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The AR Group

Contracts. Contract Breaches & Tortious Interference. Oh My!

By Jeanette Eirich

Most people understand that when entering into a contract they agree to do something that they otherwise would not be obligated to do and that in exchange for doing that, someone else is obligated to do something in return. So, when one party to the agreement breaks his promise, the other side can generally seek remedies. While remedies can and should be a discussion in and of themselves (and we will reserve that for another blawg), for purposes of this blawg, make note, contract breaches can often include monetary damages and can sometimes include specific performance of the act promised.

But what happens when a contract breach is not the result of actions by either party to the contract, but the acts of a third party?

Tortious or wrongful interference with a contract occurs when one of the parties to a contract is prohibited from performing the obligations or promises under the contract by the actions of another (generally a non-party and non-contract beneficiary). Tortious interference is considered just that — a “tort” which in common parlance means a “wrongful act” and the remedies available against a tortfeasor or the wrongdoer are broader and greater than remedies available under contract law. The act leading to the contract breach must be an intentional act and the tortfeasor must intend for the act to cause the breach. The primary goal of tortious interference laws is to permit parties to contract with one another and encourage them to honor their promises without outside influence. Unintentional interference is not actionable.

So what does all of this mean in “English” you ask?

To illustrate an example of tortious interference: John and Dalie contracted for John to sell Dalie 100 cases of wine at $100 per case, or $10,000. A day before the sale transaction was scheduled to occur, Jennifer, a competing wine distributor, told John that Dalie is undercutting John by only paying $100 per case. Jennifer also tells John that she knows that the wine sells for $200 per case. John then refused to perform under the contract, breaching his contract with Dalie by refusing to sell Dalie the wine unless she paid $200 per case.

In this instance, Dalie could sue Jennifer for tortious interference with her contract because Jennifer’s actions incented John to breach, causing Dalie harm.

Under a theory of tortious interference, Dalie can only hold Jennifer liable for tortious interference if she can prove that:

  • A valid contract existed between John and her
  • Jennifer had knowledge of the contract
  • Jennifer intended to convince or induce John to breach his contract with Dalie
  • Jennifer was not privileged or authorized to induce the breach
  • The contract was in fact breached
  • Dalie suffered measurable damages

Since interference in this manner is a tort, there are several remedies available to Dalie or such person that are not permitted in exclusively contract cases, including punitive damages (if malice is proven) and injunctive relief prohibiting the interfering party from benefitting (Jennifer could not make a sale to John).

 

SMART TIP: The circumstances of any breach of contract can be complex and the realm of potential remedies confusing. If you have suffered loss due to a breach of contract, we encourage you to seek legal counsel to advise you of your recovery rights. Failure to bring a timely claim can limit or prohibit recovery.