Tortious Interference vs. Breach of Contract: What Is the Difference?

In Tennessee, two legal claims often emerge when a business relationship goes south: tortious interference and breach of contract. While the two seem similar and are sometimes used interchangeably by some people, they are legally distinct. Understanding the difference between these two legal concepts is crucial if you are a business owner confronted with a dispute or considering legal action. This article discusses the difference between tortious interference and breach of contract in Tennessee.

Understanding Breach of Contract

A breach of contract arises when one party to a binding contract fails to meet their obligations. In Tennessee, for you to establish a breach of contract, you must demonstrate the following elements;

1. There was a valid and enforceable contract
2. You fulfilled your obligations under the agreement, you were ready to do so, or you had a legitimate reason for not fulfilling your obligations
3. The defendant failed to uphold their end of the deal
4. You incurred damages as a result

Examples of breach of contract scenarios include;

• A vendor fails to deliver goods or provide services as promised
• A customer refuses to pay for goods or services rendered
• An employee of the business violates a confidentiality clause

Understanding Tortious Interference

Tortious interference is a business tort, meaning it involves wrongful acts. This type of business tort arises when a third party deliberately disrupts a contractual or prospective business relationship. Tennessee recognizes two main types of tortious interference:

1. Tortious interference with a contract occurs when an outside party intentionally induces a party to a contract to breach the contract.
2. Tortious interference with a prospective business relationship involves interfering with potential business opportunities, such as a prospective purchase or sale.

The following are the elements that you must demonstrate to establish tortious interference;

• The existence of a legal contract or a prospective business relationship with a third party
• The defendant knew about the contract or relationship
• The defendant deliberately interfered with the relationship and acted with improper motive or means
• There was a breach of contract as a result of the defendant’s interference (in the case of a contractual relationship) or termination of the relationship (in the case of a potential business relationship)
• The interference caused harm or damages

Example: A competitor spreads lies to a potential client, convincing them not to enter into a contract with your business. The client withdraws, and you lose the opportunity. In such a case, you may have a claim for tortious interference.

Breach of Contract vs. Tortious Interference

The following are some of the main differences between breach of contract and tortious interference;

• Breach of Contract
• Involves the parties who are part of the contract
• Based on contract law
• Requires an existing, valid contract
• The focus is on someone failing to fulfill their contractual obligations
• Tortious interference
• Involves an outside party disrupting a contractual or potential business relationship
• Based on civil wrongdoing (tort law)
• Does not necessarily require a contract. It can apply to potential business relationships.
• The focus is on a third party’s intentional and wrongful interference

Understanding the difference between these two concepts can help you understand your legal options, identify the right party to sue, and select the most effective strategy to protect your business interests.

Contact a Knoxville Business & Commercial Litigation Attorney

If your business has suffered due to a tortious interference or breach of contract, contact our Knoxville business & commercial litigation attorney at Reynolds, Atkins, Brezina & Stewart, PLLC at 865-500-3121 or online.