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Economic torts
Economic torts: Understanding the basics

Just as with personal well-being and property, one’s business and source of income can also be maliciously affected by another party in such a way that causes significant financial loss. And just as with torts, economic torts, also known as business torts, are legal measures put in place to prevent actions that may hinder or damage another party’s economy and business.

Economic torts as a check to businesses

It is evident that in the commercial world, businesses are in a constant state of competition with each trying to outperform their competitors. It then goes without saying that if checks are not put in place, one business may likely employ unruly and unlawful actions in a desperate attempt to beat their competitors by intentionally harming them. Economic torts are the checks put in place to ensure that one business is not put at a disadvantage by the intentional actions of another.

Categories of economic torts

There are three fundamental categories of economic torts from which other types stem from. The three categories are as follows:

  • Inducing a breach of contract
  • Unlawful interference
  • Conspiracy

1. Inducing a breach of contract

There is inducement of a breach of contract when one party deliberately causes financial loss to another party by negatively influencing the contracts and rights of that party, thus stimulating a breach of contract.

The tort of inducing a breach of contract is a tort of secondary liability. This tort is most common with breached contracts of which the breaching party is not fully liable for the breach, and so cannot be easily sued. Here, the breach is seen to have been instigated by not the breaching party but the third-party.

In the light of the above, there is no primary liability against the breaching party.

The key elements of this economic tort category include:

  • Interfering with the contract of another party
  • Awareness as to the existence of the contract
  • Intentional incitement of a breach
  • Damages

2. Unlawful interference

Aside from actions which potentially lead to a breach of contract, there are other forms of interference which causes economic loss to another party.

When an individual or business carries out an intentional and unlawful action that causes (or is intended to cause) economic loss to another party, such an action is said to be an unlawful interference and is punishable under the law of economic torts.

Unlawful acts which affect a third party but do not affect its interaction with the plaintiff are not regarded under this category of economic tort.

There is unlawful interference whether there is a contract or not, so long there is financial loss.

The components that make up the tort of unlawful interference are as follows:

  • The defendant is proven to have interfered with the plaintiff’s business or economic relationships
  • The interference happens to be illegal
  • There is clear intention which is to cause financial loss or put the plaintiff at an economic disadvantage
  • Their ill goal is achieved.

The tort of unlawful interference can never be justified in a civil law court so long there is clear intention to cause economic loss.

3. Conspiracy

When two or more individuals or business entities come together, conspire, and carry out actions to cause financial loss to another party, there is an economic tort conspiracy.

The economy tort of conspiracy is divided into two sub-categories which are the lawful and unlawful means conspiracy.

Lawful means conspiracy

There is lawful means conspiracy when two or more parties conspire with the aim of causing financial loss to another party without the use of unlawful means. In this category, the unlawfulness of the whole thing is the conspiracy itself. Lawful means may have been used to put the plaintiff at an economic disadvantage but so long there was a conspiracy with the intention to cause harm, a tort has been done.

The key components of this category are as follows:

  • Conspiracy between two or more parties
  • With a clear intention to cause harm to a third-party
  • And carrying out the plan thus drawn
  • Which consequently leads to material damage to the third-party.

Unlawful means conspiracy

There is unlawful means conspiracy when the means used for causing the financial loss have intrinsic unlawfulness. Here, the unlawfulness is not just the conspiracy but the means used for effecting the conspiracy.

Key components include:

  • Conspiracy between two or more parties
  • Clear intention to cause harm to a third-party
  • Carrying out the plan thus drawn using unlawful means
  • Which consequently leads to material damage to the third-party.