Key Takeaways:

  • Tortious interference occurs when a third party intentionally disrupts a contractual or business relationship, leading to economic harm.
  • There are two types: tortious interference with a contract and tortious interference with a business relationship.
  • Essential elements of a claim include a valid contract or relationship, knowledge by the defendant, intent to interfere, actual interference, inappropriate conduct, and damages.
  • Defenses to tortious interference claims include justification, privilege, and lack of intent.
  • Some exceptions exist, such as privileged interference when acting in a legitimate business interest.
  • Legal consequences include compensatory and punitive damages, as well as equitable relief.
  • Preventive measures include contractual safeguards and awareness of improper competitive practices.

What is Tortious Interference?

Tortious interference occurs when a business tries to economically harm a competitor by interfering with a contract or relationship. Breach of contract is the most common cause of interference. However, it is not the only form.

Interference often leads to economic damage. For example, the interference could involve the sale of a business. It could also happen if a vendor offers a business unreasonably low prices, causing the buyer to breach a contract with another vendor. Interference must be intentional to result in a legal suit.

Basics of Interference

The defendant in one of these cases is the person who interfered with the contract. Interference can happen in many ways, including:

  • Unethical business practices
  • Blackmail
  • Inducement
  • Force

There are two types of victims in an interference case. The first is the entity damaged by the broken contract. The second is the person who is forced into breaking the contract. Either party can bring a lawsuit.

Interference cases are extremely complicated. To be eligible for a lawsuit, there are certain elements that must be present in your situation. These include:

  • A legal contract or financial relationship
  • The defendant knows about the contract or relationship.
  • The defendant's goal was to interfere with the contract or relationship.
  • Actual interference occurred.
  • The interference is inappropriate.
  • The victims suffered damage.

Cases missing any of these elements typically do not proceed to court.

Types of Tortious Interference

Tortious interference falls into two primary categories:

  1. Tortious Interference with a Contract – This occurs when a third party intentionally causes one party to breach an existing contract. The plaintiff must demonstrate that:
    • A valid and enforceable contract existed.
    • The defendant knew about the contract.
    • The defendant intentionally induced a breach.
    • The breach resulted in damages.
  2. Tortious Interference with a Business Relationship – This does not require a contract but involves improper interference in an established or prospective business relationship. Courts consider factors such as:
    • The nature of the relationship.
    • Whether the defendant used improper means.
    • Whether the defendant acted with malice or unlawful intent.

Unlike breach of contract claims, these cases fall under tort law, meaning that even at-will contracts or business prospects may be protected from wrongful interference.

Contract or Relationship

Interference claims require that the victims are involved in a legal contract or have a business relationship. However, these ties must have been valid. Relationships that were never legally recognized are not valid and therefore cannot serve as the basis for an interference claim. If a relationship violates public law, it is not a valid basis for an interference claim.

Some cases involve at-will contracts. This adds complications. Even though a contract can be dissolved at will, interference can still occur. This is especially true if the defendant knew about the contract.

Knowledge

A successful claim depends on proving the defendant knew about the relationship. This is usually shown in written statements or proven through the actions of the defendant. If the defendant can prove they didn't know about the relationship, interference cannot have occurred.

It is possible that the defendant did not believe the relationship was valid, leading them to assume they were not interfering. However, legally speaking, they may still have interfered.

Defenses Against Tortious Interference Claims

A defendant accused of tortious interference can use several defenses to challenge the claim:

  • Justification – The defendant had a legitimate business reason for their actions, such as protecting a financial interest in the company that breached the contract.
  • Privilege – Some forms of interference, such as those made in good faith negotiations or to protect a public interest, may be legally permissible.
  • Lack of Intent – If the defendant was unaware of the contract or had no intent to disrupt the relationship, interference cannot be proven.
  • Statutory Exceptions – Certain jurisdictions provide defenses for specific industries or business practices, particularly in competitive marketplaces.

Defendants must provide clear evidence to establish these defenses, such as demonstrating that their actions were legal or commercially justifiable.

Goal to Interfere

Intent is key in interference cases. The intent of the defendant must be proven to win these claims. This means they either intentionally interfered or they performed some other action knowing that interference was a likely result. However, intent alone does not always establish liability. It's possible for a legal business action to result in interference, which does not serve as the basis for a claim.

Real Interference

Victims must prove that actual interference occurred. If the defendant tried to interfere but failed, so will the claim.

