Tortious Interference with a Contract or Potential Contractual Relationship

Contracting parties have the right to perform their obligations without interference from others. Interference with a contract may give rise to tortious interference with contract performance or tortious interference with prospective contractual relations.

Tortious interference with contract performance is defined in Section 766 of the Restatement (Second) of Torts as follows:

One who intentionally and improperly interferes with the performance of a contract (except a contract to marry) between another and a third person by inducing or otherwise causing the third person not to perform the contract is liable to the other for the pecuniary loss caused by the third person’s failure to perform the contract.

Tortious interference with prospective or anticipated contractual relations is “[I]nducing or otherwise causing a third person not to enter into or continue the prospective relation or (b) preventing the other from acquiring or continuing the relationship” in Section 766B of the Restatement (Second) of Torts.

The plaintiff must prove that the defendant caused a third party not to enter into a contractual relationship with the plaintiff, or prevented the plaintiff from entering into their relationship to establish a claim of tortious interference with prospective contractual relations. In addition, the plaintiff must demonstrate that the defendant’s actions were both intentional and improper.

In actions involving claims of tortious interference with contract performance or tortious interference with prospective contractual relations, determining whether a defendant’s conduct was improper is a critical issue. When ascertaining improper conduct, courts will typically consider whether the plaintiff’s interest in an existing contract merits more protection than a less easily defined interest in a prospective or anticipated contract.

There are seven factors listed in Section 767 of the Restatement (Second) of Torts that determine if the defendant’s conduct is improper:

1. The nature of the defendant’s behavior.
2. The motivation of the defendant.
3. Plaintiff’s interests, with which defendant’s conduct interferes.
4. The interests that the defendant is attempting to advance.
5. The social interests in balancing the defendant’s conduct relative to the interference claimed by the plaintiff.
6. The “proximity or remoteness” of the defendant’s conduct in relation to the plaintiff’s claimed interference.
7. The plaintiff and defendant’s relationship.

When claiming tortious interference against a competitor it is more difficult to prove. To protect competition intentional interference with a prospective contractual relationship is not improper if the relationship involves competition between the defendant and the plaintiff. The defendant does not use “wrongful means,” and the defendant is not restraining trade but is instead competing with the defendant plaintiff.