Relationships Interference

Deliberate Interference with Contractual Rights

Generally, persons and corporates are entitled to compete in business in any way they see fit. However, certain deliberate acts may be unlawful and leave the party concerned liable to compensate a third party who has suffered economic loss as a result.

It is a civil wrong to interfere, deliberately, with a third party’s contractual relations. The scope of the civil wrong is limited because many legitimate business actions will have the consequence that a third party’s business or contractual interests may be adversely affected.

It is necessary to show knowledge and intention on the part of the defendant.  Actual or so-called constructive (imputed or implied) knowledge of the contract will suffice.  Constructive knowledge means that a reasonable person would have known that a contract existed. The defendant must intend or be reckless as to whether the contract will be breached.

Nature of Interference

The interference may manifest itself in different ways. Active persuasion or enticement to breach the contract are clear examples.

There is a distinction between advising and giving information and pressurising for and procuring a breach of contract.  A person may be advised to terminate his employment in breach of contract. This is legitimate. Where, however, he is actually induced,  persuaded or procured to breach his, the civil wrong may be committed.

Where a contract may be terminated by notice, it is not a civil wrong to induce a person to terminate his contract lawfully by notice. However, if the contract is, in fact, breached, the person inducing the breach may be liable to the other party to the contract, even though it could have been terminated lawfully.

Indirect

The wrongful act may be more indirect. It may involve actions or conduct which is designed to prevent or interfere with the performance of the contract.

Indirect procurement can happen when a person induces a third party, who is not a party to the contract to do something which prevents the performance of the contract. This issue arises in relation to trade union disputes. For example, the blocking of an employer’s premises, so as to prevent deliveries or contracts from being performed may constitute a civil wrong. The breach of contract must have resulted as a direct result of the exhortation.

There is civil immunity for these civil wrongs, where there is industrial action in the course of lawful strike action. Where strike action is not lawful (e.g. unofficial action; no ballots)  civil liability may arise. The issue may also arise in relation to secondary picketing at supplier’s premises or an all-out embargo seeking a boycott, which is generally beyond the scope of the immunity.

Inducing Breach of Contract

A person who has unlawfully induces breach of contract is liable to compensate the innocent party to the contract for the losses arising as a natural and probable consequence of his actions. The other party is under a duty to mitigate.

The plaintiff must suffer loss and damage in consequence of the breach of contract. General principles of damages apply.

The  Irish courts  have restated the key elements of the tort of inducement of breach of contract;

• that the defendant knew of the existence of the contract and intended to procure its breach;
• that the defendant definitely and unequivocally persuaded a party to breach the contract, with the intention of procuring the breach of the contract;
• that the person so persuaded, induced or procured, did, in fact, breach the contract; and
• that the breach ensued as a necessary consequence of the breach of the contract of employment.

Although the tort has most commonly arisen in the context of trade disputes, which commonly involve inducements of breach of employment of contract, it is not limited to contracts of employment. In principle, it may apply to any deliberate interference with a contractual relationship.

Inducement

Inducement involves persuading or encouraging a party to the contract to breach that contract. This may arise from a threat or ultimatum which causes the other party to breach. Some lesser inducement, having the same effect, may suffice.

There must be some positive procurement by way of pressure or persuasion. The communication of information in itself or knowledge of a statement of affairs is not sufficient.

It may be difficult to determine whether and at what point a person goes beyond advice or communication. The words used or conduct must be considered. Words, which in one context could be communicative, may in another context, constitute persuasion and inducement. Giving information or advice that incentivises the other to breach a contract in itself, is unlikely to constitute inducement of breach of contract.

Breach of Contract

There must be a breach of contract. Persuasion or inducement to another to terminate his contract in accordance with its terms is not sufficient. Most contracts are terminable on giving reasonable notice in the absence of specific provision for a longer duration.

If an apparent contract is void, voidable or non-existent, then there cannot be a breach. Where there are relieving grounds either by general law or by the terms of the contract, the termination will not constitute a breach, provided the right is properly invoked and used.

Knowledge of Contract

Courts usually take a subjective approach to whether the defendant had the requisite knowledge of the existence of the contract and that what he did, constituted an inducement to breach that contract. Generally, where a reasonable person would have been aware or should have been aware, this is strong evidence that the defendant was so aware. However, the defendant may be able to show that he was not in fact so aware.

Recklessness or wilful blindness may be sufficient to establish liability. It is not necessary that the person knows the specific terms of the contract. Knowledge of the broad types of terms which such contracts usually contain is likely to suffice.

