While it is true that robust competition is acceptable and universally beneficial, some business relationships are afforded protection from third-party interference, notwithstanding whether a formal contractual relationship exists between a business and its customer.
Two Types of Impermissible Interference
There are two types of potential claims that govern interference with business relationships.
1. Tortious Interference with Contractual Relations
Assuming a contract exists between a business and its customer, the law protects the contractual relationship such that a third-party who intentionally interferes with the contractual relationship may be liable for damages if the contract between a business and its customer is breached.
To assert such a claim premised upon tortious interference with contractual relations, four elements must be proven:
- the existence of a valid contract between the business and its customer;
- the Defendant’s knowledge of the contract;
- the Defendant’s intentional procuring of a breach of the contract between the business and its customer; and
- damages sustained by the business as a result of that breach.
The key to a claim for tortious interference with contractual relations is element number three. It typically requires conduct by the third-party that intentionally induces the customer to breach the contract with the business.
2. Tortious Interference with Prospective Business Relations
Assume for a moment that a given business did not have a formal contract with its customer, but enjoyed a long-term relationship with that customer and there was a reasonable expectation that the relationship would continue. Now assume that a third-party once again interferes with the relationship between the business and its long-term customer, and then the business loses that customer relationship. In that scenario, there may be a basis to hold the interfering third-party liable for the loss of the relationship between the business and its customer, despite the fact that no contract existed.
To assert a claim premised upon tortious interference with prospective business relations, a Plaintiff must allege the following:
- a business relationship with a customer;
- the Defendant interfered with that relationship;
- the Defendant acted for the sole purpose of harming the Plaintiff, or used dishonest, unfair or improper means to interfere with the relationship; and
- As a result, the Plaintiff sustained damages (the loss of the business relationship with its customer).
The key to a claim for tortious interference with prospective business relations claim is element three. Because the law does not protect a non-contractual relationship as much as it protects a contractual relationship, the Defendant’s misconduct must rise to the level of a crime or independent tort (such as physical violence, fraud or misrepresentation, threats of civil suits and criminal prosecutions, etc.). If the Defendant acted solely to preserve its economic self-interest, no viable claim will exist.
What To Do Next
If you have been accused of interfering with a contractual or business relationship, or a third-party has interfered with one of your contracts or business relationships, call us to discuss. We can explain the necessary details and help you resolve the matter.
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