What is meant by an economic tort?
Economic torts concern intentional harm to the business interests of a firm or individual 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.
What are the economic torts?
Deliberate interference with another party’s interests (the so-called economic torts) is usually broken down into:
- inducement to breach contract (either directly or indirectly);
- 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
This is where an individual causes 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 these scenarios:
- 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 fulfill a similar contract elsewhere.
- The defendant prevents performance of the contract by unlawful means. For example, the tortfeaser hides the tools of the claimant, rendering him unable to fulfill the contract.
- The defendant induces a fourth party to break his contract with a third party who as a consequence is unable to perform his contract for the claimant. For example, a union may instruct employees (the fourth party) of the third party not to handle the goods of the claimant. In this scenario, the tortfeasor must be aware of the contract between the claimant and the third party and endeavour to cause a breach by contacting the fourth party.
To succeed with a claim of intimidation, these elements must be established:
- a threat to the third party that is coercive in nature and which is said to be more than a mere warning;
- the threat to do something must be unlawful;
- the third party must have complied with the threat;
- there must be damage suffered due to the threat.
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. These elements must 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.
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. Damage to the claimant must be proven.
An unlawful act will include any crime and tort and breach of contract. There must be an intention to have committed the unlawful act with the aim of causing harm to the claimant.
Lawful act by unlawful means
Where a lawful act is committed by unlawful means, it is essential to prove that the tortfeasors’ predominant motive was to injure the claimant’s interests rather than simply to serve their own.
Unlawful interference with economic business interests
This is where an individual tries to gain an advantage over the competition using unacceptable and unlawful means. 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;
The following remedies are available for economic torts:
- account of profits – especially when concerned with passing off and other unlawful interference with economic business interests.