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Intentional Interference with Economic Relations

Cite this article as: Jason Mance Gordon, "Intentional Interference with Economic Relations," in The Business Professor, updated January 9, 2015, last accessed March 29, 2020, https://thebusinessprofessor.com/knowledge-base/intentional-interference-contractual-relations/.
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Intentional Interference with Economic Relations
This video explains the intentional tort of Intentional Interference with Economic Relations.

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What is Intentional Interference with Economic or Contractual Relations?

This is a tort based in common law rather than statute. There are several categories of conduct that may violate common law rights of individuals:

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.

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.

Interference with Perspective 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 vender to harm the vendor may constitute an 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 good will.

  • 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.

Discussion: 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?

Practice Question: ABC, Inc., is a competitor of 123, Inc.? ABC knows that 123’s 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 123’s legal options and why?

Proposed Answer

  • Intentional interference torts with prospective economic advantage arises when there is a business relation 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, the 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 relationship. https://www.upcounsel.com/legal-def-intentioanal-interference-with-prospective-economic-advantage

Proposed Answer

Swan, Sarah Lynnda, A New Tortious Interference with Contractual Relations: Gender and Erotic Triangles in Lumley v. Gye (August 29, 2011). Harvard Journal of Law and Gender, Vol. 35, 2012. Available at SSRN: https://ssrn.com/abstract=1919102

Long, Alex B., Attorney Liability for Tortious Interference: Interference with Contractual Relations or Interference with the Practice of Law?. Georgetown Journal of Legal Ethics, Vol. 18, p. 471, 2005. Available at SSRN: https://ssrn.com/abstract=692749

Palfreyman, Eric, Boundaries of Tortious Interference with a Contract (August 26, 2014). Available at SSRN: https://ssrn.com/abstract=2487668 or http://dx.doi.org/10.2139/ssrn.2487668

McChesney, Fred S., Tortious Interference with Contract Versus ‘Efficient’ Breach: Theory and Empirical Evidence. Journal of Legal Studies, Vol. 28, No. 1, January 1999. Available at SSRN: https://ssrn.com/abstract=161456

Neethling, J. and Potgieter, Johan, Delictual Liability for Negligent Interference with a Contractual Relationship – Minister for Safety and Security v Scott (February 13, 2015). Journal of Contemporary Roman-Dutch Law, Vol. 78, p. 162-169, 2015. Available at SSRN: https://ssrn.com/abstract=2643410

Long, Alex B., Attorney Liability for Tortious Interference: Interference with Contractual Relations or Interference with the Practice of Law?. Georgetown Journal of Legal Ethics, Vol. 18, p. 471, 2005. Available at SSRN: https://ssrn.com/abstract=692749

Long, Alex B., The Business of Law and Tortious Interference. St. Mary’s Law Journal, Vol. 36, No. 925, 2005. Available at SSRN: https://ssrn.com/abstract=748285

Vincent, Charles B., The Handling of a Claim for Tortious Interference with an At-Will Employment Contract in the Delaware State Courts versus the Delaware District Court (2011). Delaware Law Review, Vol. 12, p. 121, 2011. Available at SSRN: https://ssrn.com/abstract=1836924

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