He may not deliberately disregard facts, particularly where he is in a position to ascertain the true position. Wilful blindness in this sense, is not a defence.

Some courts have held the respondent to be liable, where he ought to have known the existence and broad terms of the contract in circumstances short of recklessness and wilful blindness.

A person may come on notice that there is a contract and that his actions constitute an inducement or persuasion to breach it. In this case, liability may be incurred once the requisite knowledge or means of knowledge arises.

A person may discover in the course of dealing, the existence of the other contract. Indeed, the party to the contract or the another may specifically inform him.

Although the person need not know the details of the contract, some knowledge that what is induced or persuaded, constitutes a breach of contract with legal consequences, appears to be necessary.

Intent

Historically, malice was an element of the tort. This has now been encompassed in the modern formulation of intention. Motive or ill will is not generally relevant.

The degree of intention required is not completely settled. At one end of the spectrum, some courts have indicated that there should be a targeting by the defendant of the plaintiff.

This approach has not been favoured and is likely to be too narrow. It appears that intention or recklessness as to whether there will be a breach of contract suffices for the purpose of establishing liability.

Justification

A number of defences exist to the civil wrong of deliberate interference with contractual rights/  procurement of breach of contract. In certain circumstances, there may be justification based on legitimate business, family or personal interests reasons.

A personal interest or family connection may justify what would otherwise create liability. Persons may be persuaded, due to a familial interest in the welfare, care and future of a person, to undertake a particular course or to dissuade him from a particular course of action.

Where a person has a legitimate interest in protecting his own position, such as his own contractual rights, he may be justified in persuading another to do that which protects his own existing legal position and relationship, notwithstanding that this equally constitutes a breach of another inconsistent contract.

Where a person has entered two inconsistent contracts, the other party may insist on his contractual right even though this inevitably causes breach of the other contract. Where B, as a result of a threat from A, breaches his contract with C, C has no right to retaliate by inducing another person to breach his contract with A.

Public Interest

Exceptionally, the public interest may be a defence. In a famous case, a representative body failed to establish justification in persuading employees who were highly exploited to leave their employment.

However, the courts are unwilling to allow public interest other than in very exceptional, particular circumstances. Public authorities or associations may be able to exercise a duty to protect the public. Private interest is only legitimate in limited circumstances.

Depriving Employers of Employees

There is an ancient legal action, whose modern status has not yet been clarified which arises where a person deprives an employer of the benefit of an employer, typically by causing him injury. Loss or damage must be shown.  There are arguments that the action only applies to so-called menial employees or servants. The action was abolished in England and Wales in 1982

It may be that the legal action no longer survives in modern times. It was originally based on the employee having property rights in his employee.  There is a view that a might be regarded as unconstitutional in the modern context.

However, there is another view that legal action still has a role in protecting a legitimate interest in a modern setting. For example,  an employer may have invested in an employee so that if he is deprived of his service by wrongful imprisonment or injury, the employer is thereby deprived of his services and suffers loss. An argument may be made that the employer has a legitimate right to be compensated by the third party which has committed the wrong.

References and Sources

Irish Books

Tully Tort Law in Ireland 2014

McMahon & Binchy Law of Torts 4ed 2013

McMahon & Binchy Case Book on the Law of Torts 3ed 2005

Connolly Tort Nutshell 2ed 2009

Quill Torts in Ireland 4ed 2014

Fahey Irish Tort Legislation 2015

Healy Principles of Irish Torts 2006

EU and UK Texts

Lunney, M. and K. Oliphant Tort law: text and materials. 5ed 2013

Peel, Edwin, Goudcamp, James Winfield and Jolowicz on tort 19 ed 2014

Horsey, K. and E. Rackley Tort law. 6ed edition 2019

Deakin, S., A. Johnson and B. Markesinis Markesinis and Deakin’s tort law 7ed 2012

Giliker, P. Tort 5ed 2014

McBride, N.J. and R. Bagshaw Tort law 6ed 2018

Steele, J. Tort law: text, cases and materials 4ed 2017

O’Sullivan, J., J. Morgan, S. Tofaris, M. Matthews and D. Howarth Hepple and Matthews’ tort: cases and materials 7ed 2015

Horsey, H. and E. Rackley Kidner’s casebook on torts 13ed 2015

Clerk & Lindsell on Torts 22ed 2019

Charlesworth & Percy on Negligence 14ed 2019