The Massachusetts Supreme Judicial Court recently weighed in on a pressing, even if theoretical, legal issue in business and contract law: When a legal claim is based on contract law or tort law, also known as personal injury law.

The business and contract attorneys at the Katz Law Group explain why the distinction is important.

Faulty Building Design Leads to Indemnity Claim

The facts of the case, Trustees of Boston University v. Clough, Harbour and Associates (CHA), are straightforward: CHA designed and built a parking structure and an athletic field on top of it for the university. However, CHA negligently failed to take into account the seasonal expansion of the joists in the parking structure. This construction defect led to depressions in the playing field, making it unsafe for use.

Importantly, the building contract included an indemnity clause, in which CHA promised to pay for expenses caused by its negligent performance under the contract. The university used this agreement to sue CHA and demand its losses associated with the playing field.

The problem was that the university did not file its lawsuit until after six years had passed since it started using the playing field, and the Massachusetts Tort Statute of Repose states that an “action of tort for damages arising out of any deficiency or neglect in the design, planning, construction or general administration of an improvement to real property” within six years. When CHA asked for summary judgment, the superior court granted it, ruling that the lawsuit was based on negligence and was therefore a tort claim. The university appealed.

SJC Clarifies Difference Between Tort and Contract Claims

The Supreme Judicial Court explained that the difference between tort and contract claims is whether “the standard of performance is set by the defendants' promises [or] imposed by law.” In tort claims, most of which are personal injury claims based on someone's negligence, but which also include defectively designed products, liability is based on the defendant's breach of a legal duty to the injured party. In contract claims, liability is based on the breach of the terms of the contract.

The difference is nuanced, but it has significant implications. For example, Massachusetts courts have held that a claim for a breach of an implied warranty is a tort claim, while one for the breach of an express warranty is a contractual claim because the warranty was a part of the agreement.

Because the indemnity clause was part of the contract between the university and CHA, the court ruled that the claim was a contractual one and that the Tort Statute of Repose did not apply: “CHA expressly promised to indemnify the university if it suffered any expenses due to CHA's negligence… it is a promise to which CHA freely and intelligently chose to be bound.”

Why the Distinction Matters

Whether a lawsuit is a contract or a tort claim can have a wide variety of repercussions. In this particular case, the statute of limitations barred tort claims but not contractual ones. This is a fairly common dilemma, as the statute of limitations for contract claims tends to be longer because much of the evidence in the case is documentary so fading memories is less of a concern. Other potential repercussions include what types of damages are available and even what elements of the case must be proven by the plaintiff.

Massachusetts Business Lawyers at the Katz Law Group

The business attorneys at the Katz Law Group have been representing companies and small businesses in central Massachusetts for four decades. Contact them online or call their law office at (508) 480-8202 for legal representation.