Healthy competition in the economy is beneficial for everyone, and it is through established relationships businesses form with each other that can help support any business’ growth.
However, a third party can threaten a contract or prospective business relationship by tortious interference, jeopardizing the relationship between the provider and its client.
When this happens, businesses need strong representation to protect them from disaster.
What Is Tortious Interference?
Generally speaking, tortious interference occurs between two parties to a contract or a prospective business relationship when an unrelated third party causes interference with that relationship. The third party can cause one party to break the contract, giving rise to a related breach of contract claim, or do something else to harm the business relationship.
If there is tortious interference with a contract, the harmed business can seek compensation from the third party if:
- A contract existed between two parties
- The third party willfully and intentionally interfered with the contract
- The third party’s interference causes a party to break the contract or does something to disrupt one party’s ability to uphold the contract
- The other party suffers damages, usually economic, because of the breach of contract
Tortious interference with a business relationship does not require a valid contract between parties. In these instances, to establish tortious interference with a prospective relation, the harmed business can seek compensation from the third-party if:
- There was a reasonable probability that the harmed party would have entered into an agreement with the prospective business
- The third-party intentionally interfered with that prospective business relationship
- The third-party’s conduct proximately caused the aggrieved party’s damages
- The harmed party suffered actual damages
Examples of Tortious Interference
Many companies often believe a third party has tortiously interfered with their customer or client and therefore should prevail on a claim for tortious interference. The reality is that a claim for tortious interference must be properly investigated and proved, which is often difficult without experienced trial attorneys in this area of the law.
An example of tortious interference occurs when Company A and Company B enter into a contract. Company A hires Company B to deliver a widget at $1 per widget, and Company A signs a contract for Company B to make 100 widgets. Company C comes along and discovers the potential sale and needs the 100 widgets Company B has manufactured under the contract. Company C believes Company A will sell the widgets for $5 per widget and offers Company A $2 per widget for all of the 100 widgets. Company A agrees, breaks the contract with Company B, and sells the widgets to Company C. Under this scenario, Company B would have a cause of action for tortious interference against Company C.
Businesses often run into this issue if one party offers below market prices to induce a breach, if another party threatens them or uses blackmail to force them to violate a contract, or if a third party makes it impossible for a business to hold up their end of a contract by refusing to transport goods or perform other necessary services.
The Justification Defense
One reason these claims are harder to win than they first appear is the justification defense. Under Texas law, a third party can defeat a tortious interference claim by showing its conduct was privileged or justified, meaning it acted to protect its own legal rights or a good-faith claim to a colorable legal right, even if that claim later turns out to be mistaken. If a court decides as a matter of law that the third party had a legal right to do what it did, the defense is established and the third party’s motive no longer matters.
This is why so many tortious interference disputes turn on the specific facts and the paper trail. A competitor pursuing a legitimate business interest is generally not liable, while one who uses improper means such as fraud, threats, or knowingly inducing a breach for no lawful reason may be. Sorting a valid claim from ordinary hard-nosed competition is exactly the analysis an experienced litigator brings to the table.
Damages and Deadlines
A business that proves tortious interference in Texas may recover actual damages, which typically means the economic loss caused by the interference. Depending on the facts, interest, court costs, and in cases involving malicious or otherwise aggravated conduct, exemplary (punitive) damages may also be available. Because damages in these cases are often disputed and can require expert testimony to establish, careful documentation of the loss is critical.
Timing matters too. In Texas, both tortious interference with an existing contract and tortious interference with prospective business relations carry a two-year statute of limitations, which generally begins to run when the interference occurs or when the harmed party knew or should have known of the injury. Waiting too long can bar an otherwise strong claim, so it is worth speaking with an attorney as soon as you suspect interference.
Resolving Tortious Interference
The law regarding tortious interference isn’t necessarily complex but proving such claims requires careful attention and evidence. Disputes of this nature require a skilled commercial litigation attorney and litigator to help you obtain compensation.
At Callender Bowlin, our attorneys are here to help you with tortious interference claims. Because we understand how damaging these types of claims can be, we offer creative fee arrangements for our clients. Call us today to see how we can help.
