In the cutthroat business world, businesses and individuals depend so much on their ability to form and sustain economic relationships. But what if a third party deliberately disrupts these relationships even before they can form? That is where Intentional Interference with Prospective Economic Relations (IIPER) comes in.
In this article, you will find out what IIPER is, the basic requirements needed to establish it, typical examples, possible defenses, and the damages you can recover. Knowing IIPER can assist you in safeguarding your business interests and seeking legal recourse if needed.
What Is Intentional Interference with Prospective Economic Relations?
Intentional Interference with Prospective Economic Relations (IIPER) occurs when a third party deliberately takes actions that prevent another party from entering into a potentially beneficial economic relationship or transaction. Unlike Intentional Interference with Contractual Relations (IICR), which involves an existing contract, IIPER deals with potential or anticipated relationships that have not yet been formally established.
Key Elements of IIPER
To successfully prove a claim of Intentional Interference with Prospective Economic Relations, the plaintiff must demonstrate the following elements:
1. An Economic Relationship with Probable Future Benefit
The plaintiff must show that they were engaged in or expecting to engage in an economic relationship with another party that had a reasonable probability of resulting in a financial benefit. This could be a potential customer, a client, a business partnership, or another financial opportunity.
2. Defendant’s Knowledge of the Relationship
The defendant must have been aware of the plaintiff’s potential economic relationship. This knowledge can be established through direct evidence (such as written communication) or through reasonable inference (such as knowledge of a planned business deal).
3. Intentional Acts of Interference by the Defendant
The defendant must have intentionally taken actions designed to disrupt the prospective economic relationship. These actions can include:
- Making false statements to discourage one party from entering into the relationship.
- Using threats, coercion, or intimidation to prevent the relationship.
- Engaging in unethical or illegal conduct that obstructs the relationship.
4. Wrongful Conduct Beyond Fair Competition
The defendant’s interference must be wrongful. This means that their actions must go beyond legitimate business competition and involve unethical, fraudulent, or illegal behavior.
5. Actual Disruption of the Relationship
The plaintiff must show that the defendant’s actions directly caused the disruption of the prospective economic relationship. If the relationship would have failed without the defendant’s interference, the claim cannot succeed.
6. Damages Resulting from the Interference
Finally, the plaintiff must demonstrate that they suffered financial harm or other losses as a result of the interference.
Common Examples of Intentional Interference with Prospective Economic Relations
Here are some common examples of Intentional Interference with Prospective Economic Relations:
Example 1: False Statements to Prevent a Business Deal
A company, TechPros, is in negotiations with a potential client for a lucrative contract. A competitor, InnovateX, falsely informs the client that TechPros is facing financial problems, causing the client to back out of the deal.
Example 2: Sabotaging a Job Offer
An individual is about to receive a job offer from a major company. A former employer, out of spite, provides false and damaging information about the individual to the hiring manager, causing the job offer to be withdrawn.
Example 3: Coercion in Business Partnerships
Two businesses are planning to form a partnership. A third company threatens one of the partners with legal action unless they abandon the partnership, resulting in the partnership being canceled.
Proving Damages in IIPER Cases
In an Intentional Interference with Prospective Economic Relations claim, the plaintiff must prove that they suffered measurable damages as a direct result of the interference. These damages can include:
- Lost Profits: The income or revenue that the plaintiff would have earned if the prospective economic relationship had been completed.
- Lost Opportunities: The loss of potential business relationships or customers.
- Reputational Harm: Damage to the plaintiff’s reputation that prevents future business relationships.
The Difference Between IIPER and IICR
It is important to understand the difference between Intentional Interference with Prospective Economic Relations (IIPER) and Intentional Interference with Contractual Relations (IICR):
- IIPER: Involves interference with a potential or anticipated economic relationship that has not yet been formalized as a contract.
- IICR: Involves interference with an existing, legally enforceable contract.
Defenses Against IIPER Claims
Defendants in IIPER cases can use several defenses, including:
1. Legitimate Business Competition
The defendant may argue that their actions were part of legitimate business competition rather than wrongful interference. For example, offering better pricing or services is considered fair competition.
2. No Knowledge of the Relationship
The defendant may claim that they were unaware of the plaintiff’s prospective economic relationship.
3. No Wrongful Conduct
If the defendant’s actions were lawful and did not involve fraud, defamation, or unethical conduct, they may avoid liability.
4. No Actual Disruption of the Relationship
The defendant may argue that the prospective relationship would have failed regardless of their actions, and that they did not cause any disruption.
Real-World Case Study
Here is an example of a real-world case of Intentional Interference with Prospective Economic Relations:
Case Example: Disrupted Supplier Agreement
A small business, FreshOrganics, is in negotiations with a major supermarket chain to supply organic produce. A competitor, EcoHarvest, learns about this potential deal and falsely claims to the supermarket that FreshOrganics uses harmful pesticides.
As a result, the supermarket decides not to proceed with the deal. FreshOrganics sues EcoHarvest for Intentional Interference with Prospective Economic Relations, arguing that EcoHarvest’s false statements directly caused the loss of the deal.
The court finds in favor of FreshOrganics, awarding them damages for the lost profits they would have earned from the supermarket contract.
How to Protect Yourself from IIPER
If you are a business owner or an individual engaged in business relationships, you can take steps to protect yourself from IIPER:
- Document Negotiations: Keep detailed records of communications with potential clients, partners, or customers.
- Use Non-Disclosure Agreements (NDAs): When negotiating with third parties, use NDAs to prevent confidential information from being shared.
- Monitor Competitor Actions: Be aware of any false or defamatory statements made by competitors.
- Seek Legal Counsel: If you suspect interference, consult with an attorney to determine your options.
How an Attorney Can Help
If you believe that someone has intentionally interfered with your prospective economic relationships, an experienced attorney can:
- Evaluate the strength of your claim.
- Help you gather evidence to prove the elements of IIPER.
- Negotiate a settlement with the responsible party.
- Represent 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.
