Most business professionals in the State of Texas are aware of the legal consequences that they could face if they fail to live up to the terms of a contract with another firm—particularly if the other party can show damages resulting from the breach. However, what they might be unaware of is that they could also be liable for breaches of contracts to which they aren’t even party. For example, if a third party disrupts the contractual obligations of another company, the disrupting or interfering party can also be sued for tortious interference with that contract.
For a plaintiff to bring about a tortious interference of contract claim in the Texas courts, they must demonstrate that the following elements exist:
- A valid, enforceable oral or written contract was in place
- The defendant willfully and intentionally interfered with that contract
- The defendant’s interference was a proximate cause of injury to the plaintiff
- The plaintiff’s injury resulted in actual damage or loss
Tortious interference with contract does not require that the defendant is one of the parties to the contract. The plaintiff must simply show that there was a contract, that it was breached, and that the breach was the cause of economic loss.
An example of this would be a Houston construction firm (Company A) that contracts with a single concrete supplier out of Dallas for delivery of its building materials. The Dallas company happens to be selling at its capacity and is unable to take on business from new clients. If a competing construction company (Company B)—also out of Houston—becomes aware of this situation, the management might be tempted to also contract with the concrete supplier in an attempt to cause shortfalls. Company B offers to pay 10% over market to become the Fort Worth supplier’s newest customer. As a result of this new arrangement, the construction material supplier must either drop Company A or at least reduce its shipments to them. If it can be shown that Company B entered this contract to disrupt Company A’s business, and Company A can also demonstrate that the breach has caused damage, Company B may be sued for tortious interference of business.
As a Houston, TX business litigator, I caution my clients against intentionally breaching contracts for any reason—theirs or those belonging to other parties. It can be particularly risky when a business attempts to back out of a contract in order to take on a new account with a company that operates in the same sector or geographic region. Breaching contracts can create an atmosphere of mistrust that is difficult to rectify. Even if a company’s business litigator beats a tortious interference with contract claim, some companies may be reluctant to tie their business to an operation that has a history of dropping loyal partners to go after more profitable accounts.