Tortious Interference with a Contract or Prospective Contractual Relations
While it may surprise you, parties to a contract are not the only ones who can be liable for a breach of the contract. If you take part in helping a party breach a contract, you can also be liable. This is called “tortious interference with contract.”
The common example is if you hire someone who is breaching an employment agreement with their current employer by coming to work for you. If you know about the employment agreement and hire the person anyway, you can be liable for tortious interference with contract.
While this may sound overly broad and perhaps unfair, there are some limitations.
Why is Interference in a Contract Illegal?
Consider the perspective of those entering into a contract. Parties of a contract have the reasonable expectation that others will not interfere with the contractual relationship.
A company’s business relationships is an important part of their business. The law says that contractual relationships are a crucial property interest. Laws protect individuals and organizations from unjustified tampering with contracts. When such tampering occurs, it may be tortious interference, and may harm the success and property rights of the business. Individuals and organizations must act swiftly to ensure their rights are protected and not forfeited. Should the tortuous interference threaten to damage the business interests, the business will likely need to consult with an experienced business attorney.
What is Tortious Interference?
A tortuous act, or tort, is simply a wrongful act that is may be remedied under the law. In general, tortious interference encompasses contractual relationships and other business activities, without regard to contract involvement.
What is “Improper?”
Determining if the interfering party’s conduct was improper is a key issue in actions involving claims of tortious interference. In determining if the conduct was improper the courts normally will keep in mind that an interest in an existing contract may merit more protection than a less easily defined interest in a prospective or anticipated contract.
Seven factors are analyzed in determining if the defendant’s conduct was improper:
- The nature of the defendant’s conduct;
- Defendant’s motive;
- The interests of plaintiff with which defendant’s conduct interferes;
- The interests which defendant seeks to advance;
- The social interests in balancing defendant’s freedom to act against the contractual interests of plaintiff;
- The “proximity or remoteness” of the conduct relative to the interference claimed by plaintiff; and
- The relations between plaintiff and defendant.
As part of a tortious interference claim, the injured party may be able to recover monetary damages for the loss that their business has incurred. An injured party by another’s tortiuous interference must consider that failure to take action can spell disaster for their company.
Two Types of Tortious Interference
There are two types of “tortious interference”:
- tortious interference with contract, and
- tortious interference with prospective or anticipated contractual relations.
In other words, the interfering party may obstruct a contractual relationship by interfering with the:
- performance of a contract, or
- prospective or anticipated contractual relations.
Tortious Interference with the Performance of Contracts
Legally speaking, a party who intentionally interferences, without just cause, with the performance of a contract between others, by preventing the contracting parties from performing the contract or causing the performance to be more expensive or burdensome, has tortiously interfered with the performance of a contract. The one interfering may be subject to liability for any financial loss.
To succeed in a claim of torturous interference with the performance of a contract, someone must show that the interfering party caused the contract to not be performed. Additionally, someone must prove that the interfering party intentionally caused the breach of conctract and did so improperly.
Tortious Interference with Prospective or Anticipated Contractual Relations
There is a similar legal doctrine that applies even when there is not yet a contract in place.
In short, inducing or otherwise causing someone not to enter into a business relationship might be considered tortious interference with prospective or anticipated contractual relations.
For a claim of tortious interference with prospective contractual relations, someone must prove that the interfering party caused another party not to enter into a contractual relationship with them or prevented the them from entering into their relationship. Someone must also show that the interfering party’s conduct was intentional and improper.
Public Interest in Free Competition
A claim of tortious interference is more difficult to prove when the claim is made against a competitor. In order to protect competition, intentional interference is not be considered improper if the interfering party did not use “wrongful means,” and the interfering party is seeking to compete with the one making the claim.
Remedies of Injured Parties
A lawsuit involving tortious interference with contract or prospective business relations can result in large financial awards to the winner. Since interference with a contract is a tort, there are several remedies available to the injured party, including both legal damages and equitable remedies; these may include: injunctive relief, economic losses for loss of profits, financial losses, potential punitive damages, etc. In short, the financial liability can be great.
Do I Need an Attorney for Tortious Interference?
Not every attorney understands this complex area of law. If an individual or business has suffered losses due to an interference with their contract rights, an experienced business attorney should be contacted immediately. The business attorney will be able to advise you or your company on your rights to financial recovery or other relief. Failure to bring a claim in a timely manner can limit or even prevent your ability to recover losses, and there are a variety of legal deadlines. Similarly, if you have been accused of tortious interference, an experienced business attorney can help defend you and your rights.