Legal Definitions - interference with contract

Interference with Contract, more formally known as Tortious Interference with Contractual Relations, occurs when a third party intentionally and improperly causes one party to a contract to breach that agreement, resulting in harm to the other party.

For a claim of tortious interference with contractual relations to be successful, several elements must generally be present:

• There must be a valid, enforceable contract between two parties.
• A third party must know about this contract.
• The third party must intentionally act to induce one of the contracting parties to breach the agreement.
• The contract must actually be breached or its performance made impossible due to the third party's actions.
• The party whose contract was interfered with must suffer damages as a result.

Here are some examples to illustrate this concept:

• Example 1: Poaching a Key Employee

  Imagine Tech Innovators Inc. has a contract with its lead software engineer, Sarah, which includes a strict non-compete clause preventing her from working for a direct competitor for two years after leaving. Global Solutions Corp., a rival company, knows about this non-compete agreement. Despite this knowledge, Global Solutions actively recruits Sarah, offering her a significantly higher salary and a promotion, specifically encouraging her to disregard her contract with Tech Innovators. Sarah accepts the offer and breaches her non-compete clause. Tech Innovators Inc. could sue Global Solutions Corp. for tortious interference with contractual relations because Global Solutions intentionally induced Sarah to breach her existing employment contract, causing financial harm to Tech Innovators.

• Example 2: Disrupting a Supply Chain Agreement

  Green Grocers, a chain of organic food stores, has a long-term contract with Farm Fresh Produce for the exclusive supply of organic berries for their region. Mega Mart, a larger supermarket chain, learns about this exclusive agreement. Wanting to corner the market on organic berries, Mega Mart approaches Farm Fresh Produce and offers them a much higher price for their entire berry harvest, knowing that doing so would make it impossible for Farm Fresh to fulfill its contract with Green Grocers. Farm Fresh accepts Mega Mart's offer and breaches its exclusive supply contract with Green Grocers. Green Grocers could claim tortious interference against Mega Mart because Mega Mart knowingly and intentionally caused Farm Fresh to violate its contractual obligations, leading to a loss of product and potential sales for Green Grocers.

• Example 3: Undermining a Business Partnership

  Artisan Crafts Co. has a contract with a popular online marketplace, E-Boutique, to be the exclusive seller of their handmade jewelry for a six-month promotional period. Creative Gems, a competitor of Artisan Crafts Co., discovers this exclusive arrangement. To harm Artisan Crafts' reputation and sales, Creative Gems contacts E-Boutique and falsely claims that Artisan Crafts' jewelry is mass-produced and not handmade, providing fabricated evidence. Based on these false claims, E-Boutique terminates its contract with Artisan Crafts Co. prematurely. Artisan Crafts Co. could sue Creative Gems for tortious interference because Creative Gems intentionally used deceptive means to cause E-Boutique to breach its contract, resulting in significant financial losses and reputational damage for Artisan Crafts Co.