14.2 Tortious Interference with Contract
3 min read•july 23, 2024
Tortious interference occurs when someone knowingly disrupts a contract or business relationship, causing harm. This can involve existing contracts or potential deals, with elements including knowledge, intent, and actual damage.
Defenses against tortious interference claims include , , or unintentional actions. Remedies may involve , , injunctions, or to address the harm caused.
Tortious Interference with Contract
Elements of tortious interference
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- between plaintiff and third party enforceable by law (employment agreement)
- aware of the specific terms and conditions
- of a breach of contract persuades third party to violate agreement (offering better compensation)
- third party fails to perform their contractual obligations
- suffers financial losses or other harm due to the breach (lost profits)
Existing vs prospective interference
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- Involves a valid, enforceable contract already in place between plaintiff and third party (signed lease agreement)
- Defendant's actions cause a breach or disruption of the existing contractual relationship directly influences third party to violate terms
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- Involves a potential economic relationship or business expectancy not yet formalized into a contract (ongoing negotiations)
- Plaintiff must demonstrate a that the economic advantage would have been realized but for defendant's interference had a strong likelihood of securing the business deal
- Defendant's actions prevent the plaintiff from acquiring or continuing the prospective economic relationship interferes with negotiations or disparages plaintiff to potential partners
Defenses for tortious interference
- Justification or
- Defendant's interference may be justified if acting to protect a legitimate business interest or legal right advising a client to breach an illegal contract
- Examples include providing honest advice, complying with a court order, or engaging in lawful competition offering competitive prices or products
- Lack of knowledge
- Defendant may argue they had no knowledge of the existing contract or prospective economic relationship unaware of the specific agreement or relationship
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- Defendant may claim their actions did not intentionally induce a breach or disruption of the contract or economic relationship actions were not directly aimed at causing interference
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- Defendant may assert that plaintiff's own breach of contract or wrongdoing led to the interference, rather than defendant's actions plaintiff failed to fulfill their contractual obligations
Remedies in interference cases
- Compensatory damages
- Awarded to compensate plaintiff for actual losses suffered due to defendant's interference covers financial harm resulting from the breach
- May include lost profits, , or costs incurred in finding a replacement for the breached contract expenses related to securing a new contract partner
- Punitive damages
- Awarded in cases where defendant's actions were particularly egregious, malicious, or intentional demonstrates a blatant disregard for the law and plaintiff's rights
- Designed to punish the defendant and deter similar behavior in the future sends a message that such conduct will not be tolerated
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- In some cases, the court may issue an injunction ordering defendant to cease the interfering behavior or take specific actions to restore plaintiff's contractual or economic relationships requires defendant to withdraw false statements or retract interference
- Restitution
- The court may order defendant to return any benefits or profits gained as a result of the tortious interference to the plaintiff disgorge any financial gains obtained through the interference
Key Terms to Review (26)
Actual Breach or Disruption of the Contract: An actual breach or disruption of the contract occurs when one party fails to perform their obligations under the contract, either by not completing their duties on time, providing substandard performance, or refusing to fulfill the terms altogether. This type of breach directly impacts the contractual relationship, leading to potential legal claims for damages by the affected party. Understanding this breach is essential in addressing claims of tortious interference, as it highlights how external factors can further complicate or exacerbate a party's failure to meet contractual obligations.
Business Relationships: Business relationships refer to the connections and interactions between individuals or organizations that engage in commercial activities, including contracts, negotiations, and partnerships. These relationships are essential in a business context as they often establish the basis for mutual benefits, trust, and collaboration among parties involved in transactions.
Compensatory Damages: Compensatory damages are monetary awards granted to a plaintiff in a legal case to compensate for losses or injuries suffered due to the actions of the defendant. These damages aim to restore the injured party to the position they were in before the harm occurred, addressing both economic and non-economic losses.
