While competition is expected and encouraged in the commercial arena, there is a strict boundary between fair competition and unlawful interference with a business relationship. Critically, if a third-party intentionally disrupts a business relationship of yours and causes you to suffer economic harm, they may be held liable for tortious interference. It’s important to be aware of what constitutes tortious interference so you can protect your business from this type of wrongful conduct.
Types of Unlawful Interference in a Business Relationship
Unlawful interference with a business relationship can come in two forms in New York. These include tortious interference with contractual relations and tortious interference with prospective economic relations.
Tortious Interference with Contractual Relations
Tortious interference with contractual relations is a cause of action meant to protect existing business relationships. Specifically, this tort can arise when a competitor induces a customer or client to breach a contract with you. To prevail in a claim, you must be able to establish the following elements:
- A valid contract existed between you and the party
- The defendant had knowledge of the contract
- The defendant intentionally procured a breach of the contract without justification
- There was an actual breach of contract
- You suffered damages due to the defendant’s wrongdoing
Notably, tortious interference with contractual relations claims depends on the intent element. The defendant must have intentionally induced the client or customer to break their contract.
Tortious Interference with Prospective Economic Relations
Unlike tortious interference with contractual relations (which has to do with existing business relationships), tortious interference with prospective economic relations can arise in connection with potential business opportunities. This claim is meant to safeguard business relationships that are likely to occur or continue — it does not require that a finalized contract be in place. To prevail in a claim for tortious interference with prospective business relations, you must be able to prove the following:
- You had an opportunity to enter into a business relationship with a customer or client
- The defendant knew about the business relationship
- The defendant intentionally interfered with the business relationship
- You would have entered into a business relationship with the customer or client, but for the defendant’s interference
- The defendant used wrongful means to interfere with the business relationship
- You suffered damages as a result
Importantly, you must be able to establish that the defendant acted with the sole purpose of harming your business. Under New York law, a party cannot be found to have acted with the sole purpose of harming someone else’s business if they were merely promoting their own.
Is Interference in a Business Relationship Ever Permissible?
Interfering in a business relationship isn’t always unlawful. It’s essential to understand that competition is permitted, as long as the competitor is acting out of their own legitimate economic interest — and not malice. A competitor may be permitted to attract a client, but they may not use fraud, misrepresentation, or defamation to cause the client to breach their contract with you. The difference between permissible competition and unlawful interference has to do with the defendant’s intent and the methods they used to pursue the business relationship.
Contact an Experienced New York Business Attorney
If a third-party has wrongfully interfered with an existing or prospective business relationship, or you have been accused of tortious interference, it’s essential to have the representation of a skillful business attorney. Offering knowledgeable counsel and aggressive advocacy, Barnes & Barnes, P.C. provides trusted legal services to business owners across Long Island. Contact us at (516) 673-0674 to schedule a consultation.
