Intentional Interference with a Contract in Virginia
Disputes over contracts do not always include parties to the contract in question. In the United States, our entire economic system is based upon the notion that competition is good. I fully agree that fair competition is good for the consumer and our market as a whole. However, should a third party be entitled to intentionally interfere with the contract relations of others? Here, most courts are united that the competition should be fair and not abusive, fraudulent or illegal.
Intentional Interference with a Contract (“IIC”) is a tort that has been known in the past as “inducing breach of contract.” One who intentionally interferes with another’s contractual rights is subject to tort liability. Chaves v. Johnson, 230 Va. 112 (1985). In order to successfully pursue a complaint of Interference with Contract, the plaintiff must be prepared to demonstrate two main elements.
Is the contract terminable at will?
If the parties to the contract can void the contract at any time, the contract is “terminable at will.” If a contract is not terminable at will, the parties to the contract have more rights and responsibilities. The result is that third party interference becomes less permissible the more that the contract is not terminable at will. If the parties can simply void the contract at any time, the offended party will have a much more difficult time showing damages resulting from the third party interference.
Elements of Intentional Interference with Contract
As a threshold matter, the court must find that there is a valid contractual relationship which is not terminable at will and knowledge of the relationship on the part of the third party (interferor). The two main elements of IIC are that the action of the third party must be (1) intentional and (2) improper.
“The requisite elements for a prima facie showing of a tortious interference with a contract that is not terminable at will are: ‘(1) the existence of a valid contractual relationship or business expectancy; (2) knowledge of the relationship or expectancy on the part of the interferor; (3) intentional interference inducing or causing a breach or termination of the relationship or expectancy; and (4) resultant damage to the party whose relationship or expectancy has been disrupted.’” Chaves, 230 Va. at 120.
If the plaintiff is unable to show each of these elements, he/she is not likely to survive a demurrer from the defendant.
What is improper?
If all of the other elements of IIC are met, much of the determination of the court will hinge on exactly what constitutes “improper” methods. Here, Virginia case law provides examples of what has been held improper in the past.
One common example would be fraudulent misrepresentation or defamation. Example: The third party calls up one of the parties to the contract (A) and tells them that the other party (B) is in dire financial situation and will not be able to meet their obligations under the A-B contract, with the intention that party “A” break the contract. Of course, this is only improper if the representation is untrue and done intentionally.
Other “improper” methods may include: violence, threats or intimidation, bribery, unfounded litigation, fraud, misrepresentation or deceit, defamation, duress, undue influence, misuse of inside or confidential information, or breach of a fiduciary relationship. Top Service Body Shop v. Allstate Ins. Co. 582 P.2d 1365, 1371 n.11 (1978)
The court will also explore whether the method of interference violates a trade or professional standard. In this instance, expert witnesses may be required to show just what the standard is.
The Last Step: Showing Harm
In order to recover, the plaintiff will have to show that they have suffered harm from the disruption in the relationship. The more facts showing that the plaintiff has lost from the intentional interference, the more money the plaintiff they will be entitled to recover in a lawsuit. Remember, the plaintiff bears the burden of proof as to the amount of damages (dollar amount).
Contact my office today to schedule an initial consultation.
If you feel that a third party has intentionally and improperly interfered with your contractual relations, contact my office today. I am available to meet with potential clients by appointment. During our consultation, we can discuss the specific facts of your case and what remedies may be available to you.
Ryan C. Young | Richmond, Virginia Attorney | Small Business Law