They Made Me Lose My Contract: Liability For Interference With Contractual Relations

Andrew M. McKenzie, Edmonds Lawyer

In our capitalistic system, the law generally favors freedom of individuals and entities to enter into contracts as they see fit.  Most of the time, when someone breaches a contract, we consider such an event the product of the breaching party’s free choice, and the only liability flowing from the breach is that of the breaching party- we hold them to their bargain by awarding relief to the non-breaching party, compensating them for the loss of benefits the contract would give them.  But in Washington, third parties can sometimes also be liable for inducing a breach. This is known as tortious interference with a contractual relationship or business expectancy.  To establish liability of the third party, the non-breaching party must establish: (1) the existence of a valid contractual relationship or business expectancy; (2) the defendant’s knowledge of that relationship; (3) the defendant’s intentional interference inducing or causing the breach or the termination of the relationship or expectancy; (4) that the defendant interfered for an improper purpose or used improper means; and (5) resultant damage.

Valid Relationship Or Expectancy

The law will not protect an interest which is merely speculative.  The strongest case will involve an existing written contract between the plaintiff and a third party.  Sometimes, the protected interest can be an established business relationship rather than a specific contract.  The more established and longstanding the relationship is, the more the plaintiff will enjoy protection, as this will correlate to a higher probability of future economic benefit.

Knowledge

The defendant must have knowledge of the relationship or contract before the defendant can be liable.  Sometimes this will have to be proven via circumstantial evidence.

Intentional Interference

The defendant must have intentionally induced or caused the termination of the contract, business relationship, or expectancy.

Improper Means Or Purpose

There must be something improper about how or why the defendant engaged in their conduct.  It is not legally improper to simply try to compete in our capitalistic system.  Nor is it improper to pursue one’s own legitimate legal interests in good faith.  One of the most common improper means of competing is supplying false or defamatory information.  For example, suppose that Plaintiff has a supply contract with X to supply shirts made in the USA.  Defendant, a competitor with knowledge of falsity, tells X that Plaintiff’s shirts are made outside the USA, inducing X to cancel the contract with Plaintiff.  That would constitute improper means, even though Defendant otherwise had a right to compete with Plaintiff.

Resultant Damage

The plaintiff must show that the defendant’s improper conduct proximately caused damages to the plaintiff.  A plaintiff cannot prevail if a relationship or contract would not have been profitable or if the contract or relationship would have terminated anyway for other reasons.

The lawyers at Beresford Booth have a wealth of experience in contractual disputes and business disputes.  We would be happy to assist you in pursuing your rights and mitigating the chances of litigation.

To learn more about contractual disputes, please contact Beresford Booth at info@beresfordlaw.com or by phone at (425) 776-4100.

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