Business Litigation: Intentional Interference With Contract
Business attorneys must often deal with claims of intentional interference with contract between competitors. Where a breach of contract lawsuit deals with a contract between two parties, a claim of interference with contract deals with a situation where someone who is not a party to the contract is allegedly interfering with that contract.
More specifically, to allege a cause of action for interference with contract, the lawsuit must show that there is a valid contract between the plaintiff and a third party, that the defendant (the alleged interferer) knew about the contract, that the defendant did something intentionally to induce a breach or disrupt the contract, that an actual breach of disruption occurred, and that the plaintiff was damaged by the interference.
In California there is no cause of action for negligent interference with contract (although see the California Supreme Court’s recognition of a cause of action for negligent interference with prospective economic advantage). The acts must be intentional, but the case law does not require that the defendant act with specific intent to interfere. Case law provides that the tort will apply if the actor “knows that the interference is certain or substantially certain to occur as a result of his action. The rule applies … to an interference that is incidental to the actor’s independent purpose and desire but known to him to be a necessary consequence of his action.”
Of course, the mere fact that interference occurs does not end the analysis. The fact that the interference was not desired and purely incidental (as opposed to intentional) can be used to defend against an intentional interference claim. However, if the action is found to be intentional, notice that the tort does not require that the defendant actually even know who the plaintiff is—just that the defendant knew about a contract and intentionally interfered with it.
This business tort also does not require that the contract actually end up being breached (which is labeled a tort to induce breach of contract). Intentional interference with contract can still be brought if the contract is not breached but plaintiff’s performance is made more costly or burdensome.
Because it is a claim of interference with someone else’s contract, a party to the contract cannot be sued for interference with his own contract. That may be a simple breach of contract action. The distinction is important because intentional interference with contract is a business tort and tort remedies can be more onerous than contractual damages.
A party can defend against a claim for interference with contract through certain privileges or justifications. The court engages in a balancing test to determine the nature of the actor’s conduct, the actor’s motive, the interests of those being interfered with, the interests being advanced by the actor, the social interests of each party, the proximity or remoteness of the actor’s conduct to the interference and the relationship of the parties. Overall, a court looks at the reasonableness of the conduct. The various privileges and justifications, and their applicability, have to be the subject of their own article.
Needless to say these privileges and justifications and the factual balancing that is involved in determining their applicability makes business litigation over an allegation of intentional interference with contract claim very fact intensive. Business litigation attorneys have to investigate these claims, analyze the case law and come up with their best analysis, but whether c company did intentionally interfere with another’s contract is rarely a cut and dry issue.
Los Angeles business litigation attorney Laine T. Wagenseller handles commercial litigation on behalf of companies throughout Southern California. Mr. Wagenseller is the founder of Wagenseller Law Firm, a real estate and business litigation firm in downtown Los Angeles. For more articles on business litigation subjects, visit www.wagensellerlaw.com. To contact Mr. Wagenseller, call (213) 286-0371 or email firstname.lastname@example.org.