As a business owner, your contracts are the lifeblood of your company’s profitability and your livelihood. Written contracts are the best way to ensure that the parties your business deals with directly live up to their end of any agreements you enter. What happens, though, when a third party, who is not covered under one of your business’s contracts, meddles in your business’s affairs? In this case, you might have a valid tortious interference claim (officially called economic interference in California).
What is a Tort?
A tort is a civil wrong committed by one party that causes another party to be injured or harmed. For example, many personal injury cases can be thought of as tort cases. Tortious interference is a form of damage caused by someone interfering with a business’s ability to function by impairing its contractual or business relationships with other parties. For example, should someone spread false rumours about your business in order to scare away parties who would otherwise contract with you, that could be considered tortious interference.
Economic Interference Regarding Contracts
Economic interference claims in California may be classified as intentional or negligent. Intentional economic interference occurs when a third party takes actions expected to cause harm to one of the contract’s parties. In other words, the defendant in an intentional economic interference claim intended to cause damage or knew that damage was likely to occur.
Negligent economic interference claims assert that the defendant owed the claimant a particular duty of care that was breached. Additionally, the claimant must show that the harm was measurable and caused by the duty of care breach.
Contractual Relationship vs. Prospective Economic Advantage
Both intentional and negligent economic interference claims are further sorted into one of two types of claim: interference with prospective economic advantage (IWPEA) or interference with contractual relationships (IWCR). IWPEA claims can be intentional or negligent; however, California law only recognizes intentional IWCR; negligent IWCR claims cannot be brought in California.
Each type of economic interference claim has several elements that must be proven by the claimant in order to have a successful claim. In the case of an intentional IWPEA claim, for instance, the claimant must prove that the defendant knew about an economic relationship between two parties that was likely to supply the plaintiff with an economic advantage in the future. The claimant must also show that the defendant intended to disrupt the economic relationship as well as a causal connection between the disruption and any economic harm.
Negligent IWPEA is similar in that the defendant knew or should have known about the economic relationship between the two parties, but in this case failed to exercise a proper duty of care that caused the claimant to miss out on an economic advantage.
Intentional IWCR is nearly identical to intentional IWPEA. In this context, the claimant must show that the defendant knew about the contractual relationship between the two parties and took actions to prevent performance under the contract.
For Example: Inducing breach of contract (IBC) is a common tortious interference (economic interference) claim in California. Let’s say you have a contract with a supplier to provide you with raw dough for your bakery. A rival baker takes extreme action by convincing the supplier to put your deliveries last on its list of priorities, causing you to miss out on sales. This could lead to a valid IBC claim, which is considered an intentional IWCR claim.
Conclusion
The procedure for bringing a claim against a third party for meddling in your business’s contractual or economic relationships can be quite complex. Integrated General Counsel understands these issues thoroughly and can help your business get the compensation and protection you need to thrive. To discuss your options, contact us at 925-399-1529 or visit our website to self-schedule your initial consultation.
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