Tortious Interference with a Contract is one of those causes of action that sounds scarier than it really is. In its simplest terms, tortious interference occurs when you encourage someone to break the contract they have with someone else. As this is law, there are also exceptions to that rule.
A simple example is when your friend hires a service provider, but because you don’t like that person, you convince your friend to no longer go through with the contract. This would likely be tortious interference with the contract your friend had with the service provider.
Elements of Tortious Interference with a Contract
The tort of interference with a contract has five elements:
- A valid contract exists between the person bringing the lawsuit (plaintiff) and a third party;
- Defendant knows of the contract;
- The defendant intentionally induces the third party not to perform under the contract;
- The defendant acts without justification (exceptions); and
- Inducement results in damages to the plaintiff.
As you can see from the elements, there are many reasons your actions may not fall into this tort. For example, you may not have known of the contract. One of the most common exceptions used is the justification rule from above. When the defendant acts with justification, there cannot be tortious interference. In the case Peoples Security Life Ins. Co. v. Hooks, the North Carolina Supreme Court outlined how it is not interference when a competitor induces employees to leave their at-will employment. The Court justifies this by saying that competition alone justifies hiring employees of your competitor. Beyond that, however, the Court also makes clear that this exception only applies to the at-will employment and cannot be done for any wrong reason.
What would constitute a “wrong reason”? In this case, wrong is typically those actions that are “tortious” in nature. This means that you’re inducing someone to break a contract for no legitimate reason, but rather for revenge, spite, or to harm someone. We actually see this claim a lot when it comes to Non-competition clauses because inducing an employee to break their non-compete is far different than breaking their at-will employment. Fortunately, there must be evidence that you induced that employee to break the non-compete versus just the at-will employment. When you hire a person specifically to break the non-compete, the plaintiff will have an easy time making this case against you. However, if you hire an employee and that employee chooses to break the non-compete without your knowledge, you are in the clear.
This tort comes up every now and then, but it is hardly ever the core of the lawsuit. It is also an easy one to avoid. Good business practices will almost always defend you from tortious interference.