Business contracts are meant to create clear obligations between the parties involved. Problems can arise, however, when someone outside the agreement intentionally interferes and causes one party to stop performing or otherwise disrupts the relationship.
California law may allow a business to pursue a tortious interference claim in certain situations. But a lost customer, failed deal, or aggressive competitor does not automatically create a lawsuit. Specific legal elements must be present.
What Is Tortious Interference With a Contract?
Tortious interference with a contract generally occurs when a third party knows about an existing contract and intentionally takes action that causes the contractual relationship to be breached or disrupted.
This differs from a typical breach of contract claim. A breach usually involves one of the parties that signed the agreement failing to meet its obligations. Tortious interference focuses on the conduct of someone outside that contractual relationship.
For example, if Company A has a contract with a supplier and Company B intentionally takes steps to cause that supplier to stop honoring the agreement, Company A may have grounds to examine whether tortious interference occurred.
What Must You Prove in California?
To establish intentional interference with contractual relations in California, a plaintiff generally must show:
- A valid contract existed between the plaintiff and another party
- The defendant knew about that contract
- The defendant intentionally acted to cause a breach or disruption
- The contractual relationship was actually breached or disrupted
- The plaintiff suffered damages as a result
These elements are reflected in California’s civil jury instructions for intentional interference with contractual relations.
Simply knowing that another company has a contract is not enough. The conduct must be intentional and connected to an actual disruption of the contractual relationship.
What Are Some Examples of Tortious Interference?
Tortious interference can arise in many types of business disputes. Depending on the circumstances, examples may include a competitor pressuring a supplier to abandon an existing agreement or a third party knowingly persuading a customer to break a contract.
Other situations might involve someone providing false information to disrupt an established business relationship or a former business associate deliberately interfering with existing customer or vendor agreements.
The facts matter. Legitimate business competition is not necessarily tortious interference simply because another company loses revenue or a customer.
Does the Contract Have to Be Completely Broken?
Not necessarily. California law recognizes claims involving an actual breach or disruption of the contractual relationship.
That distinction can matter when the interference does not cause a party to completely abandon the contract. Conduct that meaningfully prevents, delays, or disrupts performance may still warrant legal review depending on the circumstances.
Tortious Interference vs. Prospective Economic Advantage
Tortious interference with a contract centers on an existing contractual relationship. Intentional interference with prospective economic advantage generally concerns an expected future economic relationship, such as a probable business opportunity that has not yet become an enforceable contract.
The legal requirements also differ. California requires independently wrongful conduct for an intentional interference with prospective economic advantage claim, making the distinction between the two claims important.
What Damages May Be Available?
A business pursuing a tortious interference claim must be able to show that it suffered harm because of the interference.
Depending on the facts, damages may involve lost revenue, lost profits, added business expenses, or other economic losses that can be tied to the disrupted contract. The amount and type of damages will depend heavily on the agreement and the financial effect of the interference.
What Should a Business Do If Someone Is Interfering With a Contract?
When interference is suspected, preserving evidence early can be important. Businesses should consider keeping copies of contracts, emails, text messages, correspondence, and records showing how the relationship changed.
Other useful steps may include:
- Documenting when the suspected interference began
- Keeping records of lost revenue or additional expenses
- Preserving communications with the other contracting party
- Avoiding retaliatory conduct that could complicate the dispute
- Consulting a business litigation attorney before the problem escalates
An attorney can also help determine whether the circumstances support tortious interference, breach of contract, another business tort, or multiple potential claims.
Speak With a California Business Litigation Attorney
Interference with an important contract can affect revenue, operations, and valuable business relationships. Determining whether that conduct is legally actionable requires a close look at the agreement, what the third party knew, the actions taken, and the resulting harm.
Stone & Sallus represents businesses in commercial disputes involving tortious interference, breach of contract, business torts, and related claims. If another person or company has interfered with one of your contractual relationships, our attorneys can evaluate the circumstances and help you understand your legal options.
Contact Stone & Sallus to discuss your business dispute with an experienced California business litigation attorney.
