What Is Wrongful Interference with a Business Relationship?
Wrongful interference in a business relationship is referred to by legal experts as a tortuous interference.3 min read
Wrongful interference in a business relationship is referred to by legal experts as a tortuous interference. On its own, a 'tort' is when reasonable care or deference to another person is disregarded. By extension, businesses themselves can commit torts against individuals or other businesses. Such interference is referred to as a business tort. Whether committed by an individual against a business, a business against a business, or a business against an individual, tortuous interference is divided into two main types: Contract interference and business relations interference.
Interference with a Business Contract
As implied, this type of interference requires a formal business agreement or contract already be in place and then be interfered with. Furthermore, the interference with a business contract must be intentional and the contract itself must be valid. If the defendant can show the interference was accidental or unintentional, then the defendant is not guilty of tort. It also would not qualify as tort if the defendant did not use coercion to interfere with a business contract, and/or did not intend the loss of a business opportunity.
If a valid contract exists and the defendant's knowing breach of it can be documented, this is a straightforward way to demonstrate tortuous interference in a civil court. Courts in most jurisdictions, however, also require the plaintiff to prove the interference caused harm to the business in some way, which in most cases is financial.
Interference with Business Relations
This type of tortuous interference has the same requirements as interference with a business contract, but deals with relations outside of the actual contract. Often agreements made outside of a formal contract are based on a history two parties have with each other, an oral agreement, or stipulation of a future contract. Rather than a current agreement, inchoate rights may also be interfered with. Inchoate rights are those which a party does not yet have, but has reasonable expectation to have in the future.
Because business relationship interference is often much less documented than contractual interference, it can be more difficult to demonstrate in court. The burden is often on the plaintiff to prove an actual business agreement exists, then move on to proving such an agreement was knowingly interfered with. Since an outside party may not be aware of a verbal agreement, intentional interference may not have been the case. Or if a contract has yet to be signed, a competitor may see that contract as one still capable of being won.
Proving Interference Occurred with a Business Relationship
Whether or not a contract exists to show the relationship, the burden of proof is on the plaintiff to show that the defendant intentionally caused harm through coercion or other interference. Two or more businesses fairly competing for a lucrative customer contract, for instance, is standard business practice and not harmful. Furthermore, the harm must be in a lost business opportunity that the plaintiff reasonably believed it already had.
For example, it might be reasonable to believe a contract would have been signed if a thread of emails shows an agreement on a date and place for signing, and a former employee now working for a competitor knew of the date and coerced the client to sign a contract with the competitor beforehand.
Most often unlawful tortuous interference takes the form of overzealous free market competition. While competition is allowed and encouraged in business, it can become tortuous if it becomes unfair. For instance:
- Coercing a customer to break its contract with a competitor through deception, threats, or unyielding persistence.
- Deceiving another company's employees to lure them to work for you instead.
- Making false claims about a competitor to deter business.
- Threatening a logistics company if they make a supply delivery to a competitor.
- Interfering with a party's ability to uphold its contractual obligations.
Elements of a Wrongful Interference Business Case
Each jurisdiction is different in the ways it currently and historically has conducted business. Therefore the elements necessary to make a wrongful interference case will also vary by jurisdiction. Most jurisdictions agree upon the following, although it is best to consult a legal expert on a case-by-case basis:
- The defendant can prove a valid relationship or contract existed.
- Such valid contract/relationship was willfully violated.
- The interference was not authorized in any way.
- Financial or other damages must have been the result of such interference.
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