Abie Cedee, president of Proton Electric, was reviewing the books and thought her company was having a good year. However, recent developments in two of her jobs made her anxious.
The first one was at a new high school. The electrical work was going well, but the general contractor was having major problems with the school district. The project was well behind schedule, there had been some serious foundation problems and there were now disputes over alleged extra work claims by the general. Proton Electric continued its good relations with the school district. Over the years, Proton had maintenance and upgrade contracts with the district, and there were some current ones, so its reputation with the district was stellar.
Because of the delays, the school district voted to default terminate the general contractor. After doing so, the district almost immediately called Abie and asked Proton to stay on under a new agreement to finish the electrical installation. Proton agreed and signed the new agreement.
Then, Abie got a letter from the general contractor’s attorney telling her that Proton was going to be sued because it had actively interfered with the general’s contract with the district. The contractor alleged that Proton had discussed the idea of finishing the work with the school district before the general was terminated, and helped to induce it. Did Abie have cause for concern?
The opposite problem
In Proton’s second problem job, the shoe was on the other foot. Proton was the electrical sub on a shopping center expansion. A competitor, Deadline Electric, was very disappointed that it did not get that job. Deadline had been courting the shopping center’s owners for a while and felt sure it had an inside track to do the electrical work.
What Deadline did next was not nice. It used some sneaky ways of finding out what work Proton had installed, and then reported to the owners that some of Proton’s electrical installation was questionable. Without revealing the source, the owners told the general contractor that they had concerns with Proton’s work. Deadline’s snitching happened often enough that when a serious question arose about a part of the electrical work, the owners were so worried that they demanded that the general contractor have Deadline do the repair. The general contractor then backcharged Proton for the “emergency repair” costs.
Abie remembered the letter she got on the school project and wrote to Deadline, saying “You have intentionally interfered with my contract.” Was Abie correct?
What’s interference of contract?
What Abie did, before calling her own attorney, was go to the internet to find out what intentional interference of contract was all about. This is what she found.
If a person/company knows of the existence of a contract and then “improperly” induces one of the parties to breach that contract, it is wrongful interference with contract. Just about every state has some variation on this concept. Some state courts do not use the word “improperly” and instead say “without justification” or “with intent to harm.” Some states require proof that the one who interfered did so with malice; some do not. Abie found this part to be pretty straightforward.
Abie located a widely accepted definition of intentional interference with contract in The Restatement (Second) of Torts, Section 767. This section lists factors that help determine whether an interference is “improper.” Things now got a little less certain in Abie’s mind.
Among the factors are the actor’s motive, the social interests in protecting freedom of action of the actor and the relationships between the parties. She found that there is no tort—that is, nothing legally improper—where the interference was caused by the actor giving truthful information or honest advice.
With this knowledge, Abie took a fresh look at the facts of the two projects. With the school project, Abie needed to find out for how long the district had been discussing termination. If she learned that the discussions took place over a period of time, it would then appear less likely that Proton induced the termination decision. In some states, there is a freedom of information or public records act that would permit Abie to access public documents, such as the school district board’s meeting minutes.
She also needed to find out about any discussions between Proton and the district prior to the termination. For that inquiry, Abie thought it best to have Proton’s lawyer interview their employees to gain attorney/client privileged communication protection.
With the shopping center, Abie thought she had a good case. Because Deadline knew that Proton had a contract, there would be code inspections that would detect any issues with Proton’s installation and Deadline had a financial interest in telling tales on Proton. To show that Deadline was acting improperly, it would be helpful to find out whether Deadline’s reports to the owners were inaccurate or incomplete.