Economic Torts

What is meant by an economic tort?

Economic torts concern intentional harm to a person’s or firm’s business interests and are frequently in the context of industrial disputes or unfair competition.  A cause of action based on an economic tort is usually made in addition to another claim and it is very unusual for it to be the primary basis of a claim.

What are the Economic Torts?

Deliberate interference with another party’s interests is usually broken down into the following categories, the so called economic torts:

  • Inducement to breach contract – this can be done directly or indirectly

  • Intimidation

  • Conspiracy – this included conspiracy to commit an unlawful act or to use unlawful means and conspiracy to injure

  • Unlawful interference with economic business interests

Inducement to breach contract

What is meant by Inducement to breach a contract?

This is whereby one individual has caused harm to a third party by persuading a contract involving that third party to be broken.

Inducement to breach a contract can be broken down into the following three scenarios:

  1. The defendant persuades a third party to break a contract with the claimant. This usually occurs when the third party is offered more money to fulfil a similar contract elsewhere.

  2. By unlawful means the defendant prevents performance of the contract. A good example of this is where the defendant may have hidden the tools of the claimant thereby rendering him unable to fulfil the contract.

  3. The defendant has induced a fourth party to break his contract with a third party who as a consequence is unable to perform his contract for the claimant. An example of this is where a union may instruct employees (the fourth party) of the third party not to handle the goods of the claimant. The contract is between the third party and the claimant with the fourth party the employees of the third party induced to break their contract of employment.*

*For this third case to occur the defendant must be aware of the contract between the claimant and the third party and endeavour to cause a breach by contacting the fourth party.

Intimidation

What is meant by Intimidation?

In order to succeed with a claim of intimidation the following four elements need to be established:

  1. A threat to the third party that is coercive in nature and which is said to be more than a mere warning

  2. The threat to do something must be unlawful, for example a crime, tort or breach of contract

  3. The third party must have complied with the threat and have done what was asked

  4. There must be damage suffered due to the threat

Conspiracy

What is meant by Conspiracy?

The tort of conspiracy is defined as the agreement between two or more parties to do an unlawful act, or to do a lawful act by unlawful means. The following elements need to therefore be established:

  • Two or more persons

  • Agreement causing damage  

  • Unlawful act or Lawful act by unlawful means

Two or more persons

  • A company is said to be a separate legal person and therefore can conspire with its directors.

Agreement

  • This does not have to be in writing and does not have to be a legally binding contract, there can be tacit collusion between parties in the form of a combination for a common purpose.

  • Damage has to be proven to have occurred to the claimant.

Unlawful Act

An unlawful act will include any crime and tort and breach of contract. There must be an intention to have committed the unlawful act which meaning that there must be intention to have caused harm to the claimant.

Lawful Act by unlawful means

In the case of where a lawful act is committed by unlawful means the essential thing to be proven is that the defendants’ predominant motive must have been to injure the claimant’s interests rather than simply to serve their own.

An example of this would be in the case of a company preventing an individual to gain employment in a certain area not for their own benefit (i.e. due to the trade secrets he may know placing a term in his contract with his previous employer not to take employment with certain companies for a specified amount of time) but simply out of maliciousness towards that individual.

Unlawful Interference with Economic Business Interests

What is meant by unlawful interference?

Unlawful interference with economic business interests is whereby an individual tries to gain an advantage over the competition using unacceptable and unlawful means. Consequently the following elements are required:

  • The conduct needs to be directed at the economic interests of the other company

  • The purpose of the conduct must be to adversely affect the other company

  • The conduct must have interfered with the other company’s right to carry out their business without molestation or obstruction

  • The conduct either threatened or caused a breach of contract

  • An example of this would be a competitor of a local attraction providing an offer to the people in the queue for this attraction to instead visit their attraction at a lower price. 

  • Clearly offering a lower price than a competitor would not be considered unlawful but the manner of which the offer was given would consequently make it unlawful as the conduct was directed at the economic interests, the purpose was to remove some customers, it clearly obstructed their right to carry on their business and in some cases caused breach of contract due to the fact that many customers in line may have pre-paid tickets.

Passing Off

The tort of passing off is a clear example of an economic tort and would fall within the category of unlawful interference with economic business interests.

Remedies

The following remedies are available for economic torts:

  • Damages

  • Account of profits – especially when concerned with passing off and other unlawful interference with economic business interests.