Defendant's intentional and unjustified inducement: Defendant's intentional and unjustified inducement refers to a situation where one party intentionally persuades or influences another party to breach a contract, leading to harm or damages for the other party involved. This conduct is considered tortious because it interferes with the contractual relationship between two parties, disrupting expectations and causing economic harm.
Defendant's knowledge of the contract: Defendant's knowledge of the contract refers to the awareness or understanding that a defendant has regarding the existence of a contractual relationship between two parties. This knowledge is crucial in cases of tortious interference, as it establishes whether the defendant acted with intent to disrupt that relationship, thereby leading to potential liability for any resulting damages.
Employment contracts: Employment contracts are formal agreements between employers and employees that outline the terms and conditions of employment, including duties, compensation, duration, and termination rights. These contracts serve as legal protection for both parties and ensure clear expectations in the workplace.
Eugene v. Alachua County: Eugene v. Alachua County is a significant legal case that deals with tortious interference with contract, specifically focusing on the wrongful disruption of a contractual relationship. This case highlights how third parties can unlawfully influence or interfere with existing contracts, which can lead to legal liability for those parties involved. Understanding this case helps clarify the boundaries of acceptable behavior when it comes to contracts and emphasizes the protection of contractual rights.
Existence of a Valid Contract: The existence of a valid contract refers to the essential elements that must be present for an agreement to be legally enforceable. This includes an offer, acceptance, consideration, capacity of the parties, and a lawful object. Without these elements, the agreement may lack the necessary legal foundation, making it vulnerable to claims of tortious interference if a third party disrupts the contractual relationship.
Injunctive Relief: Injunctive relief is a legal remedy that involves a court ordering a party to do or refrain from doing a specific act. This type of relief is often sought to prevent harm, maintain the status quo, or protect rights before a final decision is made in a case. It's an essential tool in various legal disputes, providing immediate action that can prevent irreparable damage while the underlying issues are resolved.
Intentional interference with contractual relations: Intentional interference with contractual relations occurs when a third party intentionally disrupts a contractual relationship between two other parties, causing one party to breach the contract or making it more difficult to perform. This legal concept seeks to protect the sanctity of contracts by holding individuals accountable for meddling in agreements that are not theirs. It emphasizes the importance of honoring commitments and the potential consequences of undermining those obligations.
Justification: Justification refers to a valid reason or defense that a defendant can present in a legal context to excuse or legitimize their actions, particularly when those actions would otherwise be considered tortious. In the realm of tortious interference with contract, justification serves as a potential defense for a party accused of wrongfully disrupting a contractual relationship. Essentially, if the accused can prove that their actions were reasonable and intended to protect a legitimate interest, they may be excused from liability.
Lack of Knowledge: Lack of knowledge refers to the absence of awareness or understanding regarding a particular fact or circumstance, which can influence a person's actions or decisions. In the context of tortious interference with contract, this concept is critical because a defendant's lack of knowledge about a contract can determine their liability for interfering with that contract.
Loss of business opportunities: Loss of business opportunities refers to the financial harm a party suffers when a third party unlawfully interferes with a contractual relationship, resulting in lost profits or potential business. This concept is significant in cases of tortious interference, where one party's actions prevent another from enjoying the benefits of their agreements, leading to missed contracts and economic downturns.
Malice: Malice refers to the intention or desire to do harm or cause injury to another person. In legal contexts, particularly relating to defamation and tortious interference, malice signifies a knowing or reckless disregard for the truth, which can significantly affect liability and defenses in lawsuits. Establishing malice is crucial as it can elevate the seriousness of a defendant's actions and influence the outcomes of various legal claims.
Negligent interference with contractual relations: Negligent interference with contractual relations occurs when a third party unintentionally causes a breach of an existing contract, resulting in harm to one of the parties involved. This tort hinges on the idea that the third party acted carelessly or without reasonable care, affecting the contractual relationship between two parties. It is essential to establish that the interference was not intentional but resulted from negligence, leading to financial or other forms of damages.
