H. Interference with Prospective Contractual Relationship

• Library: South Carolina Business Torts (SCBar) (2021 Ed.)

H. INTERFERENCE WITH PROSPECTIVE CONTRACTUAL RELATIONSHIP

Like many of its sister jurisdictions, South Carolina has distinguished between intentional interference with contractual relations and intentional interference with prospective contractual relations. This interference may arise in the context of a third party inducing or otherwise causing a person or entity not to enter into or continue with a prospective contract or business relation, or in the context where a third party prevents a party from acquiring or continuing a contract or business relationship.

Although intentional interference with contract and intentional interference with prospective contract are distinct torts, both require the action to be brought against a third party — that is, the defendant must be "a stranger to both the contract at issue and the business relationship giving rise to and underpinning the contract."³⁵³ In other words, like a claim for intentional interference with contract, a claim for intentional interference with prospective contract cannot be asserted against a party to the actual or prospective contract at issue.³⁵⁴

1. Origins and Development

South Carolina did not appear to have recognized a cause of action for interference with prospective contractual relations until 1990.³⁵⁵ In 1978, the South Carolina Supreme Court in Smith v. Holt, Rinehart & Winston, Inc. declined to acknowledge such a cause of action.³⁵⁶ However, the court in Crandall Corp. v. Navistar International Transportation Corporation overruled Smith, stating, "We now join the vast majority of our sister jurisdictions in recognizing such a cause of action and overrule our holdings to the contrary in Smith and Columbia Management."³⁵⁷

In Crandall, the court formulated the elements which a plaintiff must provide in order to recover on an action for intentional interference with prospective contractual relations.³⁵⁸ Under South Carolina Law, intentional interference with potential contractual relations requires that a plaintiff prove:

(1) The defendant intentionally interfered with the plaintiff's potential contractual relations

(2) For an improper purpose or by improper methods

(3) Causing injury to the plaintiff.³⁵⁹

This formulation has become the standard in South Carolina for proving such a cause of action.³⁶⁰

2. Present Day Pleading and Proving

a. Defendant Intentionally Interferes with the Plaintiff's Potential Contractual Relations

First, a party to a contract must demonstrate that he had a potential contract with a third party that was interfered with by a stranger to that relationship or potential contract in order for the action for intentional interference with contractual relations to lie.³⁶¹

(1) Prospective Contractual Relations. In 2002, the South Carolina Court of Appeals articulated the meaning of the phrase "prospective contractual relations"³⁶² In concluding that the plaintiff had not sufficiently alleged that it had a reasonable probability of entering into a specific contract but for the interference of the defendant, the court explained that prospective contractual relations "generally stands following the loss of an identifiable contract or expectation."³⁶³ Thus, a "plaintiff must demonstrate that he had a truly prospective or potential contract with a third party; that the agreement was a close certainty; and that the contract was not speculative."³⁶⁴

The plaintiff has the burden of proving that this contract was truly prospective and not merely speculation, and must demonstrate "the loss of an identifiable contract or [identifiable] expectation."³⁶⁵ Additionally, the agreement supporting a claim of interference with contractual relations "must be a close certainty; thus, a mere offer to sell for example," would not give rights to sufficient legal rights to support such a claim.³⁶⁶ The plaintiff must prove that but for the interference of the third party, the contract would have ensued.³⁶⁷

In the context of a contract terminable at will, the plaintiff must prove that "but for the interference, the contractual relationship would have continued."³⁶⁸ The plaintiff is not required to prove the tort in his initial pleadings; however, his allegations must present sufficient facts that "give rise to some reasonable expectation of benefits from the alleged lost contracts."³⁶⁹

Further, the reasonable expectation of benefits from the alleged lost contract, as required for the claim of intentional interference, need not be based on an enforceable contract.³⁷⁰ Rather, the plaintiff may allege a business relation with specific third parties or with an identifiable prospective class of third persons.³⁷¹

(2) Intent to Interfere. The plaintiff's claim must allege facts sufficient to show that the defendant intentionally interfered with the plaintiff's potential contractual relations.³⁷² This does not require that the defendant have intended any harm on the plaintiff, only that he intended to interfere.³⁷³ Thus, the defendant must have been aware of the alleged contract and must have intentionally tried to interfere with the contract.³⁷⁴

b. Defendant Interferes for an Improper Purpose or by Improper Means

(1) Improper Purpose. A plaintiff must show that the defendant interfered in the prospective contract for an improper purpose.³⁷⁵ As an alternative to showing that the defendant acted with an improper purpose, a plaintiff seeking to recover for intentional interference with prospective contractual relations may establish that "the defendant's method of interference was improper under the circumstances."³⁷⁶

(2) Improper Means. Means of interference considered improper include actions or methods that are "illegal or independently tortious, such as violations of statutes, regulations, or recognized common-law rules."³⁷⁷ Improper means may include threats, violence, fraud, unfounded litigation, misrepresentation or deceit, defamation, duress, undue influence, or breach of a fiduciary relationship, among other means.³⁷⁸ A means may also be improper because it violates an established standard of a certain trade or profession or includes unethical conduct.³⁷⁹ If a defendant in a situation has acted for more than one purpose, "his improper purpose must predominate in order to create liability" on his part.³⁸⁰ In the alternative, a "plaintiff may prove that the defendant's method of interference was improper under the circumstances."³⁸¹

(3) Competition and Economic Self-Interest. A defendant may defend such an action by arguing that its actions were justified by legitimate business...