Chapter 1-1 Tortious Interference with Existing Contract

• Jurisdiction: United States

1-1 Tortious Interference with Existing Contract

1-1:1 Overview

A party to a contract does not commit a tort by merely breaching that agreement, absent some other duty imposed by law. However, a third party (a non-party to the contract) may incur tort liability when it intentionally interferes with an existing contract of another. A plaintiff will prevail on a cause of action for tortious interference with an existing contract if he can establish that a valid contract exists, that the defendant knew about the contract and intentionally interfered with it, and that the plaintiff suffered damages as a proximate result of the defendant's interference.

1-1:1.1 Related Causes of Action

Tortious Interference with Prospective Business Relations, Breach of Contract, Breach of Covenant not to Compete, Business Disparagement

MUST READ CASES

Prudential Ins. Co. of Am. v. Fin. Rev. Servs., Inc., 29 S.W.3d 74, 77 (Tex. 2000)

ACS Investors v. McLaughlin, 943 S.W.2d 426, 430 (Tex. 1997)

Juliette Fowler Homes, Inc. v. Welch Assocs., 793 S.W.2d 660 (Tex. 1990)

1-1:2 Elements

(1) The plaintiff must show a contract exists that is subject to interference.¹

• A contract which is void, illegal or unenforceable on grounds of public policy cannot validly be the subject of a claim for tortious interference with existing contract.²
• A contract which is voidable but not void may still be the subject of a claim for tortious interference with existing contract.³
• Unenforceability of a contract pursuant to the statute of frauds has been held to eliminate an action for interference with a contract.⁴
• An employment contract terminable at will may or may not be sufficient to support an action for interference with a contract.⁵
• The plaintiff must present evidence that the defendant interfered with a specific contract, beyond simply showing that contracts generally exist.⁶
• A party generally cannot interfere with its own contract, but the corporate agent of the party who is motivated only by his own personal interests can be liable for tortious interference.⁷

(2) The defendant committed a willful and intentional act of interference with the contract.⁸

• The plaintiff must prove that the defendant had actual knowledge of the contract and the plaintiff's interest in it, or sufficient knowledge to lead a reasonable person to believe in the existence of the contract.⁹
• The plaintiff must prove that the defendant committed an act of interference with the plaintiff's contract by intentionally inducing or causing a party to the contract to breach.¹⁰
• A defendant interferes with a contract when the act makes performance more difficult and defendant intends to cause a breach.¹¹
• The defendant's interference with the contract must have been intentional.¹²

(3) The willful and intentional act was a proximate cause of damage.¹³

• to establish tortious interference with contract requires meeting the classic proximate cause test with the component elements of cause in fact and foreseeability.¹⁴

(4) Actual damage or loss occurred to the plaintiff.¹⁵

• The measure of damages for tortious interference is the same as for breach of contract, to put plaintiff in the same economic position as if the contract had not been breached.¹⁶
• Despite the general rule equating tortious interference with contract and breach of contract damages, the rule is not without exception; damages for tortious interference with contract are necessarily limited to damages proximately caused by the act of interference and do not extend to any other breach of the contract that the contracting party happened to commit.¹⁷

1-1:3 Damages and Remedies

1-1:3.1 Actual Damages

Restatement (Second) of Torts § 774A provides:

One who is liable to another for interference with a contract or prospective contractual relation is liable for damages for

(a) the pecuniary loss of the benefits of the contract or the prospective relation;
(b) consequential losses for which the interference is a legal cause; and
(c) emotional distress or actual harm to reputation, if they are reasonably to be expected to result from the interference.¹⁸

1-1:3.1a Pecuniary Loss

The measure of actual damages in tortious interference cases is the same as for breach of contract—to put the plaintiff back in the same economic position he would have occupied had the contract been performed.¹⁹ See Chapter 11.

1-1:3.1b Mental Anguish

Mental anguish damages are recoverable.²⁰

1-1:3.1c Injury to Reputation

Damages are potentially recoverable for actual harm to reputation resulting from the tortious interference.²¹

1-1:3.1d Lost Profits and Loss of Value of a Business

Lost profits are recoverable when they are reasonably calculable.²²

When a plaintiff cannot show his own lost profits with a reasonable degree of certainty, a plaintiff may still be entitled to recover lost profits based upon the amount of profits the defendant realized on the contract.²³

Where the result of interference is to put the plaintiff out of business, damages are the difference between the value of the plaintiff's business in the absence of the interference and the amount realized by liquidation.²⁴ See Chapter 11, Sections 11-4, 11-6, and 11-7.

1-1:3.2 Exemplary Damages

Exemplary damages are available in an action for tortious interference with a contract.²⁵ The Texas Supreme Court...