Bringing a Lawsuit for Intentional Interference With a Contractual Relationship

When most parties - even quite sophisticated business entities - enter into contractual agreements, they do not necessarily contemplate the possibility of "intentional" third-party interference with the performance of said contract. Contractual interference is not entirely uncommon, however, and can lead to substantial losses.

You are not without options in the event that you have suffered losses in a contractual interference scenario. California law entitles those whose contracts have been breached (due to third-party inducement) or significantly disrupted to bring an action for damages pursuant to an Intentional Interference With Contractual Relations claim.

Suppose, for example, that you own a small product manufacturing business, and you enter into a contract with a retail store chain. Then, a competing business (also in product manufacturing) engages with the retail store chain and convinces their purchasing department that your product is defective. The retail store chain terminates your contract and enters into a new contract with the competing business.

Under such circumstances, you would almost certainly have a legitimate claim for Intentional Interference With Contractual Relations. Assuming that you could prove that the third-party competitor did, in fact, interfere with your contract and induce the breach, then you would be entitled to damages for your losses.

How does an Intentional Interference With Contractual Relations claim work? Let's take a brief look.

Proving Intentional Interference

California Civil Jury Instruction (CACI) 2201 cleanly and succinctly describes the elements necessary to prove Intentional Interfere With Contractual Relations. In order to successfully prove that the defendant has engaged in such behavior (entitling you damages), you will have to show that:

  1. there was a valid contract;
  2. the defendant knew about the existence of the contract;
  3. the defendant acted in such a way that it interfered with or otherwise disrupted the performance of the contract;
  4. the defendant intended to interfere with or disrupt the performance of the contract; and
  5. you suffered harm as a result, and the defendant's disruptive conduct was a substantial factor in causing such harm.

Each of these elements must be satisfied in order to prove the liability of the defendant (the disruptive third-party). For example, if you demonstrate that there was a valid contract, that the defendant knew about the contract, and that the defendant disrupted the performance of the contract, but cannot show that the defendant "intended" to interfere with the contract, then you will not be able to recover damages.

Critically, the behavior at-issue need not be wrongful. You can secure damages even if the defendant was acting in a manner that could not necessarily be construed in a negative way, so long as the effect and intention of the behavior was to disrupt the performance of the contract.

If the defendant warns a contractual party that your product is constructed with cheap materials and that it may not be a long-lasting product, for example, then one might argue that such a warning is perfectly reasonable (if it is indeed true) and not wrongful. However, the effect would likely be the same: it might disrupt the contract. If disruption does occur, then bringing an action for damages is justified.

Damages May Be Substantial

Damages may include:

  • Lost profits
  • Immediate losses and expenses
  • Injury to reputation and brand
  • And more

Depending on how fundamentally malicious (and unjustified the interference) the conduct of the defendant was, the court may also choose to award punitive damages.

Common Defenses to Overcome

There are a number of defenses that may be asserted. These include, but are not necessarily limited, to the following possibilities:

  • The defendant did not know about the contract at-issue;
  • The contract itself was invalid and unenforceable;
  • No actual disruption occurred, and if there was a disruption, it was not due to the activities of the defendant;
  • The defendant did not intend to cause a disruption;
  • You did not actually suffer losses.

For example, suppose that the defendant knows about the contract and intentionally disrupts its performance, causing the contract to be breached. Just a few days later, however, you find an alternative party to replace the previous contract - depending on the circumstances, you may not actually suffer any harm.

Consult an Experienced San Jose Contract Attorney for Further Guidance

When contemplating legal action for the intentional inducement of a breach of contract - or the intentional disruption of a contract - you may be feeling somewhat overwhelmed by the prospect of litigation. In many cases, third-party disruption of a contract is entirely unexpected and can leave the harmed individual (or entity) stunned and confused. Litigation may also be somewhat complicated in comparison to a more straightforward breach of contract claim. As such, it's important that you consult with a highly-qualified attorney who has a track record of success in handling contract litigation involving sophisticated third-party inducement and disruption issues.

Here at the Law Offices of Brian O'Grady, we have decades of experience advocating on behalf of those who have suffered losses due to a breach of contract, including those situations in which the breach (or alternatively, the disruption of performance) was intentionally caused by a third-party. We are committed to comprehensive, client-oriented legal representation - from beginning-to-end, we work closely with clients to ensure that their case is thoroughly evaluated and that all possibilities have been fully exhausted. This approach to litigation has enabled us to secure substantial compensation for our clients over the years, in the form of favorable verdicts and settlements.

If you'd like to learn more about your claims, we encourage you to contact our office to schedule a free and confidential consultation. Call (650) 318-6131 to speak to an experienced San Jose contract attorney today. We look forward to helping you fully recover for the losses you suffered.