Can You Breach a Contract You Never Agreed to?
The old saying is "it's all fair in love and war," but should the same apply to business? Businesses are built on relationships and agreements, therefore trustworthiness means a lot. Everyday contracts fail. Sometimes it is because of miscommunication or confusion, but sometimes breaking a contract is an intentional act because one party thinks they can get a better deal elsewhere. The common claim of breach of contract requires that there be a contract between two parties, that the plaintiff fulfilled his or her part, the defendant did not and damages. However, if you cause someone to breach a contract, even if you are not involved with the contract you could be liable for causing this breach. This is known as tortious interference with a contract.
Take for example, the New York case of White Plains Coat and Aprons. Inc. v. Cintas Corp. and Cintas Corp. 2. In this case White Plains Coat and Aprons (White Plains) is suing Cintas Corp. (Cintas) for knowingly interfering with its clients and encouraging the clients to break their contracts with White Plains and sign a new contract with Cintas. This case was originally brought in district court, then appealed to the Court of Appeals in the Second Circuit. In the first case, Cintas won because the court decided it was allowed to solicit White Plains customers as a competitor in the area for its economic interest. White Plains appealed the case, with the focus of the second case being whether the economic interest defense should apply in this case.
In a contract interference case, the plaintiff must show four things. First the plaintiff must show the existence of a valid contract with a third party. Second, the defendant must have knowledge of that contract. Third the defendant must have intentionally and improperly procured the breach. Finally, there must be damages.
Sending regular advertising and soliciting business in the normal course of business in not considered inducement of breach of contract. Whether a competitor is found liable of tortuous interference of a contract will depend on a showing that the inducement exceeded a minimum level of ethical behavior in the marketplace. A common defense to a tortuous interference of contract claim is the economic interest defense. This is an affirmative defense where the defendant admits that it lured away clients but argues that it did so to protect its own legal or financial stake in the breaching party's business. This defense is usually applied where the defendant and the breaching party have some sort of relationship. In this case there was no evidence of a previous relationship between Cintas and any of the clients it was accused of stealing. The court found that because of the lack of a relationship before the clients switched from White Plains to Cintas, the economic interest defense did not apply.
You can't control other people but you can prepare yourself. If you believe someone is interfering with your business, an attorney can help decide which steps to take next. If you are thinking about litigation in New York, please contact our attorney.