No Intentional Inducement: No intentional inducement refers to the lack of deliberate actions taken by a party to persuade or incite another party to breach a contract. This concept is critical in tort law, particularly when determining whether a third party has unlawfully interfered with an existing contract between two parties. Understanding this term helps clarify the boundary between lawful competition and tortious interference, focusing on whether the interference was intentional or merely incidental.
Plaintiff's breach: Plaintiff's breach refers to a situation in tort law where the plaintiff fails to uphold their own contractual obligations, which can impact their ability to claim damages for tortious interference. This concept is important because if a plaintiff is found to have breached their own contract, it may limit or negate their right to recover damages against a third party who allegedly interfered with that contract. Understanding this term is essential as it highlights the reciprocal nature of obligations in contracts and the potential consequences of failing to meet those obligations.
Privilege: Privilege, in legal terms, refers to a special right or immunity granted to individuals that allows them to act without fear of liability in certain situations. This concept is crucial in tort law, especially concerning the protection of free speech and the balance between an individual's rights and societal interests. Privilege can provide a defense in cases like defamation, as it acknowledges that some statements, while potentially harmful, are protected due to their context or the speaker's position.
Punitive Damages: Punitive damages are financial awards given to a plaintiff in a civil case that go beyond compensatory damages, aiming to punish the defendant for particularly harmful behavior and deter similar conduct in the future. These damages are typically awarded in cases involving egregious wrongdoing, such as fraud, malice, or gross negligence, making them distinct from standard compensatory damages that simply aim to reimburse the victim for losses.
Reasonable foreseeability: Reasonable foreseeability is a legal concept that determines whether a party could have anticipated the consequences of their actions, particularly in the context of tort law. This concept is crucial in establishing whether a defendant can be held liable for negligence, as it assesses if the harm caused was a predictable result of their actions or omissions. It plays a significant role in determining the extent of duty owed to others, especially when considering interference with contractual relationships.
Reasonable probability: Reasonable probability refers to the likelihood that a certain event will occur, based on the available evidence and circumstances. In the context of tortious interference with contract, it assesses whether there is a valid chance that a party could have acted in a way that would breach a contract, impacting the relationships and expectations among the involved parties.
Restatement (Second) of Torts § 766: Restatement (Second) of Torts § 766 outlines the principle of tortious interference with contractual relations, establishing the conditions under which a third party can be held liable for intentionally interfering with a contract between two parties. It emphasizes that the interference must be intentional and improper, focusing on the harm caused to one party's contractual rights by the actions of the other.
Restitution: Restitution is a legal remedy aimed at restoring a party to its original position before a wrongful act occurred, particularly concerning unjust enrichment. It focuses on compensating the injured party for the value of the benefits conferred to another party without legal justification. In the context of tortious interference with contract, restitution addresses situations where one party has improperly disrupted a contractual relationship, allowing the injured party to seek compensation for losses incurred.
Resulting Damage to the Plaintiff: Resulting damage to the plaintiff refers to the harm or loss that a plaintiff experiences as a direct consequence of another party's wrongful act, specifically in tortious interference cases. This damage can be economic, such as lost profits or opportunities, or non-economic, like emotional distress. Establishing this damage is crucial for the plaintiff to succeed in a tortious interference claim since it demonstrates how the wrongful act has negatively impacted their situation.
Tortious interference with an existing contract: Tortious interference with an existing contract occurs when a third party intentionally disrupts the contractual relationship between two parties, causing one party to breach the contract or making it more difficult for them to fulfill their obligations. This legal concept emphasizes the protection of contractual relationships and aims to hold accountable those who unjustly meddle in these agreements. The plaintiff must demonstrate that the interference was intentional and that it caused actual damages.
Tortious interference with prospective economic advantage: Tortious interference with prospective economic advantage occurs when one party intentionally damages another's ability to secure a business opportunity or relationship, even when there is no formal contract in place. This legal concept protects individuals and businesses from wrongful interference that disrupts their potential economic relationships, emphasizing the need for fair competition and ethical business practices.