An Overview of Business Torts

business contract agreement

Competition is a normal part of business, and markets thrive on it. But what happens when competition goes too far and a line is crossed?

If one business interferes with another business’s contracts or business relationships, they may violate laws against unfair competition between business. When this happens, the victim may consider filing a lawsuit for any of a variety of business torts.

What Is a Tort?

A tort is an act that results in an injury, suffering, damage, loss, or unfair harm to another person. The harm is often physical, but a tort can also include financial harm to a person or business.

Torts serve two purposes: (1) to compensate the victim for losses caused by the defendant’s actions; and (2) to discourage the defendant from repeating the same actions in the future.

Business torts can occur when a business or a person goes too far and engages in wrongful, or tortious, conduct.

To define business torts, also known as economic torts, the law considers wrongful acts committed against business entities. These actions are often intentional, but they can also be due to negligence or recklessness.

Business torts are not criminal activities, although they may result in criminal charges. Rather, they are civil claims that result from financial injury to another business. The injured business can seek money damages and, in some cases, an injunction ordering the other business to stop the tortious activities.

Examples of Business Torts

Common business torts include:

  • Unfair competition
  • Tortious interference with contract
  • Wrongful interference with prospective economic advantage
  • Negligent misrepresentation

Unfair Competition

Unfair competition occurs when businesses compete on unequal terms due to favorable or unfavorable conditions that are applied to some businesses but not others. Claims of unfair competition frequently arise in antitrust litigation, and in financial regulations that address trade and commerce. Examples of unfair competition include false advertising, passing off, commercial disparagement, and misappropriation.

Tortious Interference with Contract

Tortious interference with contract occurs when an individual or business forces someone to break a contract they have with a third party. This could be by offering below-market prices to induce someone to break a contract, by threatening someone to induce them to breach a contract, or by making it impossible for someone to perform under the terms of the contract, such as by refusing to transport goods. 

Tortious interference with contract must be done intentionally. To prove intent, courts will consider the motivation of the person or business that induced the breach of contract to determine whether they acted improperly. Without an improper motive to induce a breach of contract there can be no claim for tortious interference with contract.

Elements of Tortious Interference with Contract

When evaluating a claim for tortious interference with contract, courts will evaluate the following elements:

  • Was there a valid contract?
  • Did the defendant know about the existence of the contract?
  • Did the defendant intend to interfere with the contract between the other two parties?
  • Did the defendant actually interfere with the contract?
  • Was the interference improper?
  • Did the party claiming damage actually suffer a financial loss?

Wrongful Interference with Prospective Economic Advantage

Wrongful interference with a business relationship occurs before two parties have entered into a contract. In this situation, a third party steps in to prevent the plaintiff from establishing or maintaining a business relationship with a third party.

To be actionable, wrongful interference with a business relationship must be intentional. To prove wrongful interference with a business relationship, the plaintiff must be able to show that, if not for the actions of the defendant, the business relationship would have occurred.

Elements of Wrongful Interference with a Business Relationship

To prove wrongful interference with a business relationship, the injured business must prove:

  • The existence of a beneficial business relationship between two parties
  • That the defendant had knowledge of the relationship
  • That the defendant intended to interfere with the business relationship
  • That the business relationship was actually breached
  • That the plaintiff actually suffered damages as a result of the breach

Negligent Misrepresentation

Negligent misrepresentation occurs when one party to a contract makes false statements without a sufficient factual basis that induces another party to enter into a contract. The party making the false statements may not necessarily have lied, but the false statements had the effect of inducing another party to enter into a contract.

Elements of Negligent Misrepresentation

Negligent misrepresentation occurs when:

  • A person or business makes a false statement without a sufficient factual basis
  • The other party to the contract relied on the representation as an inducement to enter into a contract
  • The other party was damaged as a result of its reliance on the misrepresentation

Remedies for a Business Tort

If you or your company was the victim of a business tort, an experienced business litigation lawyer can help. You may be entitled to damages, which is how the law refers to money paid for the purpose of compensating a victim for their injuries or losses.

You might also be entitled to punitive damages. Punitive damages may be awarded in cases of egregious conduct to punish the defendant and to deter similar conduct in the future.

Courts can also provide equitable relief which often takes the form of a court order that compels a party to stop engaging in certain actions. If the defendant fails to abide by the terms of a court injunction the party may face civil or criminal penalties. 

Fremstad Law—Experienced Business Litigation Lawyers Who Move You Forward

The experienced business litigation lawyers at Fremstad Law are here to help if your business has been the victim of a business tort, or if you have been accused of having committed a business tort.

We can help by analyzing the facts of your unique situation and offering advice on how to move you forward. We understand that business litigation can be costly and time-consuming. That’s why we try to devise solutions that avoid going to court. But sometimes litigation is unavoidable. Our lawyers have represented business clients in all manner of business tort disputes. When our clients are considering litigation, we discuss all your options to help you make the best decision under the circumstances. 

North Dakota and Minnesota business litigation attorneys  Joel Fremstad, James Teigland, Mark Western, Brandt Doerr, and Nick Thornton are here to help move you forward through a business tort claim. Learn more about our mission, our people, and our services, then contact us today.