A note on law relating to ‘Tortious interference with business relationship’

 

The development of tort jurisprudence in the country leaves a lot to be desired. The delays in civil courts are endemic and have dissuaded many a bona fide litigant from pursuing a just cause for damages. Instead, the emphasis seems to somehow give a civil dispute a veneer of criminality and invoke criminal process, which is, needless to state, much faster and effective. Due to this, tort law never really took-off in the country.   One particular tort, which is of great importance in today’s scenario is the ‘tort relating to interference with business relationships’ and the ‘tort of inducement of breach of contract’.

A seeks to woo employees of B to break their contract with B and join him may be committing the tort of ‘inducing breach of contract’. Similarly, a party ‘X’ may, with a view to defeat his erstwhile partner Y, write to all potential parties with whom Y is about to enter into contractual relationship(s) inducing them not to enter into a business deals with Y. This may also be construed as ‘tortious inducement of breach of contract’ and/or ‘tortious interference with a business relationship/contractual relationship/business expectancy’ and may possibly expose X to a claim for damages, if on account of X’s representation Y either terminates the contract or modifies the condition in such a way so that Y suffers a damage.

The legal ingredients necessary to make out a case of ‘tortious interference’ are :

  1. The existence of a contractual relationship or beneficial business relationship between two parties.
  2. Knowledge of that relationship by a third party.
  3. Intent of the third party to induce a party to the relationship to breach the relationship.
  4. Consequent interference (direct or indirect) with the contract. (not necessarily a breach!)
  5. Damage to the party against whom the breach occurs.

The fact that the interferer has a commercial or other best interest in the matter or acted bona fide and in his best interests may not afford a valid justification to such an action.     (De Jetley v. Marks (1936) All E.R 863 at 873 ).

Reference may also be made to the decision in Edwin Hill & Partners (a firm) v. First National Finance Corp Plc., (1988) 3 All ER 801 (CA), where, after a review of the authorities, it was pointed-out by the court that : absence of malice/ill-will or intention to injure the person or commercial or other best interests of interferer do not amount to valid justifications for ‘interference in contractual relationships’. The judgment also affirms the position that merely because of the fact that A has broken his contract with X does not by itself justify X in procuring a breach of contract between A and B.

However, a mere advise, as opposed to inducement, will not amount to tortious interference.

There are very few Indian cases on this. Pepsi Foods v. Bharat Coca-Cola Holdings Pvt. (1999) Delhi High Court, happens to be one of them. The case concerned poaching of employees and arguments made therein are extremely instructive.

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