Legal Definitions - tortious interference with contractual relations

Tortious interference with contractual relations occurs when a third party, who is not part of an existing contract, intentionally acts to cause one of the contracting parties to break their agreement, resulting in harm to the other contracting party.

To establish this legal claim, several key 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 induce or persuade one of the contracting parties to breach the contract.
• The contract must actually be breached as a result of the third party's actions.
• The breach must cause damage or harm to the non-breaching party.

Here are some examples to illustrate this concept:

• Example 1: Employee Poaching

  Imagine Tech Solutions Inc. has a valid employment contract with its lead software engineer, Sarah, which includes a clause stating she cannot work for a direct competitor for two years after leaving. Innovate Corp., a rival company, is aware of Sarah's contract with Tech Solutions. Innovate Corp. actively and aggressively recruits Sarah, offering her a significantly higher salary and benefits package, specifically to entice her to break her non-compete agreement and bring her expertise to their team. Sarah accepts Innovate Corp.'s offer, breaching her contract with Tech Solutions. As a result, Tech Solutions suffers financial losses due to the loss of a key employee and potential exposure of proprietary information.

  How this illustrates the term: Innovate Corp. is the third party that intentionally induced Sarah (one contracting party) to breach her employment contract with Tech Solutions Inc. (the other contracting party), causing damage to Tech Solutions.

• Example 2: Supplier Sabotage

  Consider "The Daily Grind" coffee shop, which has an exclusive one-year contract with "Bean Roasters Co." for all its specialty coffee beans. "Brew Haven," a competing coffee shop, learns about this exclusive arrangement. Wanting to disrupt The Daily Grind's supply chain and gain an advantage, Brew Haven offers Bean Roasters Co. an exorbitant sum to immediately terminate its contract with The Daily Grind and supply beans exclusively to Brew Haven instead. Bean Roasters Co., swayed by the lucrative offer, breaches its contract with The Daily Grind. The Daily Grind is then left without its primary coffee supplier, leading to a temporary closure and significant loss of business while it scrambles to find a new source.

  How this illustrates the term: Brew Haven is the third party that intentionally interfered with the contract between The Daily Grind and Bean Roasters Co., causing Bean Roasters Co. to breach its agreement and resulting in financial harm to The Daily Grind.

• Example 3: Real Estate Deal Disruption

  Suppose Mr. Henderson has a signed purchase agreement to buy a specific commercial property from Property Holdings LLC. The contract includes a clause that the sale is contingent on Mr. Henderson securing financing within 60 days. Ms. Albright, a rival developer who also wanted the property, learns about Mr. Henderson's contract. She then intentionally contacts Mr. Henderson's bank and spreads false, damaging information about his financial stability and business acumen, specifically to make the bank deny his loan application. The bank, influenced by Ms. Albright's false statements, denies Mr. Henderson's financing, causing his purchase agreement with Property Holdings LLC to fall through.

  How this illustrates the term: Ms. Albright is the third party who intentionally interfered with the contractual relationship between Mr. Henderson and Property Holdings LLC by causing Mr. Henderson to fail to meet a contractual condition (securing financing), thereby preventing the contract from being completed and causing Mr. Henderson to lose the property.