Monday, March 10, 2008

Business Torts and Troubles

Having a good business structure does not always guarantee you immunity from other troubles and problems. In the course of your business life, you may encounter problems or threats to your economic interest or business relationship. This may be in the form of intentional torts meant to harm your business.
Here are some of the common problems besetting a business:
  • Fraudulent misrepresentation - Known also as fraud or deceit. For a fraud claim, a plaintiff must establish that the defendant intentionally misrepresented a material fact and the plaintiff relied on and was harmed by the misrepresentation.
  • Interference with Contractual Relations - The tort of interference with contractual relations allows a person to recover damages from a claim that someone had interfered with the plaintiff's contractual relations. The elements of an intentional interference with contractual relations claim are:
    1. a valid contract between plaintiff and a third party
    2. actual breach or disruption of the contractual relationship
    3. defendant's knowledge of this contract
    4. defendant's intentional acts designed to induce a breach or disruption of the contractual relationship
    5. Resulting damage.
To be considered ‘tortious’, an offending party’s acts must have exceeded fair competition and free expression, such as persuading a bank not to lend a competitor any more money.
  • Interference with Prospective Business Advantage - The tort of interference with prospective business advantage protects economic interests that have not yet been formalized into contract. The elements of this tort include the following:
    1. an economic relationship between the plaintiff and some third person containing the probability of future economic benefit to the plaintiff
    2. actual disruption of the relationship
    3. defendant's knowledge of the existence of the relationship
    4. defendant's intentional acts designed to disrupt the relationship
    5. Damages to the plaintiff proximately caused by the acts of the defendant.
  • Unfair Competition - In California, the tort of unfair competition includes "any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising." California Business and Professions Code § 17200.