Other torts - Claims based on intentional interference with ...

Learning Outcomes

This article explains intentional interference with business and economic relations on the MBE, including:

• Distinguishing clearly between interference with existing contracts and interference with prospective economic advantage, and recognizing which cause of action best fits a given MBE-style fact pattern.
• Stating the black-letter elements of each tort and methodically applying them to determine whether the plaintiff can establish liability, causation, and compensable damages.
• Evaluating whether a relationship is at-will or firmly contractual, and explaining how that classification affects available claims, defenses, and the strength of the competition privilege.
• Identifying when a defendant’s conduct is “improper” versus privileged or justified, focusing on fraud, defamation, coercion, malicious motives, and other independently wrongful means frequently tested on the exam.
• Analyzing classic defenses and privileges—such as lawful competition, protection of financial or contract interests, assertion of legal rights, and provision of truthful information—and predicting which are most likely to succeed.
• Using structured reasoning steps and common exam clues to avoid traps, differentiate these torts from misrepresentation and commercial disparagement, and select the best answer among close multiple-choice options.

MBE Syllabus

For the MBE, you are required to understand intentional interference with business relations and economic expectancies, with a focus on the following syllabus points:

• The elements of intentional interference with contract.
• The elements of intentional interference with prospective economic advantage (prospective business relations).
• How these torts differ from misrepresentation and other economic torts.
• When competition is privileged and when it becomes improper interference.
• Defenses and privileges available to defendants, including justification based on legal rights or financial interests.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. Which of the following is NOT a required element for a claim of intentional interference with contract?
   1. Existence of a valid contract
   2. Defendant’s knowledge of the contract
   3. Defendant’s intent to interfere
   4. Actual breach of contract by the defendant
2. A business competitor persuades a supplier to stop dealing with a rival, knowing the rival has an exclusive supply contract. The supplier breaches. What is the best defense for the competitor?
   1. The competitor acted in good faith
   2. The competitor was protecting a financial interest
   3. The competitor was a stranger to the contract
   4. The competitor was a direct party to the contract
3. Which defense is LEAST likely to succeed in an action for interference with prospective economic advantage?
   1. The defendant was a bona fide competitor
   2. The defendant acted to protect a financial interest
   3. The defendant used threats of violence
   4. The defendant relied on truthful information

Introduction

Intentional interference with business relations is an umbrella term for torts that protect contractual and economic relationships against improper third-party meddling. On the MBE, these torts appear in business-flavored fact patterns involving:

• Competitors trying to divert customers or suppliers.
• A third party coaxing a contracting party to breach.
• Someone sabotaging a likely future deal.

The core idea: if A has (or reasonably expects) an economic relationship with B, C may be liable if C intentionally and improperly interferes.

There are two main torts:

• Interference with an existing contract.
• Interference with a prospective (future) economic relationship.

Key Term: Intentional Interference with Contract
A tort in which the defendant intentionally and improperly causes a third party to breach, terminate, or not perform an existing, valid contract with the plaintiff, resulting in damage to the plaintiff.

Key Term: Intentional Interference with Prospective Economic Advantage
A tort in which the defendant intentionally and improperly interferes with the plaintiff’s reasonable expectation of future economic benefit (such as a likely contract, customer, or business deal), causing loss of that expectancy.

These torts are distinct from misrepresentation. Misrepresentation focuses on false statements causing reliance. Interference focuses on wrongful disruption of relationships, even where no false statement is made.

Types of Claims

There are two main types of intentional interference with business relations:

• Interference with Contract: Disrupting an existing, valid contract between two parties.
• Interference with Prospective Economic Advantage: Disrupting a reasonable expectation of future business or economic benefit.

Interference with contract is generally easier for a plaintiff to prove, because a clear contract and its breach can be shown. Interference with prospective advantage is broader but more heavily limited by privileges for competition.

Key Term: Business Expectancy
A reasonably likely future economic relationship or benefit (e.g., a near-certain contract award, a long-term customer relationship, or a regular supply arrangement) that, while not yet formalized as a contract, is sufficiently concrete to support a claim if intentionally and improperly disrupted.

Elements of Intentional Interference with Contract

To establish this claim, the plaintiff must prove:

• Existence of a valid, enforceable contract between the plaintiff and a third party.
• Defendant’s knowledge of the contract.
• Intentional and improper interference by the defendant that induces breach, termination, or nonperformance.
• Actual breach or disruption of the contract.
• Damages to the plaintiff resulting from the interference.

Key Term: Improper Interference
Conduct by the defendant that is unjustified or not privileged under the circumstances, taking into account factors such as the defendant’s motive, means used, and the interests the defendant sought to advance.

Each element raises issues the MBE can exploit.

