When is it a tort to interfere with somebody else’s contract? In this video, project Reporter Ward Farnsworth discusses the development of the tort of interference with economic interests since the Restatement Second of Torts.

Included below the video is the Black Letter from § 16, Interference with Contract, as well as Comments a and b from Tentative Draft No. 3. This draft will be presented to membership at ALI’s 95th Annual Meeting later this month. The full draft contains additional Comments (with Illustrations) and Reporters’ Notes.

§ 16. Interference with Contract

(1) A defendant is subject to liability for interference with contract if:

(a) a valid contract existed between the plaintiff and a third party; 

(b) the defendant engaged in wrongful conduct as defined in Subsection (2); 

(c) the defendant intended to cause a breach of the plaintiff’s contract or disruption of its performance; and 

(d) the defendant’s wrongful conduct caused a breach of the contract or disruption of performance.

(2) Conduct is wrongful for purposes of this Section if

(a) the defendant acted for the purpose of appropriating the benefits of the plaintiff’s contract; or 

(b) the defendant’s conduct constituted an independent and intentional legal wrong; or 

(c) the defendant engaged in the conduct for the sole purpose of injuring the plaintiff.

Comment:

a.  Relation to the Second Restatement.  This Section uses a different framework to define tortious interference with contract than was employed in Restatement Second, Torts §§ 766-767.  The Second Restatement recognized liability when interference was found improper, and offered a seven-factor test to guide the inquiry into impropriety.  This Section states elements of liability that are more narrow and specific, and that reflect the results in well-reasoned decisions that applied the earlier test.  The framework of this Section is meant to promote clarity and predictability.  It is not intended to cause substantial changes in the results produced by the tests and privileges in the Second Restatement.

b.  Scope.  A party to a valid contract has interests that the law protects in more than one way.  If the contract is breached, the law of contract provides remedies against the party by whom the breach was committed.  If the breach was caused by the interference of someone else, the rules stated in this Section may also provide remedies in tort against the party who interfered.  In some cases the law of restitution also allows the recovery of gains from a party who interfered.  See Restatement Third, Restitution and Unjust Enrichment § 44.  If the plaintiff did not have a completed contract, § 17 of this Chapter may provide a remedy for interference with economic expectancy.  The Second Restatement treated interference with contract on the one hand, and interference with economic expectancy on the other, as two branches of the same tort with common elements of liability.  This Chapter treats them as distinct torts with different elements.

A party who has committed a breach of contract, and a party who induced the breach, may both be held fully liable for the resulting injuries suffered by the plaintiff.  At the same time, however, a suit under this Section and a suit for breach of contract may not be used to produce a double recovery.  If the victim of a breach recovers damages from the party who committed it, for example, those damages reduce what may be due from a party who is liable for inducement of the breach under this Section.

A defendant who is subject to liability under the rules of this Section may assert the privileges stated in § 19.  See Comment g for further discussion.

 

Ward Farnsworth

Reporter, Restatement of the Law Third, Torts: Liability for Economic Harm

Ward Farnsworth is Dean and John Jeffers Research Chair of the University of Texas School of Law. He taught for fifteen years at Boston University School of Law, where he also served as Associate Dean for Academic Affairs. Dean Farnsworth is author of Restitution: Civil Liability for Unjust Enrichment, The Legal Analyst, and Farnsworth's Classical English Rhetoric. He served as a law clerk to Anthony M. Kennedy, Associate Justice of the United States Supreme Court, and to Richard A. Posner, Chief Judge of the United States Court of Appeals for the Seventh Circuit. He has also served as Legal Adviser to the Iran-United States Claims Tribunal in The Hague.

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