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Avoiding Legal Landmines When You Compete for
Business:
The "Interference" Torts
By: Justene M. Adamec Justene@worldnet.att.net
Let's suppose you open a widget manufacturing company and you
want to sell some widgets. Most people who buy widgets are
already buying them somewhere and it's your job to convince them
to buy from you. Your glorious ads have not done the trick and
you decide to get more aggressive and set up meetings with the
Chief Executive Officers of various widget-buyers. You land the
account of National Widgie Co. Before you came along, National
Widgie Co. bought its widgets from your competitor, Joe
Widgetmaker. A month after you start selling to National Widgie
Co., Joe Widgetmaker sues you for interference with contract and
interference with prospective economic advantage. Now what?
This brief article introduces you to those two torts. Only
California law is presented.
- The elements of intentional interference with contract
are:
- the existence of a contractual relationship,
- knowledge by the defendant of the relationship,
- intentional acts to disrupt the relationship,
- actual disruption
- damages to the plaintiff.
- The elements of intentional interference with prospective
business advantage are similar and the differences are
highlighted:
- an economic relationship between
the plaintiff and a third party containing
a probable future economic benefit or advantage
to plaintiff
- knowledge by the defendant of the existence of
the relationship
- intentional, wrongful acts to
disrupt the relationship
- actual disruption
- damages to the plaintiff.
In California, the courts have recognized that a contract is
worthy of more protection than another economic relationship
between two parties. Thus, in 1995, the California Supreme Court
made clear that in order to interfere with prospective economic
advantage, the act that interferes must itself be wrongful. The
exact parameters of "wrongfulness" are not clear yet
but some examples are misuse of trade secrets and libel.
Liability for either tort would be the amount of actual
damages caused and punitive damages, which, as the name suggests,
are an additional sum designed to punish the defendant. There are
many defenses to the tort which are beyond the scope of this
article.
In the example which began this article, we
would need to know whether Joe Widgetmaker had a contract with
National Widgie Company, how much you knew about their
relationship, and whether you did anything more than meet with
National Widgie Company's Chief Executive Officer. The facts as
presented above, without more, would not result in liability.
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