When a business owner enters into a formal or informal agreement that will benefit their company, they do not usually expect an outside party to interfere with that relationship. If a third party interferes with a contract or business relationship, it may be tortious interference in a business relationship.
Some examples of actionable interference may include convincing a shared supplier to renege on a contract or a third party interrupting the sale of property to a business. If a third party unfairly interferes with a business contract or relationship and causes damage, a tortious interference claim may be a viable option.
The focus of a tortious interference claim is to remedy the wrongful conduct of a non-party to an existing contract or other type of business relationship.
What Happens When a Third Party Interferes?
When facing tortious interference, the remedy is found in contract and tort law. Contract law specifically applies to claims between parties that already have a preexisting agreement. A tortious interference claim can apply to the acts of a business or individual with which you do not have an agreement.
Types of Tortious Interference
Two types of business relationships can be subject to interference by a third party:
Interference With Existing Contractual Relationships
Tortious interference with an existing contractual relationship relies on the existence of a business agreement or contract. When a contract already exists, and a third party wrongfully interferes with its terms, a business attorney will need to prove the following elements to bring a successful tortious interference claim:
- A contract exists between the business and another individual or business.
- The contract was valid.
- An outside (third) party had knowledge of this contract.
- The outside party purposefully and wrongfully disrupted the contractual relationship.
- The outside party’s interference with the contract caused harm to the relationship.
The situation is a bit different when a formal contract is not involved. For example, a business may be in the middle of negotiating the terms of a contract that would result in an increase in revenue. If an outside party interferes with the negotiation process and the contract is subsequently taken off the table, the business may have a claim against that outside party.
Interference With Prospective Economic Advantage
Tortious interference with prospective economic advantage occurs when a third party or another individual or entity with outside influence interferes with an informal relationship that could create an expectation of economic advantage. To lodge a claim for interference with prospective economic advantage, the following elements must be proven:
- The business had a relationship with another business or individual.
- An outside (third) party knew this relationship existed.
- The outside party purposefully and by wrongful means disrupted that business relationship.
- The outside party’s interference with the business relationship caused harm.
Improper conduct by an outside party that affects business relationships and/or contractual agreements can include:
- Breach of fiduciary duty
- Economic pressure
- Fraud
- Initiating lawsuits (civil or criminal)
- Misrepresentation
- Threats and physical violence
Actions That Are Independently Tortious
Some of the above acts may be considered “independently tortious” in Texas when the actions are the type that could get an individual sued under tort law. The determining factor in the claim will be if the third party’s actions were improper, depending on the third party’s motivations as well as how direct or indirect their behavior was to the interference.
Whether or not one’s actions rise to the level of being independently tortious may also depend on the interests of the third party and whose agenda the third party is attempting to advance. If there was a preexisting relationship between the business and the third party, and the third party had the motivation to harm the business, that will be taken into account as well.
Proving Tortious Interference in Court
Proving to a court that a third party intentionally interfered in a business relationship or contract is complicated. The plaintiff’s business lawyer must present robust evidence that the defendant acted in a way that was purposely meant to cause harm by using their knowledge of the contract.
The attorney and their client must show that the following conditions are met:
A Valid Contract or Economic Expectation Existed
By presenting the contract itself (or a draft, if the document was not completed at the time of the interference), the plaintiff can begin establishing their case. In addition, testimony from the other parties to the contract can support the claim that the defendant knowingly and wrongfully interfered with it.
The Defendant Had Knowledge of the Contract
The plaintiff will need to demonstrate evidence that the defendant had knowledge of the contract between the parties. If they were unaware of the relationship, their actions may not rise to the standard of interference. A careful and thorough investigation by an experienced business dispute attorney can build a solid case that shows foreknowledge.
The Defendant Demonstrated an Intent to Interfere
The next element to prove is that the defendant used their knowledge with the intent to interfere with or disrupt the contract. It is crucial to show they meant to slow or stop the business relationship. Their reasons may have been to cause harm to the plaintiff or to improve their potential relationships with the other parties in the contract.
Regardless of the background purpose, the plaintiff must show the defendant’s intent to interfere to move the case forward.
Proof of the Interference or Wrongful Act
Along with knowledge and intent, the plaintiff must show that the defendant did something intentionally wrong to interfere with the contract. There are many business activities that may harm another company’s profits that are not knowingly and intentionally malicious. For example, running ads in a competitive market is not inherently wrongful, but doing so in a manner that misrepresents the plaintiff’s goods or services may be.
Proof of the Plaintiff’s Damages
After showing the existence of a contract and the defendant’s knowledge of it, intent, and wrongful action to interfere with the relationship, the claimant must present evidence of their damages. A party affected by tortious interference with contract will have damages including the economic and non-economic losses they experienced as a result of the defendant’s actions.
Tortious Interference Damages
As the victim of tortious interference in Texas, there are different types of losses you may be able to recover. Expert testimony may be required to prove up some types of damages, as well as specialized presentation of forensic evidence. An experienced business litigation attorney will have the resources needed to hire the experts required to prove your case.
Some of the damages that can be awarded for tortious interference in a business relationship include:
Economic Loss
A company that has been damaged by tortious interference can claim all the financial losses the business has documented resulting from the economic impact of the attack. This includes loss of existing profits, future contracts, and other economic benefits the plaintiff will no longer realize.
They may also request compensation for expected profits and benefits, which would not have been lost without interference from the third party. Because the lawsuit is brought under tort law, the plaintiff also has standing to demand relief for emotional distress damages to address the owners’ concerns and mental anguish.
Finally, the affected business should seek compensation for the damage inflicted to its reputation, community standing, customer goodwill, and credit rating.
Future Profit Loss
In situations where the business interference results in a significant decrease in anticipated profits, the plaintiff can request restitution. This may include incidents where the interfering party defamed the claimant’s business or products or involve the claimant receiving other contracts that were then not honored or paid for work performed as a result of the interference.
Punitive Damages
Punitive damages are intended to harshly punish particularly egregious acts of interference or those carried out with malice. Not only are these damages meant to have a substantial financial impact on the liable party, but they serve as a warning to others who may consider engaging in similar actions.
Tortious Interference Statute of Limitations
In Texas, there is a statute of limitations that limits the amount of time you have to file a lawsuit related to tortious interference. You have two years from the day the alleged interference with a contract or business relationship occurred. Hiring an experienced business attorney will be critical to a successful outcome in your case.
Get Help With Tortious Interference In Your Business Relationship and Contact Feldman & Feldman Today
If someone has attempted to interfere in your business relationships, you will need qualified and highly-skilled commercial litigation attorneys on your side to successfully protect your rights and the future of your business. At Feldman & Feldman, we are prepared to examine your case and devise a powerful strategy aimed at achieving the best possible outcome for you.
Contact our office today to schedule a consultation and learn more about your legal rights and remedies in a tortious interference claim.