Contracts are the pillars of most business and personal relationships. If a third party intentionally interferes with an otherwise valid contract between two parties, it may result in monetary losses, ruined reputations, and legal conflicts. This is where the theory of Intentional Interference with Contractual Relations (IICR) becomes relevant.
In this article, you will find out what IICR is, the essential facts needed to establish it, typical examples, possible defenses, and the types of damages recoverable. Whether you are a business owner, employee, or contracting party, knowledge of your rights can assist you in protecting your interests.
What Is Intentional Interference with Contractual Relations?
Intentional Interference with Contractual Relations (IICR) occurs when a third party deliberately disrupts a valid contract between two other parties, causing one of the parties to suffer financial harm. This interference can take various forms, such as persuading one party to breach the contract, making it impossible for one party to perform their obligations, or intentionally harming the contractual relationship.
Key Elements of IICR
To successfully prove a claim of Intentional Interference with Contractual Relations, the plaintiff must establish the following elements:
1. Existence of a Valid Contract
The plaintiff must show that a legally enforceable contract existed between two parties. This contract can be written, oral, or implied, as long as it meets the basic requirements of contract law (offer, acceptance, consideration, and mutual consent).
2. Defendant’s Knowledge of the Contract
The defendant must have known that the contract existed. This knowledge can be established through direct evidence (such as written communication) or through reasonable inference (such as knowledge of a well-known business agreement).
3. Intentional Interference by the Defendant
The defendant must have intentionally taken actions that disrupted or caused a breach of the contract. This interference can take many forms, including:
- Persuading one party to break the contract.
- Providing false information that leads to a breach.
- Making performance under the contract impossible.
4. Actual Breach or Disruption of the Contract
The interference must result in an actual breach or disruption of the contract. If the contract remains unaffected, the plaintiff cannot succeed in an IICR claim.
5. Damages Resulting from the Interference
The plaintiff must demonstrate that they suffered measurable damages as a direct result of the interference. This can include financial losses, reputational damage, or other harm.
Common Examples of Intentional Interference with Contractual Relations
Here are some common examples of Intentional Interference with Contractual Relations
Example 1: Competing Business Interference
A restaurant owner learns that a rival restaurant has a contract with a popular supplier. The owner offers the supplier a better deal to stop doing business with the rival, causing the rival restaurant to breach its supply contract.
Example 2: Employee Poaching
A company intentionally persuades an employee of a competitor to break their non-compete agreement and join them instead, leading to a breach of the employee’s contract.
Example 3: False Claims Leading to Breach
A third party provides false information to one party in a contract, causing them to believe that the other party has breached their obligations, leading to termination of the agreement.
Example 4: Blocking Contract Performance
A landlord, aware of a lease agreement between a tenant and a sub-tenant, takes steps to prevent the sub-tenant from accessing the property, causing a breach of the sublease.
Proving Damages in IICR Cases
In an Intentional Interference with Contractual Relations claim, the plaintiff must show that they suffered damages as a direct result of the interference. Common types of damages include:
- Financial Losses: Lost profits, costs incurred due to breach, or other economic harm.
- Reputational Damage: Harm to the plaintiff’s business reputation due to the breach.
- Emotional Distress: In some cases, if the interference led to personal distress, compensation may be available.
Defenses Against IICR Claims
Defendants in IICR cases may use several defenses, including:
1. No Knowledge of the Contract
The defendant may argue that they were unaware of the existence of the contract between the plaintiff and the other party.
2. Justification or Privilege
If the defendant acted to protect a legitimate business interest or acted in good faith, they may claim that their interference was justified. For example, a business trying to protect its own contracts may have a legitimate reason to take action.
3. No Intentional Interference
The defendant may argue that their actions were not intentional or that any disruption was accidental.
4. No Actual Breach or Disruption
If the contract was not actually breached or affected by the defendant’s actions, the plaintiff cannot succeed in their IICR claim.
Understanding the Difference: IICR vs. Negligent Interference
It is important to distinguish Intentional Interference with Contractual Relations from Negligent Interference with Contractual Relations:
- IICR: Requires intentional actions aimed at disrupting a contract.
- Negligent Interference: Involves disruption caused by careless or negligent behavior rather than deliberate intent.
Real-World Case Study
Here is an example of real-world Intentional Interference with Contractual Relations:
Case Example: Employee Poaching Gone Wrong
A technology company, TechCo, has a contract with a senior engineer that includes a non-compete clause. A rival company, InnovateTech, offers the engineer a higher salary and convinces them to breach their contract and join InnovateTech.
TechCo sues InnovateTech for Intentional Interference with Contractual Relations, arguing that InnovateTech was aware of the engineer’s contract and intentionally induced them to break it.
The court finds that InnovateTech knowingly caused the breach and awards TechCo damages for lost profits and the cost of hiring a replacement engineer.
How to Protect Yourself from IICR
Whether you are a business owner, a contractor, or an individual, there are steps you can take to protect yourself from IICR claims:
- Use Clear Contract Terms: Ensure that your contracts clearly define the obligations of each party and the consequences of breach.
- Communicate in Writing: Document any communications related to contractual agreements, especially when third parties are involved.
- Educate Employees: Make employees aware of the importance of respecting existing contracts with clients, partners, and vendors.
- Seek Legal Advice: If you suspect that someone is attempting to interfere with your contracts, consult an attorney immediately.
How an Attorney Can Help
If you believe you are the victim of Intentional Interference with Contractual Relations, an experienced attorney can help you by:
- Evaluating the strength of your claim.
- Gathering evidence to prove the elements of IICR.
- Negotiating with the responsible party for a fair settlement.
- Representing you in court if necessary.
About the Author
Neil Bhartia
Neil Bhartia isn’t your typical, stuffy attorney that you see on TV. While some have their sights exclusively on money and treat their clients like a number, Neil takes a personal interest in every single client he has. As an empath, Neil understands that people that seek legal help are typically in an involuntary, and stressful situation, and he goes out of his way to diffuse the stress and educate clients on each every detail of the legal process.
