What Are Business Torts?
Business torts are wrongful actions performed against a business that cause harm to the business.4 min read
Business torts are wrongful actions performed against a business that cause harm to the business. Business torts may cause a loss of profits, loss of reputation, loss of business competitive advantage, loss of market share, and/or other types of losses. Business torts are also known as economic torts because they are often associated with losses of current or projected business profits.
Business torts may be committed intentially (e.g., by a competitor business) or may be caused by negligent or reckless behavior by individuals or other businesses. Business torts may include conspiracy, trade libel, misrepresentation, negligence, and other civil offenses.
The legal recourse to a business tort is a civil suit in a court of law. In the suit, the defendant is the offending party, and the plaintiff is the harmed party. In a business tort case, the plaintiff must prove the following elements:
- The defendant had a responsibility (statutory or otherwise) to act in a certain manner
- The defendant did not uphold the responsibility
- The defendant's actions further caused the plaintiff a loss
In addition, the plaintiff must prove that the defenant's actions either were intentional or were negligent or reckless, as well as identify a specific law, contractual responsibility, or norm of behavior that the defendant breached. Finally, the plaintiff must prove that the defendant's actions caused a measurable loss.
The loss can be due to various types of misconduct, including malpractice, negligence, misrepresentation, theft of trade secrets, business disparagement, and so forth. The loss can also be caused by an improper interference into the business interests or dealings of an individual or business. Losses can also include future, unrealized profits a business expects to lose as a result of a business tort.
Legal remedies to business torts may include the award of damages. In addition, restraining orders and injunctions may be issued to inhibit a defendant from continuing to harm the plaintiff.
Types of Business Torts
Common types of business torts include:
Tortious interference is the deliberate and unlawful meddling with the contractual dealings of a business. One interpretation of tortious interference may be interfering with the economic expectations of a plaintiff by harming a business relationship.
Restraint of Trade
Restraint of trade is a common law doctrine that requires that businesses and individuals do not take actions or enter into agreements that would cause another business to cease being able to operate normally. For example, creating a raw materials conglomerate that refuses to sell necessary materials to specific manufacturers could be construed as restraint of trade. Exceptions to this common law doctrine may include lawful non-compete agreements.
Theft of Trade Secrets
Theft of trade secrets is the unlawful accessing of proprietary business information for the purpose of acquiring an improper competitive advantage over a business.
Fraudulent misrepresentation is the deliberate or reckless statement of an falsehood designed to induce a party to enter into a contract. It’s a breach of a good faith agreement and is grounds for civil claims, rescission of a contract, and the award of damages.
Trade libel is the publication of intentionally false information about the servicies or products of a business that causes a lose of revenue or profitability. Defarmation of a business's products or services is a civil wrong.
Commercial disparagement is the intentional defamation of a business's reputation or property with the goal of causing harm to the business. Commercial disparagement is also a civil wrong.
Remedies for Business Torts
The remedies for a business torts include the award of damages to cover pecuniary losses, and restraining orders and injuctions to stop damaging actions. With respect to pecuniary damages, losses incurred by a business must be calculatable with "reasonable certainty.”
For example, in a commercial disparagement case, losses may include income from prospective clients that chose, based on the disparagement, to not conduct business with the company. To maximize the awarded damages, thoroughly identify all real and potential injuries and carefully calculate a monetary loss incurred from each injury.
A judge may also issue restraining orders and injunctions to require the offending party to ceasing its damaging actions. For example, the offending party may be required to take back defamatory and disparaging statements about a business. In addition, the offending party may be required to sign non-compete agreements in theft of trade secret cases. Further, restraining orders may be issued to prevent the offending party from interfering in future contracts and transactions of the plaintiff's business, in tortious interference cases.
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