Legal Definitions - interference with a contractual relationship

Interference with a contractual relationship, also known as tortious interference with contractual relations, occurs when a third party intentionally and improperly causes one party to a valid contract to breach that contract, resulting in financial harm to the other contracting party.

For a claim of interference with a contractual relationship to succeed, the party claiming harm (the plaintiff) typically must demonstrate the following:

• A valid and enforceable contract existed between two other parties.
• The defendant (the interfering third party) knew about this contract.
• The defendant intentionally acted to induce one of the contracting parties to breach the contract or make its performance impossible or more difficult.
• The contract was actually breached or its performance was disrupted as a direct result of the defendant's actions.
• The plaintiff suffered actual damages (financial losses) due to the breach or disruption.

Here are some examples illustrating this legal concept:

• Example 1: Poaching a key employee with a non-compete clause

  Imagine "Tech Innovations Inc." has a valid employment contract with its lead software engineer, Alex, which includes a non-compete clause preventing him from working for a direct competitor for two years after leaving. "Global Solutions Corp.," a rival company, learns about Alex's contract and his non-compete. Global Solutions Corp. then aggressively recruits Alex, offering him a significantly higher salary and benefits, and explicitly encourages him to violate his non-compete agreement with Tech Innovations Inc. Alex accepts Global Solutions Corp.'s offer, breaching his contract and non-compete with Tech Innovations Inc. As a result, Tech Innovations Inc. suffers significant financial losses due to Alex's departure and the loss of proprietary knowledge to a competitor.

  How this illustrates the term: Global Solutions Corp. is the third party that intentionally interfered with the contract between Tech Innovations Inc. and Alex, causing Alex to breach his agreement, which directly resulted in damages to Tech Innovations Inc.

• Example 2: Disrupting a supply agreement

  A boutique coffee shop, "The Daily Grind," has a long-term contract with "Bean Roasters Co." for an exclusive supply of a rare coffee bean at a fixed price. "Brew Master Cafe," a competing coffee shop, discovers this exclusive supply agreement. Wanting to gain a competitive edge, Brew Master Cafe approaches Bean Roasters Co. and offers them a much higher price for the entire supply of the rare coffee bean, knowing that accepting this offer would force Bean Roasters Co. to breach its contract with The Daily Grind. Bean Roasters Co. accepts Brew Master Cafe's offer and informs The Daily Grind that they can no longer fulfill their contract. The Daily Grind is unable to find an alternative supplier for the rare bean and loses significant business and customer loyalty.

  How this illustrates the term: Brew Master Cafe intentionally induced Bean Roasters Co. to breach its contract with The Daily Grind, causing The Daily Grind to suffer financial harm due to the loss of its unique product supply.

• Example 3: Maliciously preventing a property sale

  Ms. Chen has a signed contract to sell her antique vase to Mr. Davies for a specific amount. Ms. Chen's neighbor, Mr. Thompson, who has a personal grudge against Mr. Davies, learns about the sale agreement. Out of malice, Mr. Thompson falsely tells Ms. Chen that Mr. Davies has a history of defaulting on payments and that his check will likely bounce, urging her not to complete the sale. Believing Mr. Thompson's false statements, Ms. Chen backs out of the deal with Mr. Davies. Mr. Davies, who had already arranged for specialized shipping and insurance for the vase, suffers financial losses and the disappointment of the failed purchase.

  How this illustrates the term: Mr. Thompson intentionally interfered with the contract between Ms. Chen and Mr. Davies through false and misleading statements, causing Ms. Chen to breach the agreement, and Mr. Davies suffered damages as a result.