Contracting to Avoid Extra-Contractual Liability — Can Your Contractual Deal Ever Really Be the 'Entire' Deal?

40 Pages Posted: 17 Sep 2015 Last revised: 4 Oct 2017

See all articles by Glenn D. West

Glenn D. West

Weil, Gotshal & Manges LLP; Texas Tech University School of Law; SMU Dedman School of Law

W. Lewis

Weil Gotshal & Manges LLP

Date Written: August 1, 2009

Abstract

Although business lawyers frequently incorporate well-defined liability limitations in the written agreements that they negotiate and draft on behalf of their corporate clients, contracting parties that are dissatisfied with the deal embodied in that written agreement often attempt to circumvent those limitations by premising tort-based fraud and negligent misrepresentation claims on the alleged inaccuracy of both purported pre-contractual representations and express, contractual warranties. The mere threat of a fraud or negligent misrepresentation claim can be used as a bargaining chip by a counterparty attempting to avoid the contractual deal that it made. Indeed, fraud and negligent misrepresentation claims have proven to be tough to define, easy to allege, hard to dismiss on a pre-discovery motion, difficult to disprove without expensive and lengthy litigation, and highly susceptible to the erroneous conclusions of judges and juries. This Article traces the historical relationship between contract law and tort law in the context of commercial transactions, outlines the sources, risks, and consequences of extra-contractual liability for transacting parties today, and surveys the approaches that various jurisdictions have adopted regarding the ability of contracting parties to limit their exposure to liability for common law fraud and misrepresentation. In light of the foregoing, the authors propose a series of defensive strategies that business lawyers can employ to try to limit their clients’ exposure to tort liability arising from contractual obligations.

Keywords: fraud, misrepresentation, contractual, extra-contractual, tort, waivers

JEL Classification: K12, K13

Suggested Citation

West, Glenn D. and Lewis, W., Contracting to Avoid Extra-Contractual Liability — Can Your Contractual Deal Ever Really Be the 'Entire' Deal? (August 1, 2009). Business Lawyer , Vol. 64, No. August, 2009, Available at SSRN: https://ssrn.com/abstract=2660935

Glenn D. West (Contact Author)

Weil, Gotshal & Manges LLP ( email )

767 Fifth Avenue
New York, NY 10153
United States
214-746-7780 (Phone)
214-746-7777 (Fax)

Texas Tech University School of Law ( email )

1802 Hartford
Lubbock, TX 79409
United States

SMU Dedman School of Law ( email )

Dallas, TX
United States

W. Lewis

Weil Gotshal & Manges LLP ( email )

767 Fifth Avenue
New York, NY 10153
United States

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