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Business Related Torts

Inducing Breach of Contract

Inducing breach of contract was is a tort. Examples of the underlying inducement of breach of contract giving rise to a recognition of a remedy include breach of an employment contract, a conspiracy between a buyer and seller of real estate to deprive a broker of his commission, inducing a businessman to violate a covenant not to compete, and two air conditioning subcontractors deliberately failing to perform subcontracts causing the general contractor a delay in his work thereby incurring excess costs and liquidated damages.

Interference with Prospective Advantage

These cases cover a diversity of fact situations. A few examples are as follows: (a) Defendant induced plaintiff's creditors to demand immediate payment and to refuse to extend credit in order to destroy the plaintiff's business; (b) Defendant intentionally circulated a pamphlet containing false and misleading statements to deny plaintiff the opportunity for election to office; (c) Plaintiff was a real estate broker given an exclusive right to sell certain land. After the exclusive right expired, the owner placed a sign on the property reading "For Sale—Contact Your Local Broker." The purchaser contacted plaintiff who supplied information concerning the property, and the sale was consummated directly with the seller denying the broker his commission. The court acknowledged that no contract existed between plaintiff and the owner found that, nevertheless, the plaintiff had pleaded "a colorable economic relationship between the seller and plaintiff with the potential to develop into a full contractual relationship." Generally, in order for there to be liability for interference with prospective advantage, the defendant must have had knowledge of the prospective advantage and intended to interfere with it. This is similar to the tort of inducing breach of contract. The plaintiffs must also show that the contract which otherwise would have been performed was breached or abandoned by reason of the wrongful act of the defendant and that such wrongful act was the proximate cause of the breach. But for the tortious interference, there must be a reasonable probability that the prospective advantage would have been obtained.

Miscellaneous Causes of Action

In addition to the inducement of breach of contract and intentional interference with prospective business advantage, there are additional causes of action based on negligent interference with contractual relations, invasion of privacy, intentional infliction of emotional distress (an action against a person who by outrageous conduct and without privilege intentionally subjects another to severe mental or emotional suffering), negligent infliction of emotional distress.

Trade Libel

Trade libel is the intentional disparagement of a company's products or services resulting in damage to the company's economic interests. The tort is committed when the defendant publishes a false statement which induces customers not to purchase the plaintiff's goods or services, where the defendant knew that the statement was false (or had a reckless disregard of its falsity), which causes a pecuniary loss to the plaintiff. The trade libel is distinguished from business defamation in that the latter disparages the reputation of the company as opposed to the company's goods or services. The disparaging statement must be published to a third party, and can be written or oral or implied by conduct. Pecuniary loss must be the loss of particular customers rather than a general decline in business. There are several affirmative defenses, the principal of which is privilege. Competitors have a conditional privilege of criticizing the competitor's products based on personal taste or preference. The privilege does not extend to false statements of purported facts or statements made with malice or without good faith. Damages are those actual damages which will compensate the plaintiff for detriment proximately caused by the libel. Punitive damages are also recoverable if special damages are proved and if the statements are made with malice or oppression. Injunctive relief in trade libel cases have also been granted. A general insurance policy insuring a company against personal injury committed while conducting business should insure against trade libel as well as business defamation.