Nuisance is an act causing any common
injury, danger or annoyance to the public, and
does not create a right for civil action in any one
person. In India, remedy under Section 91, CPC.
 Private Nuisance results when use or authorization
of use of one’s property, or of anything under
one’s control, injuriously affects another.
(Examples: (i) Obstruction to light and air; (ii) Disturbance
of right to support, (iii) Escape of deleterious substances
into another’s property, etc.)
 TRESPASS: Basic Principles
 Positive act of interference or entry, however
slight, onto the property of another.
 Ignorance of the boundaries will be no excuse in
an action for trespass
 Slightest violation of a boundary will be a
trespass, (e.g.: placing objects on another person’s land,
driving nails into his wall, using it to support scaffolding,
or leaving a ladder, planks or a shed or piling rubbish).
 Trespass equally includes a violation of the air
space above the another person’s land, at a height
which would interfere with any use of his land.
 OTHER PRINCIPLES OF
LIABILITY
 Absolute Liability
 Strict Liability
 Vicarious Liability
 ABSOLUTE LIABILITY: Rule laid
down by Supreme Court of India in the
Oleum Gas Leak Case
 Where an enterprise is engaged in a hazardous or
inherently dangerous activity, the enterprise is
strictly and absolutely liable to compensate all
those who are affected by the accident and such
liability is not subject to any exceptions.
 The enterprise cannot escape liability by showing
it had taken all reasonable care and there was no
negligence on its part.
 This principle, however, has been rarely applied
since it was formulated.
 STRICT LIABILITY: Rule in
Ryland v. Fletcher
 “The person who, for his own purpose, brings on
his land and collects and keeps there anything
likely to do mischief if it escapes, must keep it in at
his peril; and if he does not do so is prima facie
answerable for all the damage which is the
natural consequence of its escape.”
 The liability under this rule is strict and it is no
defense that the thing escape without that persons
willful act, default or negligence or that he had no
knowledge of its existence.
STRICT LIABILITY: Exceptions
 Only applicable when non-natural use of land
 Not applicable when:
– the escape of the object was due to act of God
– the escape was a result of an act of a stranger,
or default of the person injured
– the thing was present with the consent of the
person injured or for common benefit of person
injured.
– it is the consequence of an act done for public
purpose in the discharge of a public duty under
the express authority of a statute.
 REMEDIES FOR
TORTIOUS ACT
 Action for Damages
 Injunction
 Specific restitution of a property (in an
action for detention of property)
 Recovery of land (in cases of wrongful
dispossession)
 MEASURE OF DAMAGES
 Determined on facts and circumstances- burden of
proof on injured party.
 Compensatory Damages which, so far as money
can compensate, will give the injured party
reparation for the wrongful act
 Pecuniary loss: Actual expenses, loss of earnings
 Non-pecuniary losses, e.g., pain & suffering.
 Damages for Nervous Shock
 Nominal Damages awarded where no substantial
harm caused. Action to establish a legal right.
 Exemplary Damages to deter a party from similar
conduct.
DFENSES & STRATEGIES TO
MITIGATE LIABILITY (1)
 Effective watertight contracts that allocates risks
between Contractor and Owner of a Project/Site.
 Clear provisions for handing over of works and
transfer of risks to Owner once Contractor’s
obligations are completed.
 Provisions for Indemnity by Owner for third party
claims. Only exceptions: Gross negligence or
wilful misconduct of Contractor.
 Obtaining all required statutory clearances, and
compliance with applicable laws, also provides a
mitigation against potential tortious claims.
DFENSES & STRATEGIES TO
MITIGATE LIABILITY (2)
 Cost of adequate insurance should be covered in
cost of contract. Provision to be made for Third
Party Liability insurance & Builders All Risk
Insurance as Project Owner’s responsibility.
 Contractor’s right to be an additional insured in
policies taken out by the Project Owner.
 Owner’s insurance policies to provide for waiver
of subrogation in favor of Contractor.
 Contractor should also require from all of its
subcontractors insurance with the same coverage
and limits as it agrees to with the Owner.
 STEPS TO MITIGATE
LIABILITY
 Facts are critical in tortious cases. Contractors
should therefore maintain clear records of
activities and obtain Owner’s agreement to the
records on regular basis. (E.g.: In large EPC Contracts
this is done through weekly/monthly progress meetings).
 The specific defenses against tortious claims are
tailored to the facts of each case and are based on
challenging the basis of liability:
 Causation
 Remoteness Foreseeability
 Intervening Acts or events
 Mitigation of Damages not taken by Plaintiff.
 .

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