Business contracts: What to do when a third party interferes with your contract?

X contracts with Y but before completing the contract Y starts doing business with Z. Can X do anything about this?

Under Indiana law, X may have a lawsuit for tortious interference with contract. Indiana law has five things that must be proven for a tortious interference with contract claim.

(1) the existence of a valid and enforceable contract;
(2) defendant's knowledge of the existence of the contract;
(3) defendant's intentional inducement of breach of the contract;
(4) the absence of justification; and
(5) resulting damages.

I assume for this post that X has a valid and enforceable contract, and I assume that Z knew of the contract between X and Y, and also assumed is X can show the financial harm satisfying the fifth requirement.

For inducement, think causation. That Z did something that which acted as the moving force that lead to Y breaching the contract with X. However, inducing is more than mere negligence.

Does this mean that competitors cannot compete? No. While the issue can be a close one in some cases, the lack of justification protects the idea of business competition. For justification the courts will look to the following: (a) the nature of the defendant's conduct; (b) the defendant's motive; (c) the interests of the plaintiff with which the defendant's conduct interferes; (d) the interests sought to be advanced by the defendant; (e) the social interests in protecting the freedom of action of the defendant and the contractual interests of the plaintiff; (f) the proximity or remoteness of the defendant's conduct to the interference; and (g) the relations between the parties. See Winkler v. V.G. Reed & Sons, 638 N.E.2d 1228, 1235 (Ind. 1994).

Related to this type of are the tort of intentional interference with a business relationship and interference with a prospective advantage. The principal difference between these kind of cases and tortious interference with contract is that the other types do not require a contract. I will write about these kind of cases another day.

If you have a possible tortious interference with contract case from Indiana and need to consult with an attorney, please feel free to contact me.

For those interested in reading more of my posts related to this post, you just need to click the links below and next to the word label for business law, consumer protection, and/or contracts.