Other torts - Claims based on intentional interference with business relations, and defenses

Learning Outcomes

After reading this article, you will be able to identify the elements of intentional interference with business relations, distinguish between interference with contract and prospective advantage, and apply the main defenses tested on the MBE. You will be able to analyze fact patterns for these torts and recognize common pitfalls in MBE questions.

MBE Syllabus

For MBE, you are required to understand the law governing intentional interference with business and economic relations. This includes the ability to:

  • Recognize the elements of intentional interference with contract and with prospective economic advantage.
  • Distinguish between interference with existing contracts and interference with future business opportunities.
  • Identify valid defenses and privileges to these torts.
  • Apply these rules to fact patterns involving business competition, contract breaches, and third-party conduct.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

  1. Which of the following is NOT a required element for a claim of intentional interference with contract?
    1. Existence of a valid contract
    2. Defendant’s knowledge of the contract
    3. Defendant’s intent to interfere
    4. Actual breach of contract by the defendant
  2. A business competitor persuades a supplier to stop dealing with a rival, knowing the rival has an exclusive supply contract. The supplier breaches. What is the best defense for the competitor?
    1. The competitor acted in good faith
    2. The competitor was protecting a financial interest
    3. The competitor was a stranger to the contract
    4. The competitor was a direct party to the contract
  3. Which defense is LEAST likely to succeed in an action for interference with prospective economic advantage?
    1. The defendant was a bona fide competitor
    2. The defendant acted to protect a financial interest
    3. The defendant used threats of violence
    4. The defendant relied on truthful information

Introduction

Intentional interference with business relations covers tort claims where a defendant intentionally disrupts another’s contractual or economic relationships. These torts are frequently tested on the MBE, especially in scenarios involving business competition, contract breaches, and third-party conduct. Understanding the elements and defenses is critical for answering MBE questions accurately.

Types of Claims

There are two main types of intentional interference with business relations:

  1. Interference with Contract: Disrupting an existing, valid contract between two parties.
  2. Interference with Prospective Economic Advantage: Disrupting a reasonable expectation of future business or economic benefit.

Key Term: Intentional Interference with Contract A tort where the defendant intentionally causes a third party to breach or not perform an existing, valid contract with the plaintiff.

Key Term: Intentional Interference with Prospective Economic Advantage A tort where the defendant intentionally disrupts the plaintiff’s reasonable expectation of future economic benefit or business, even if no contract exists.

Elements of Intentional Interference with Contract

To establish a claim, the plaintiff must prove:

  1. Existence of a valid, enforceable contract between the plaintiff and a third party.
  2. Defendant’s knowledge of the contract.
  3. Intentional and improper interference by the defendant inducing breach or making performance impossible.
  4. Actual breach or disruption of the contract.
  5. Damages to the plaintiff resulting from the interference.

Key Term: Improper Interference Conduct by the defendant that is not justified or privileged and is intended to disrupt the plaintiff’s contract or business expectancy.

Elements of Interference with Prospective Economic Advantage

This tort protects business opportunities where no contract exists. The plaintiff must show:

  1. A reasonable expectation of economic benefit or future business with a third party.
  2. Defendant’s knowledge of the expectancy.
  3. Intentional and improper interference by the defendant.
  4. Actual loss of the expected benefit.
  5. Damages to the plaintiff.

Defenses and Privileges

Defendants may avoid liability by showing their conduct was privileged or justified. Common defenses include:

  • Competition Privilege: Bona fide competition is generally not actionable if lawful means are used.
  • Protection of Financial Interest: Interference to protect a legitimate financial or contractual interest may be privileged.
  • Truthful Information: Providing truthful information or honest advice is not improper interference.
  • Justification: The defendant acted to protect their own legal rights or interests.

Key Term: Competition Privilege A defense allowing a competitor to interfere with another’s prospective business advantage if done through lawful, non-coercive means.

Worked Example 1.1

A supplier has an exclusive contract to provide goods to Retailer A. Retailer B, a competitor, knows of this contract and offers the supplier a better deal, persuading the supplier to breach. Retailer A sues Retailer B for intentional interference with contract. Is Retailer B liable?

Answer: Yes. Retailer B knew of the contract, intentionally induced a breach, and caused damages to Retailer A. The competition privilege does not apply to interference with an existing contract.

Worked Example 1.2

A business owner expects to win a major contract after positive negotiations. A competitor, using false rumors, convinces the potential client not to contract with the owner. The owner sues for interference with prospective economic advantage. What result?

Answer: The owner can recover. The competitor’s use of false information is improper interference, and the owner lost a reasonable business expectancy.

Exam Warning

On the MBE, be careful to distinguish between interference with an existing contract (which requires a valid contract) and interference with prospective advantage (which does not). The competition privilege is a defense only to the latter, not to interference with an existing contract.

Revision Tip

Remember: Lawful competition is a defense to interference with prospective business, but not to interference with an existing contract.

Key Point Checklist

This article has covered the following key knowledge points:

  • Intentional interference with business relations includes interference with contract and with prospective economic advantage.
  • Interference with contract requires a valid contract, knowledge, intent, improper interference, breach, and damages.
  • Interference with prospective advantage requires a reasonable expectancy, knowledge, intent, improper conduct, loss, and damages.
  • Defenses include competition privilege (for prospective advantage), protection of financial interest, and truthful information.
  • The competition privilege does not apply to interference with an existing contract.

Key Terms and Concepts

  • Intentional Interference with Contract
  • Intentional Interference with Prospective Economic Advantage
  • Improper Interference
  • Competition Privilege
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