• Valid contract: The contract must be enforceable. If it is void or unenforceable (e.g., due to illegality or failure of consideration), there is usually no claim.
• At-will contracts: Many courts treat at-will employment or at-will supply arrangements as existing contracts for interference-with-contract claims, but the at-will nature often weakens the claim and overlaps with prospective advantage.

Key Term: At-Will Contract
A contract, often for employment or supply, that either party may terminate at any time, for any reason not prohibited by law, without incurring liability for breach.

• Knowledge: The defendant does not need to know every term; it is enough that the defendant knows the relationship is contractual.
• Intent: The defendant must intend the interference—either as a goal or as a known, substantially certain consequence of their conduct—though they need not intend specific legal “breach.”
• Interference: Common ways include persuading the third party to breach, making performance impossible, or preventing the plaintiff from performing.
• Breach/disruption: Mere attempt is not enough; the plaintiff must show performance was actually disrupted (e.g., breach, cancellation, or materially hindered performance).
• Damages: Lost profits, increased costs, or other economic loss resulting from the disruption.

Elements of Interference with Prospective Economic Advantage

This tort protects future opportunities where no contract exists yet. The plaintiff must show:

• A reasonable expectation of economic benefit or future business with a third party.
• Defendant’s knowledge of the expectancy.
• Intentional and improper interference by the defendant.
• Actual loss of the expected benefit (e.g., deal falls through).
• Damages to the plaintiff.

This tort is narrower in practice because lawful competition is widely privileged.

Examples of protected expectancies:

• Being the low bidder on a contract with all non-price factors strongly in the plaintiff’s favor.
• An ongoing course of dealing with customers, where repeat business is reasonably expected.
• Advanced negotiations where only formalities remain.

Mere “hope” of future customers, without something more concrete, is insufficient.

Defenses and Privileges

Defendants may avoid liability by showing their conduct was privileged or justified under the circumstances.

Key Term: Competition Privilege
A defense allowing a bona fide competitor to interfere with another’s prospective business advantage—though not an existing contract—if the interference occurs through lawful, non-coercive means in pursuit of legitimate competitive interests.

Key Term: Justification or Privilege
A general defense that the defendant acted to protect a legally recognized interest—such as their own contract rights, property, or financial stake—and used appropriate, non-wrongful means to do so.

Common defenses include:

• Competition privilege (prospective advantage only): Competing by offering better prices, quality, or terms is generally privileged, even if it diverts business away from the plaintiff.
• Protection of financial interest: A creditor, partial owner, or party with its own contract rights may act to protect those interests (for example, urging a debtor not to enter a risky deal).
• Truthful information: Providing accurate information or honest advice (e.g., a truthful warning that a party is insolvent or has a poor performance record) is usually not improper.
• Legal rights: Asserting one’s own rights (e.g., filing a good-faith lawsuit, enforcing a lien, or exercising a contract termination right) is generally privileged, even if it incidentally harms another’s business.

Improper means such as fraud, defamation, physical threats, or unlawful conduct will usually defeat any privilege.

Worked Example 1.1

A supplier has an exclusive contract to provide goods to Retailer A. Retailer B, a competitor, knows of this contract and offers the supplier a better deal, persuading the supplier to breach. Retailer A sues Retailer B for intentional interference with contract. Is Retailer B liable?

Answer:
Yes. Retailer B knew of the existing contract, intentionally induced a breach, and caused damages to Retailer A. The competition privilege does not apply to interference with an existing contract; competition is only privileged when interfering with prospective business, not when causing breach of a binding contract.

Worked Example 1.2

A business owner expects to win a major contract after positive negotiations. A competitor, using false rumors, convinces the potential client not to contract with the owner. The owner sues for interference with prospective economic advantage. What result?

Answer:
The owner can recover. The owner had a reasonable business expectancy, the competitor knew of it, and the competitor used improper means—knowingly false rumors—to induce the client not to contract. The loss of the expected contract and resulting economic harm support damages.

Special Issues: At-Will Relationships

Courts differ on whether interference with an at-will contract is analyzed as interference with an existing contract or with prospective advantage. For MBE purposes:

• Many questions treat at-will employment, distributorships, or supply arrangements as existing contracts, but the at‑will nature may make interference easier to justify.
• Even where treated as a contract, competition privilege is more likely to be recognized, so the plaintiff must usually show particularly improper means (e.g., defamation, threats, or fraud).

On exam questions, pay attention to:

• Whether the relationship is explicitly terminable “at will.”
• Whether the defendant used independently wrongful methods versus simply making a better offer.

What Makes Interference “Improper”

On the MBE, interference is usually “improper” where the defendant uses:

• Fraud or intentional misrepresentation.
• Defamation or disparagement.
• Threats of physical harm or other unlawful coercion.
• Inducing breach solely to harm the plaintiff, without legitimate competition or financial purpose.
• Breach of fiduciary duty (e.g., an officer luring business away from the corporation they serve).

