What is “tortious” interference with a contract?
Tortious interference with a contract occurs when a party improperly disrupts a contractual relationship between other parties. A business has a claim for tortious interference with contract when it can show: (1) the existence of a valid contract; (2) the defendant’s knowledge of that contract; (3) that the defendant intentionally caused a breach of that contract without justification; and (4) resulting harm. The first element makes clear that a plaintiff must show an existing contractual relationship, not a prospective one. A separate claim exists for tortious interference with a prospective economic relationship.
Litigation over tortious interference with a contract most often focuses on whether the defendant unjustifiably caused a contractual breach. Courts are careful to distinguish between legitimate competition and tortious interference with a contract. Ultimately, for a defendant to be held liable, its conduct must go beyond typical ethical behavior in the marketplace. Advertising one’s goods or services is permissible, even if the targets of that advertising have preexisting contractual relationships with others. But businesses should be wary of directly targeting a party specifically in the hopes that it will breach an existing contract.
A defendant accused of tortious interference with contract can respond by showing its actions were justified. Justification is a defense, however, and the defendant bears the burden of proving it. A defendant can meet that burden in different ways, such as by showing, for example, that it acted to protect its own legal or financial stake in the breaching party’s business. If the defendant makes such a showing, then the plaintiff can prevail only by showing that the defendant’s conduct was otherwise illegal or motivated by malice.
If a plaintiff proves tortious interference with contract, it can generally recover for both the benefits it expected to receive under the contract and the harms it suffered because of the tortious interference. For example, where a defendant tortiously interfered with a contract between a plaintiff and its supplier, the potential damages could include the cost of finding alternative supplies, the expected profits from any business the plaintiff lost as a result of the breach, and the harm the breach and interference caused to the plaintiff’s reputation. Punitive damages may also be available if the conduct is deemed sufficiently outrageous. As the name suggests, punitive damages are intended to punish the defendant and deter others from acting similarly.
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