The Interference Was Inappropriate

Not all interference is illegal or immoral. It must be proven that the defendant interfered improperly. For example, if the defendant intended to interfere with a business relationship as punishment for other actions, this is improper. There are many issues used to decide if the interference was improper. These include:

  • Motive of the party that interfered
  • Interests of the party that interfered
  • How the interference occurred
  • The victim's interests
  • The nature of the broken relationship or contract
  • If there is any social interest in preserving the relationship
  • If the defendant's actions were intended to cause interference
  • Damages that occurred

If interference is proven, two types of damages are available. The first is legal damages. This includes economic and punitive types. It is also possible to receive equitable relief. This is when a court order prevents the defendant from benefitting from wrongful actions.

How Courts Determine Improper Interference

Not all interference is legally actionable. Courts examine multiple factors to determine if interference was improper, including:

  • Motive and Intent – If interference was done with malice or to harm a competitor unfairly, it is more likely to be considered wrongful.
  • Method of Interference – Deceptive tactics, fraud, coercion, or threats are strong indicators of improper interference.
  • Competitive Justification – If the defendant's actions were part of fair competition, such as marketing a superior product, courts may not consider it tortious.
  • Public Policy Considerations – Some business interferences, such as whistleblowing or reporting illegal activity, may be deemed legally justified.

A court’s decision on improper interference depends on the circumstances of the case and the laws of the jurisdiction.

Economic Injury

Tortious interference falls under the category of economic injury. There are two types of injury that interference causes. The first, as mentioned, is a broken contract. The other type is damage to a business relationship. This does not always involve a contract. All that matters in these cases is that the defendant interfered with the relationship between the victims and that this caused damage.

The main difference between these two injuries is the contract. However, both forms of interference are eligible for a claim.

Legal Remedies for Tortious Interference

When tortious interference is proven, courts may award various types of damages:

  1. Compensatory Damages – Reimbursement for lost profits, breach-related financial losses, and reputational harm.
  2. Punitive Damages – Applied in cases of extreme misconduct to punish wrongful behavior and deter similar actions.
  3. Equitable Relief – Courts may issue injunctions preventing further interference or requiring specific actions from the defendant.

Damages depend on the extent of economic harm suffered by the plaintiff. In some cases, expert testimony is required to quantify lost profits or business disruptions.

Exceptions for Interest

There are limits to interference in certain states. In Mississippi, for example, interference has not happened if it was in pursuit of a legitimate business interest. This is called 'privileged interference'. In one such case, a school superintendent sent out letters to a voice teacher's students stating that private lessons must be discontinued. The letters were deemed legitimate because the teacher worked for the school system.

It is also important to understand that not all damages count as interference. For example, if a business is able to attract another business's customers, this can cause damage. However, this is not interference. It is only a normal part of business competition. The exception is when one business makes false claims about another. This is interference and may result in a successful claim.

Although interference laws are similar in most states, there are differences. Some states have a higher threshold for evidence. Others give more rights to the defendant. For instance, some states don't consider it interference if it was a result of negligence. In addition, interference does not usually apply to at-will employees.

State-Specific Variations in Tortious Interference Laws

Laws regarding tortious interference vary by state. Key differences include:

  • Burden of Proof – Some states require a higher level of evidence, especially for proving intent.
  • Employment Contracts – In certain jurisdictions, at-will employment relationships do not qualify for tortious interference claims.
  • Legitimate Business Interests – Some states, like Mississippi, recognize "privileged interference" if actions were taken in pursuit of a valid economic interest.
  • Competitive Conduct – Some jurisdictions provide greater leeway for competition, limiting the scope of interference claims.

Given these differences, legal consultation is crucial for businesses or individuals considering a tortious interference lawsuit.

Interference Terminology

Many people are confused by interference laws because it's a complicated term. For example, plaintiffs may come across the term 'tortfeasor'. This is simply the legal term for the person that interfered. 'Tort' is another term to understand. Interference cases fall under tort law rather than contract law. This is because the third-party was not involved in the contract. Tort law is a type of financial law.

Frequently Asked Questions

  1. What is the difference between tortious interference with a contract and a business relationship?
    Tortious interference with a contract involves disrupting an existing agreement, while interference with a business relationship targets an economic expectancy.
  2. Can a business sue for tortious interference if no contract exists?
    Yes, but the business must show an established business relationship or a reasonable expectation of economic gain that was wrongfully disrupted.
  3. What is an example of tortious interference?
    If a competitor spreads false information to discourage a client from working with a business, leading to lost revenue, that could be tortious interference.
  4. How can businesses protect against tortious interference?
    Businesses can use non-compete clauses, strong contractual terms, and legal action against competitors engaging in wrongful tactics.
  5. What is the statute of limitations for tortious interference claims?
    The timeframe varies by state, typically ranging from 2 to 6 years, depending on the jurisdiction.

Find an Attorney

Tortious interference cases are extremely difficult to prove. This is true whether you are the victim or the defendant. The best way to handle an interference case is with the help of an attorney. Find an attorney to handle your tortious interference case by searching on UpCounsel today.

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