By contrast, interference is more likely privileged where the defendant:

• Offers better terms in open competition to a potential customer.
• Advises another based on truthful information and honest belief.
• Acts in good faith to protect their own property, contract rights, or security interest.

Worked Example 1.3

An employee has a written contract to work for Employer A “for three years, terminable at will by either party upon 30 days’ notice.” Employer B knows of this contract and offers the employee double salary and better benefits. The employee resigns from A and joins B. A sues B for interference with contract.

Answer:
The claim is weak. Although there is an existing contract, it is terminable at will on 30 days’ notice. Employer B’s conduct—offering better employment terms—is ordinary competition in labor markets. Without evidence of improper means (such as misrepresentation or defamation), B’s conduct is likely privileged. On the MBE, this is often treated as a case of interference with a prospective relationship where competition privilege applies.

Worked Example 1.4

A lender holds a security interest in all of Debtor Co.’s inventory. Debtor Co. is negotiating to sell most of its stock to Buyer. Lender believes the sale will impair its collateral and tells Buyer, truthfully, that Debtor Co. is in default and that Lender will exercise its rights if the sale proceeds. Buyer backs out. Debtor Co. sues Lender for interference with prospective economic advantage.

Answer:
Lender has a strong defense. Lender acted to protect its legitimate financial interest and used truthful information and lawful means. This is a classic example of justified interference, which is privileged even though it foreseeably harmed Debtor Co.’s anticipated sale.

Worked Example 1.5

A manufacturer learns that a rival is about to sign a nonexclusive supply contract with a major retailer. The manufacturer sends a letter to the retailer stating, falsely, that the rival is under investigation for selling defective goods and that the retailer may face liability if it contracts with the rival. The retailer cancels negotiations. The rival sues for interference with prospective economic advantage.

Answer:
The rival should prevail. The rival had a clear business expectancy, the manufacturer knew of it, and the manufacturer used improper means—knowing false statements that amount to commercial disparagement—to derail the deal. Competition privilege does not extend to interference by fraud or defamation.

Relationship to Other Torts

MBE questions sometimes require choosing between multiple economic torts. Keep these distinctions straight:

• Interference with contract: Existing contract + intentional inducement of breach + damages.
• Interference with prospective advantage: Reasonably certain future benefit + improper interference + loss.
• Fraud/intentional misrepresentation: False statement of material fact + justifiable reliance + damages.
• Injurious falsehood/commercial disparagement (less often tested): False statements about the quality of goods or business, causing pecuniary loss.

Sometimes, the same conduct supports multiple torts. For example, spreading a knowing falsehood to a customer that causes them to cancel a contract could be both misrepresentation (to the customer) and interference (with the plaintiff’s contract or expectancy).

Exam Warning

On the MBE, be careful to distinguish between interference with an existing contract (which requires a valid contract and actual breach or disruption) and interference with prospective advantage (which does not require a contract but does require a concrete, reasonable expectancy). The competition privilege is a defense only to interference with prospective economic advantage; it does not justify causing breach of a firm, non-at-will contract.

Common traps:

• Assuming any interference is tortious: competition and justified self-protection are often privileged.
• Forgetting the knowledge element: if the defendant did not know about the contract or expectancy, liability is unlikely.
• Overlooking causation: if the contract would have failed anyway (e.g., independent insolvency), the plaintiff may not recover full expected profits.

Revision Tip

Remember: lawful, non-coercive competition is a defense to interference with prospective business, but not to interference with an existing, non-at-will contract. Look for improper means (fraud, threats, defamation) or pure spite to defeat privileges.

Key Point Checklist

This article has covered the following key knowledge points:

• Intentional interference with business relations includes interference with contract and with prospective economic advantage.
• Interference with contract requires a valid contract, the defendant’s knowledge, intentional and improper interference, actual breach or disruption, and resulting damages.
• At-will contracts raise special issues; they may be treated more like prospective relations, making competition privilege more available.
• Interference with prospective economic advantage requires a concrete, reasonable business expectancy, knowledge, intentional and improper interference, loss of the expectancy, and damages.
• Improper interference often involves fraud, defamation, threats, or purely malicious motives; lawful competition and truthful advice are usually privileged.
• Defenses include competition privilege (for prospective advantage), protection of financial or contract interests, and truthful information or honest advice.
• The competition privilege does not apply to inducing breach of an existing, non-at-will contract, though it may apply where the relationship is at-will.

Key Terms and Concepts

• Intentional Interference with Contract
• Intentional Interference with Prospective Economic Advantage
• Business Expectancy
• Improper Interference
• Competition Privilege
• At-Will Contract
• Justification or Privilege