Casualty & Liability InsuranceQuestion 92 of 53191% of test-takers answer this correctly

Which of the following BEST describes the difference between tort liability and contract liability?

a.Tort damages are always capped at $250,000 by statute, covering economic and non-economic loss alike, while contract damages are unlimited and may be recovered in whatever amount the plaintiff proves at trial, no matter how serious the injury suffered by the plaintiff
b.Tort liability arises from a breach of a duty imposed by law (independent of any agreement), while contract liability arises from a breach of a duty voluntarily assumed by the parties' agreement
c.Tort liability requires a written agreement signed by both parties before the injury; contract liability does not and may rest on an oral promise
d.Tort liability is created only by a statute enacted by the Legislature, while contract liability is created only at common law by judicial decision, so a duty arising from one source can never be enforced under the other theory in the same lawsuit before the same court

Explanation

A TORT is a civil wrong arising from the breach of a duty IMPOSED BY LAW for the protection of others (e.g., the duty of reasonable care). A CONTRACT obligation arises from a duty the parties have VOLUNTARILY UNDERTAKEN by their agreement. The same facts can sometimes give rise to both (a doctor's malpractice can be both a tort and breach of contract), but the distinction in source of duty is fundamental.

Law Reference: Tort vs. contract liability principles

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