Importance of Tort Law in Business
The importance of tort law in business is to have a way to defend against a financial loss that stems from the unlawful actions of others.3 min read
Updated November 16, 2020:
The importance of tort law in business is to have a way to defend against a financial loss that stems from the unlawful actions of others and that limits the business' ability to operate as normal. In business, there are several forms of torts that can affect a company. When a civil wrongdoing has been inflicted on a person or business, it is called a tort. Tort is derived from the Latin word tortus, meaning wrong, and torts provides a legal way to remedy the wrong.
The main purpose of tort law is to provide a way to hold those who cause harm responsible. The overall intent is to discourage others from making the same mistakes and to avoid having to pay the fines that come with tort judgments. The judgments cover:
- Medical bills.
- Loss of wages.
- Loss of earning capacity.
- Pain and suffering.
Financial compensation with larger tort cases also includes punishment for the corporation or other business entity for putting profits above safety. The tort system also allows for the possibility of criminal cases, if justified.
Types of Business Torts
Three common business torts include:
- A restraint of trade is when the defendant in the case might not have caused the immediate financial loss but caused a larger hindrance that prevents a business from continuing in a normal manner.
- Theft of trade secrets occurs when one party takes the proprietary information from a business with the intent of gaining a competitive advantage unfairly.
- A fraudulent misrepresentation is when two parties agree through a contract or handshake to an agreement in good faith but do not follow through.
Purpose and Types of Tort Law
Tort law's main objective is to restore the injured party to the condition they were before the infliction of an injury due to the actions of another. This is done by awarding monetary funds to cover medical expenses, lost wages, and compensation for mental pain and anguish. Tort law is in place to help lessen negligence and misconduct by corporations or individuals who can cause harm by their actions.
There are several forms of tort law including:
- Negligence: Most tort cases are due to negligence that stem from the carelessness of a person or entity including:
- Car accidents.
- Pedestrian accidents.
- Slip and falls.
- Medical malpractice.
- Intentional: In these cases, the harm caused was through purposeful conduct. An intentional tort often results in criminal charges including:
- Toxic: This type of tort is both intentional and negligent. Tort lawyers will look to hold those responsible for both the harm to the person and/or to the environment that is damaged by exposure to toxic substances.
- Nuisance: This tort is to protect a person's right to enjoy a comfortable lifestyle and the right to enjoy their property. Nuisance tort law looks to uphold the rights of property owners.
Most common nuisance torts are related to noise complaints. In these cases, the duration of the interruption and the time of day are taken into consideration. If the noise is infrequent, it won't be seen as a tort. If the noise occurs at night, the plaintiff will have a better case as it also violates local government noise ordinances. Conversely, if the noise occurs during the day and the defendant is taking part in normal daily tasks, the defendant has a stronger case.
If a business is involved in a nuisance tort, the court will assess if the business has the means to eliminate the nuisance and if eliminating the nuisance is a detriment to the business. In this case, monetary compensation will be expected from the business as opposed to an injunction.
How Do Torts Affect A Business
While tort law deals with a variety of misconduct including negligence, malpractice, and injuries, torts in business involve both intentional and improper interference to the interests of another. This interference is seen as an injury to the business in relation to the actual or potential loss of:
- Competitive edge.
- New business opportunities.
- Existing and new business partners.
The injury inflicted creates a complex formulation to determine the financial loss of existing and projected losses.
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