Define: Intentional Interference With Contractual Relations

Intentional Interference With Contractual Relations
Intentional Interference With Contractual Relations
Quick Summary of Intentional Interference With Contractual Relations

Intentional interference with contractual relations refers to a legal concept where a third party intentionally disrupts or interferes with an existing contractual relationship between two parties. This interference can be in the form of inducing one party to breach the contract, causing financial harm to the other party, or preventing the contract from being performed. The injured party can seek legal remedies, such as damages, against the interfering party for their intentional actions.

Full Definition Of Intentional Interference With Contractual Relations

Intentional interference with contractual relations, or tortious interference with contracts, is a legal concept in which a third party intentionally disrupts a contractual relationship between two other parties. This overview looks at the components of a tort, the available defences, the legal remedies, and notable case law, primarily from British law.

Elements of the Tort

To establish a claim for intentional interference with contractual relations, the claimant must typically prove the following elements:

  1. Existence of a Valid Contract: A legally binding contract between the claimant and a third party must be signed.
  2. Knowledge of the Contract: The defendant must know of the existence of the contract.
  3. Intentional Interference: The defendant must have intentionally acted in a way that interferes with the contractual relationship.
  4. Causation: The defendant’s interference must have caused harm to the claimant, often in the form of a breach of contract or loss of a contractual benefit.
  5. Damages: The claimant must have suffered actual damages due to the interference.

Existence of a Valid Contract

The claimant must first establish the existence of a valid and enforceable contract. This involves proving that a legally binding agreement was in place, which includes an offer, acceptance, consideration, and the intention to create legal relations. Contracts can be written or oral, but the claimant must provide evidence of the contract’s terms and conditions.

Knowledge of the Contract

The defendant must be aware of the contract’s existence. This knowledge need not be detailed; general awareness of the contractual relationship suffices. If the defendant is unaware of the contract, they cannot be held liable for intentional interference.

Intentional Interference

The defendant’s interference must be intentional. This does not necessarily mean that the defendant acted maliciously but purposefully engaged in actions they knew would likely interfere with the contract. This could involve persuading a party to breach the contract, providing incentives to terminate the contract, or engaging in conduct that makes it impossible to perform the contract.

Causation

The claimant must demonstrate a causal link between the defendant’s interference and the harm suffered. This involves showing that the interference directly led to a breach of contract or other detrimental outcomes. The interference must be the proximate cause of the harm, meaning that the harm was a foreseeable result of the defendant’s actions.

Damages

Finally, the claimant must have suffered actual damages due to the interference. These damages can include financial losses, such as lost profits, additional costs incurred, or other economic harm resulting from the breach or termination of the contract.

Defences to Intentional Interference

Several defences are available to defendants accused of intentional interference with contractual relations. These include:

  1. Justification: The defendant may argue that their actions, such as protecting a legitimate business interest or exercising a legal right, were justified.
  2. Lack of Intent: The defendant may contend that they did not intentionally interfere with the contract or were unaware of its existence.
  3. Absence of Causation: The defendant might argue that their actions did not cause the breach or harm alleged by the claimant.
  4. Privilege: In some situations, such as legal advice from a solicitor or actions taken in the public interest, the defendant’s actions may be privileged.

Justification

A defendant can argue that their interference was justified under certain conditions. This can include scenarios where the defendant acted to protect a legitimate business interest or where the interference was a reasonable and lawful exercise of their rights. For instance, a business competing for a contract may argue that its actions were part of fair competition rather than intentional interference.

Lack of Intent

If the defendant can demonstrate that they did not have the requisite intent to interfere with the contract, this can serve as a strong defence. This could involve showing that the interference was accidental or that the defendant was unaware of the contractual relationship.

Absence of Causation

The defendant might also challenge the causation element by arguing that their actions did not directly cause the breach of contract or the harm suffered by the claimant. This defence may be successful if the breach or harm occurred regardless of the defendant’s actions.

Privilege

Certain actions are considered privileged and may not constitute intentional interference. For instance, if a solicitor gave legal advice that led to a breach of contract in good faith and within the scope of legal representation, the advice may be privileged.

Remedies

Remedies for intentional interference with contractual relations aim to compensate the claimant for the harm suffered and may include:

  1. Compensatory Damages: These are intended to compensate the claimant for losses from interference. This can include lost profits, additional expenses, and other economic harms.
  2. Punitive Damages: In rare cases, punitive damages may be awarded to punish the defendant for particularly egregious conduct.
  3. Injunctions: The court may issue an injunction to prevent the defendant from further interfering with the contractual relationship.
  4. Specific Performance: Although less common, the court may order specific performance, requiring the third party to fulfil their contractual obligations.

