Intentional Interference with Economic Relations - Explained
What is the Tort Action for Interfering with Economic Relations?
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What is a civil action for Intentional Interference with Economic or Contractual Relations?
This is a tort that is based in common law rather than statute. There are several categories of conduct that may violate common law rights of individuals:
- Interference with Contractual Relations
- Interference with Prospective Advantage
Next Article: Negligence Actions Return to: TORT LAW
What are the types of Intentional Interference with Economic or Contractual Relations?
The categories of conduct that may violate common law rights of individuals include:
What is Disparagement?
This is an untrue statement about someone's business acumen, product, or service. This tort may be addressed as defamation; however, some states lack a statute or common law protecting commercial rights against defamatory statements.
What is Interference with Contractual Relations?
This tort occurs when a non-party to a contract knowingly induces a party to the contract to fail to honor or breach the agreement.
- Example: This situation often arises when one company raids another for employees. The raiding company knowingly induces employees to breach their employment contracts with their current employer.
What is Interference with Prospective Advantage?
This cause of action entails a situation in which there is a business relationship between the plaintiff and a third party. The defendant then acts in a way intended to disrupt the relationship. This conduct is done not for personal advantage but with the purpose of harming the plaintiff. The plaintiff may bring an action to recover the losses or damages sustained.
- Example: A third party intentionally creating distrust between a supplier and vendor to harm the vendor may constitute illegal interference.
Wrongful Appropriation of Business Interests
This tort arises when a fiduciary breaches the duty of loyalty and appropriates someone else's intellectual property rights, such as patent, trademark, copyright, trade secret, or goodwill.
- Note: This type of conduct is often addressed in non-compete and non-disclosure agreements. These agreements establish a contractual right. This is in addition to any common law rights to seek redress in tort for such conduct.
- Example: An employee downloading an employer's client list (that is a trade secret) with the purpose of opening her own business would constitute wrongful appropriation.
How do you feel about the tort of intentional interference with contractual relations? Does the tort conflict with valid business practice? Why or why not? Who do you think this cause of action is meant to protect?
ABC, Inc., is a competitor of 123, Inc.? ABC knows that 123s contract with Supplier Corp is instrumental to its business operations. ABC offers Supplier Corp a substantial sum of money to breach its contract with 123, Inc. ABC does not plan on doing business with Supplier Corp. What are 123s legal options and why?
- Intentional interference torts with prospective economic advantage arises when there is a business relationship between the plaintiff and a third party and the defendant does something to ruin that business relationship. The elements of that tort include:
- An economic relationship between the plaintiff and a third party containing the probability of future economic benefit to the plaintiff.
- Knowledge by the defendant of the existence of the relationship.
- Intentional acts on the part of the defendant designed to disrupt the economic relationship between the plaintiff and the third party.
- Actual disruption of that economic relationship.
- Damages to the plaintiff proximately caused by the acts of the defendant.
In the example from the practice question, 123 Inc. can bring a cause of action against ABC Inc. for a tort of intentional interference with prospective economic advantage between them and the third party. ABC has caused them damages due the loss of business relationships.
- Tort Law (Intro)
- What are Torts?
- What are the types of torts?
- Assault and Battery?
- Intentional Infliction of Emotions Distress?
- Invasion of Privacy?
- False Imprisonment?
- Malicious Prosecution?
- Defamation and 1st Amendment Considerations?
- Intentional Interference with Contractual Relations?
- What is Negligence?
- Negligence A Duty of Care?
- Negligence Breach of Duty of Care?
- What are common defenses to negligence actions?
- What is Strict Liability?
- Strict Liability Causes of Action Examples
- Strict Products Liability
- What defenses exist to strict product liability actions?
- Compensatory damages?
- Punitive damages?
- Treble Damages