III. Interference with Contractual Relations

• Jurisdiction: North Carolina

III. INTERFERENCE WITH CONTRACTUAL RELATIONS

Under the tort for interference with contractual relations, a plaintiff, as party to a contract, may recover from a third party who wrongfully causes the other party to the contract not to perform the contract or to terminate or refuse to renew the contract.

A. Elements

The elements of tortious interference with contract are:

(1) A valid contract between the plaintiff and a third person which confers upon the plaintiff a contractual right against a third person;
(2) The defendant knows of the contract;
(3) The defendant intentionally induces the third person not to perform the contract;
(4) In doing so, acts without justification; and
(5) Resulting in actual damage to the plaintiff.¹⁶²

B. Justification

Malice must be shown to support a claim for tortious interference with contract.¹⁶³ But, even if malice is shown, an employer will not be liable if it can show that they took the action for a reason reasonably related to a legitimate business interest: "Interference is without justification if a defendant's motive is not 'reasonably related to the protection of a legitimate business interest."¹⁶⁴

Whether an actor's conduct is justified depends upon the circumstances surrounding the interference, the actor's motive or conduct, the interests sought to be advanced, the social interest in protecting the freedom of action of the actor, and the contractual interests of the other party. Generally speaking, interference with contract is justified if it is motivated by a legitimate business purpose, as when the plaintiff and the defendant, an outsider, are competitors.¹⁶⁵

As the supreme court stated in Peoples Security Life Insurance Co. v. Hooks:¹⁶⁶

If the defendant's only motive is a malicious wish to injure the plaintiff, his actions are not justified. If, however, the defendant is acting for a legitimate business purpose, his actions are privileged. Numerous authorities have recognized that competition in business constitutes justifiable interference in another's business relations and is not actionable so long as it is carried on in furtherance of one's own interests and by means that are lawful.

In Peoples, the plaintiff alleged that the defendant offered the plaintiff's former employees job opportunities, inducing them to breach their at-will employment contracts and noncompetition agreements with the plaintiff. Fatal to the plaintiff's claim, though, was the fact that the complaint alleged the former employee joined the new company to "develop the territory of North and South Carolina." This, the court reasoned, was sufficient to establish the new employer justifiably induced the employee to breach the contract.

C. At-Will Contracts

At-will employment contracts may be the foundation for a tortious interference with contract claim. Even though both the employee and the employer may terminate the at-will employment contract at any time, for any reason, third parties may still be liable for intentionally causing the breach.¹⁶⁷

D. Knowledge & Mistake

It is important to note that a plaintiff can establish a defendant's "knowledge" of a contractual relationship by showing that the...