In today’s competitive marketplace, business disputes are inevitable. Among the most disruptive forms of economic harm is tortious interference, a business tort that arises when a party unlawfully interferes with a contract or an expected business relationship.
Understanding Tortious Interference
Tortious interference occurs when one party intentionally disrupts the contractual or economic relationship between two others, resulting in economic harm. It is distinct from a breach of contract, which occurs between parties to the agreement. Instead, this tort is brought against a third party, someone outside the contract or relationship, who interferes without justification.
There are two types of tortious interference claims:
1. Tortious Interference with Contract
To prevail on a claim of tortious interference with contract under New York law, a plaintiff (the party bring the lawsuit) must prove:
- A valid, enforceable contract existed between the plaintiff and a third party;
- The defendant (alleged wrongdoer) had knowledge of that contract;
- The defendant intentionally and improperly procured a breach of that contract; and
- The plaintiff suffered damages as a result.
Improper means can include fraud, threats, economic coercion, or other unethical conduct. A common example arises when a competitor knowingly induces a customer to break a supply contract by making false claims about the supplier’s ability to perform.
If successful, the plaintiff may recover compensatory damages, including lost profits. Injunctive relief is also available in certain cases to prevent further interference.
2. Tortious Interference with Prospective Economic Advantage
Unlike interference with contract, this tort concerns business relationships that have not yet resulted in a formal agreement. To succeed, a plaintiff must prove:
- There was a reasonable expectation of economic benefit or advantage;
- The defendant knew of that expectancy;
- The defendant’s intentional and wrongful acts interfered with that expectancy; and
- The plaintiff suffered economic harm as a result.
Critically, New York courts require proof that the defendant acted through wrongful means—such as fraud, misrepresentation, or threats. Mere competition or persuasion is not enough. (Source: Carvel Corp. v. Noonan, 3 N.Y.3d 182 (2004)).
Defenses to Tortious Interference
New York recognizes several defenses to tortious interference claims, including:
- Justification: The defendant acted to protect a legitimate economic interest (e.g., enforcing their own contract).
- Privilege: The defendant was exercising a legal right (such as competitive advertising).
- Lack of wrongful means: Especially in prospective advantage claims, if the conduct was fair competition, no liability arises.
- Statute of limitations: Under CPLR § 214(4), tortious interference claims are subject to a three-year limitations period.
Conclusion
Tortious interference claims can have serious legal and financial consequences. Whether you are seeking to enforce your rights after interference, or you’ve been accused of it, understanding the nuances of this tort is essential.
When engaging with parties already involved in business relationships, proceed carefully. If your actions intentionally disrupt a contract or a potential deal, you may face liability, even if no written agreement exists. Consult with one of our experienced attorneys today to evaluate potential exposure or remedies.
Contributions to this blog by Kennedy McKinney.