Compensatory Damages

The primary remedy for intentional interference is compensatory damages, which aim to make the claimant whole by covering the financial losses directly resulting from the interference. This could involve lost revenue from a breached contract, additional costs incurred in mitigating the breach, or other measurable economic harms.

Punitive Damages

Punitive damages are awarded less frequently in British law but may be considered in cases where the defendant’s conduct was malicious or egregious. These damages serve as a deterrent to prevent similar conduct in the future and to punish the wrongdoer.

Injunctions

An injunction is a court order requiring the defendant to cease specific actions interfering with the contractual relationship. This remedy is useful in preventing ongoing or future interference and protecting the claimant’s interests.

Specific Performance

In some instances, the court may order specific performance, compelling the third party to adhere to the terms of the contract. This remedy is typically reserved for situations where monetary compensation is inadequate to address the harm suffered by the claimant.

Notable Case Law

Several cases illustrate the application of the tort of intentional interference with contractual relations in British law. These cases provide insight into how courts assess the tort’s elements and the available defences and remedies.

Lumley v Gye (1853)

The landmark case of Lumley v Gye established the tort of intentional interference with contractual relations in English law. In this case, the defendant persuaded an opera singer to breach her contract with the claimant and perform at his theatre instead. The court held that the defendant’s actions intentionally interfered with the claimant’s contractual relationship, setting a precedent for future cases.

OBG Ltd v Allan (2007)

In OBG Ltd v Allan, the House of Lords clarified the distinction between the torts of inducing breach of contract and causing loss by unlawful means. The case involved receivers who were appointed without proper authority, leading to the termination of contracts. The court held that for a claim of inducing breach of contract, the claimant must prove that the defendant’s conduct was intended to cause the breach and that the breach resulted from the defendant’s actions.

Mainstream Properties Ltd v Young (2005)

Mainstream Properties Ltd v Young addressed the issue of whether a fiduciary can be held liable for intentional interference with a contract. In this case, company directors were found to have diverted business opportunities to a rival company. The court concluded that the directors’ actions constituted intentional interference with the company’s contractual relations, reinforcing the principle that fiduciaries owe a duty not to interfere with their principals’ contracts.

Douglas v Hello! Ltd (2007)

In Douglas v Hello! Ltd, the Court of Appeal considered whether a magazine’s publication of unauthorised photographs interfered with a couple’s exclusive contract with another magazine. The court recognised that interference with contractual relations could extend to indirect actions that undermine the contractual benefits, such as undermining the exclusivity of a publication agreement.

Conclusion

Intentional interference with contractual relations is a well-established tort in British law, providing a remedy for parties harmed by a third party’s intentional actions that disrupt a contractual relationship. Claimants must demonstrate the existence of a valid contract, the defendant’s knowledge of the contract, intentional interference, causation, and resulting damages. Defendants may rely on defences such as justification, lack of intent, absence of causation, and privilege. Remedies include compensatory and punitive damages, injunctions, and, in rare cases, specific performance.

The tort serves as a crucial mechanism for protecting contractual relationships from unwarranted interference, ensuring that parties can rely on the sanctity of their agreements. The evolution of case law, from Lumley v Gye to more recent decisions, highlights the ongoing importance of this tort in addressing the complexities of modern contractual relationships and commercial interactions.

Intentional Interference With Contractual Relations FAQ'S

Intentional interference with contractual relations refers to a legal claim where a third party intentionally disrupts or interferes with an existing contractual relationship between two parties, causing harm or damages.

To establish a claim for intentional interference with contractual relations, the following elements must typically be proven:

Knowledge of the contract by the interfering party.

Damages suffered by the non-breaching party as a result of the interference.

Yes, a third party can be held liable for intentional interference with contractual relations even if they did not directly benefit from the interference. The key factor is whether the interference was intentional and unjustified, regardless of the third party’s personal gain.

A claim for intentional interference with contractual relations can be brought against both individuals and business entities. As long as the elements of the claim are met, any party that intentionally interferes with a valid contract can be held liable.

The types of damages that can be sought in a claim for intentional interference with contractual relations may include compensatory damages, which aim to compensate the non-breaching party for the harm suffered, as well as punitive damages, which are meant to punish the interfering party for their intentional misconduct.

Yes, a claim for intentional interference with contractual relations can be brought even if the contract was not yet fully performed. As long as there was a valid and enforceable contract in place, and the interference caused harm or damages, a claim can be pursued.

Yes, there are several defences that a party accused of intentional interference with contractual relations may raise. These defences may include showing that the interference was justified, that the interfering party had a legitimate business interest, or that the contract was invalid or unenforceable.

Yes, a claim for intentional interference with contractual relations can be brought against a government entity if the elements of the claim are met. However, it is important to note that there may be additional procedural requirements or limitations when suing a government entity.

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Disclaimer

This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.

This glossary post was last updated: 11th June 2024.

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