If a business or individual commits tortious interference, it means they've knowingly interfered with a contract between two other parties, causing a harmful result (or "tort") for at least one of these other parties.
The state of Virginia has enacted tortious interference laws for two reasons:
- First, to protect contracts between companies and individuals.
- Second, to promote healthy economic competition in business.
In this article, we'll talk about how Virginia's tortious interference laws can help you fight unfair business practices from other organizations.
We'll also give some examples of cases that don't qualify as tortious under Virginia law.
Contents
- Defining "Tortious Interference"
- Examples of Tortious Interference
- Tortious Interference Exceptions
- Conclusion
Defining "Tortious Interference"
The term "tortious interference" is often used in cases where a third party interferes with the business of another party, resulting in some form of damages.
As noted above, tortious interference can be defined as:
Essentially, any action from a third party that wrongfully interferes with the business or contracts of two other parties can count as tortious interference.
In order to make a claim of tortious interference, the accuser must show that four elements are present in the case:
- The existence of a valid contractual relationship or business expectancy between two parties.
- Prior knowledge of that contract or business expectancy by a third party.
- Intentional interference by the third party inducing or causing a breach or termination of the contract or expectancy.
- Resulting damages to the party whose contractual relationship has been disrupted.
Basically, to prove that there was intentional interference, there must be a contract and the third party must know about it.
Further, the third party must set out to induce one company to break or alter the contract, causing damage to the primary company (the plaintiff, or person who is filing the suit).
Examples of Tortious Interference
Most cases of tortious interference occur when a third party attempts to harm a competitor by interfering with a pre-existing contract or relationship. In this way, breach of contract is the most common cause of interference.
As with many business law matters, it's easier to understand tortious interference by looking at examples.
The two most common examples of tortious interference are interference with a contract and interference with a business expectancy.
Tortious Interference with a Business Contract
Tortious interference with a business contract is the most basic type of tort in this category.
As explained above, this tort happens when a third business or individual does something which significantly impacts a contract between two other businesses or individuals.
For example, consider the following scenario:
Business A is a wholesale seller that supplies Business B with cooking oil.
They have a contract that says Business B will only buy their oil from Business A, and in return Business A will offer them a lower price for the oil.
A new business, Business C, comes into town and starts aggressively marketing their oil at Business B, even after Business B tells them that they exclusively buy from Business A.
As a direct result of this aggressive marketing, Business B begins buying from the new business on the side, thus breaking their agreement with Business A and costing Business A a large amount of revenue.
In this scenario, Business A may sue Business C for tortious interference, since:
- Business A had an exclusive contract with Business B,
- That business C knew about and intentionally breached,
- Resulting in damages (loss of revenue) to Business A.
For this reason, Business A would likely be able to win their case as long as they are able to sufficiently prove all four of these elements in court.
Tortious Interference with an Employment Contract
Tortious interference can also apply to contracts between employers and employees.
There are two common situations that result in tortious employment interference:
- When, because of false information given by a third party, a business terminates the employment of one of their employees.
- In the case where a former employee violates a non-compete agreement that they had with their former employer.
While the first scenario is rather self-explanatory, the second point is actually a bit more nuanced.
Essentially, a "non-compete" agreement is when an employee leaves a company and agrees not to start a job with another business that directly competes with their former employer.
These agreements are common in industries that rely on trade secrets or staying one step ahead of the competition at all times.
If a third party knows about a non-compete agreement, but still hires the employee to do work that is against that agreement, the original business may file a tortious interference suit against them.
This is because, like in our previous business contract example, a third party is interfering with the contract between two other parties.
Tortious Interference with a Business Expectancy
Finally, tortious interference cases can also be based on contracts that haven't been fully realized yet.
However, these cases are much harder to prove in court.
Essentially, tortious interference with a business expectancy is when two companies or individuals are hoping to do business together, but don't yet have a formal agreement.
The tort then comes from a third party intentionally and knowingly breaking up these negotiations in an unfair way.
To prove interference, the plaintiff would have to show concrete evidence that the two companies were planning to do business.
They would also have to prove that the third party knew of their relationship and set out to interfere.
Finally, and most importantly, if the third party used “improper methods” to break the relationship between the two businesses, they could be found to have caused tortious interference.
These improper methods would include things such as threats of violence, slander, bribery, or fraud.
Tortious Interference Exceptions
Interfering with non-binding contracts is generally not a type of tortious interference.
In some instances, a third party may be guilty of meddling, but is not technically guilty of tortious interference.
As seen in our examples above, and the title of this article, the business practices must be inherently unfair or underhanded for a tortious interference suit to be successful.
We'll list two of the common exceptions below.
Interfering with Non-Binding Contracts
Contracts that allow one or both parties to terminate at any time are a general exception to this rule.
These are called "terminable at will" contracts, and (usually) can be broken for any or even no reason.
If a third party induces one of the primary parties to break a non-binding contract, there is rarely a case for tortious interference.
However, if that party uses improper methods to intimidate one of the parties to break the contract, they could still be charged with interference.
For example, say you're working two jobs. You're fired unexpectedly from one job, and your boss who fired you contacts your other job with information about your termination. Your second job then fires you as well.
Since most employment contracts in Virginia (such as this one) are terminable at-will, the only case where this line of actions would count as tortious interference would be if the first employer used improper methods (blackmail, false claims, etc...) to convince the other business to fire the employee.
Because the first job never acted inappropriately (i.e. because they only informed the other job of your termination) the defendant's case for tortious interference would most likely fail in court.
Meddling is Not Interfering
Virginia law requires several things to happen before a third party’s involvement becomes illegal interference.
As stated above, the company must know about the contract, must set out to interfere, and their interference must cause damage to the other company.
However, and most importantly, the interference must have occurred due to improper actions.
Illegal actions, fraud, unethical conduct, or other similar acts are a necessary requirement for a tortious interference case.
In other words:
- If a third party interferes with your business, but doesn't break the original business relationship, it's probably not tortious interference.
- If a third party meddles in your business, but you can't prove that they knew about the contract when they set out to interfere, it's probably not tortious interference.
- Finally, if a third party interferes with your business, but does so using an accepted practice of the free market, it's probably not tortious interference.
Remember, meddling in another party's business does not constitute tortious interference by itself. There must be additional factors at play.
Because of the many nuances involved, you should always speak with an experienced business attorney before filing a tortious interference claim.
Conclusion
Tortious interference is a unique area of common law that can have a large impact on how your business fits into your unique market.
The Virginia Code includes tortious interference laws to protect existing contracts and agreements between businesses.
However, the state must also respect healthy competition in the free market.
To convict a third party of tortious interference, the plaintiff must prove several essential elements, as noted above.
The most important of which is the fact that the interference must include some improper method, such as illegal activity, threats, or unethical conduct.
If you believe your or your business has been adversely affected by an instance of tortious interference, you should speak to an attorney immediately.
Further Reading
- 11 Ways an Attorney Can Help You Start a Small Business
- Virginia Business Conspiracy Laws and Protecting Your Brand
Other Resources
- Tortious Interference with Contract or Business Expectancy: An Overview of Virginia Law — A publication in the Virginia Bar Association News Journal from 2006 which provides a wonderful top-down overview of how tortious interference works in Virginia. The article begins on page nine.
