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Can my competitors encourage my client to renege on an agreement?

On Behalf of | Mar 8, 2023 | Business & Commercial Litigation

Contracts keep your business running. You rely on contracts with clients, suppliers and others to achieve your business objectives and make a profit. Contracts are an important part of your business’ operations and outputs.

If a competitor tries to muscle in on a contract you have with a client, not only does it seem unfair from a good business standpoint, but it could induce your client to renege on the agreement they had with you, whether that was a contract, a potential contract or other beneficial business arrangement. If so, your competitor’s actions might rise to a claim of tortious interference with a contract or business relationship.

In Florida, tortious interference exists when the following elements are met.

An existing relationship

First, there must be an existing relationship between you and a third party. This relationship can be via an enforceable contract, but a contract is not necessary to satisfy this element. The element is usually satisfied if the relationship between you and the third party gives you a legal right or expected benefit.

For example, a current relationship with an existing customer may give you a legal right, for example, the right to expect to and execute contract with that customer. A relationship with a past customer does not necessarily confer a current legal right or expectation and generally is not protected by tortious interference laws.

Second, the defendant must be aware that you have that relationship with the third party. If the defendant does not know you have a relationship with the third party, this element is not satisfied.

Intentional interference

Third, the defendant must directly, intentionally and without justification interfere with your relationship with the third party. They can do this by inducing or otherwise convincing the third party not to go through with their end of the contract or other expected benefit of the relationship.

Negligent interference or consequential effects do not rise to the level of tortious interference.

If the defendant was simply safeguarding or promoting their own legitimate interests via legal means, there is no cause of action. This is true even if the defendant holds ill-will toward you.

Damages suffered

Fourth, you must have suffered damages due to the third party’s failure to go through with their end of the contract, expected contract or other benefit from the relationship.

You can seek damages via a lawsuit for tortious interference with a contract or business relationship. However, you generally cannot seek punitive damages or attorney’s fees. Still, it is good to know there is a remedy when a contract you have in the works with a client falls through due to the direct and intentional interference of a competitor.