In order to prove an intentional interference with contract claim in Tennessee, a plaintiff must prove the following elements:
1. That there was a legal contract;
2. The defendant knew of the contract;
3. The defendant intended to induce the breach of contract;
4. The defendant acted with malice;
5. The contract was breached; and
6. The injured party actually suffered damages.
If the contract between the plaintiff and the third party was not an enforceable contract, then, even if the defendant induced its breach, the defendant is not liable for interference with contract or for inducement to breach contract. For example, some types of contracts are not enforceable if they are not written and signed. (Under what is called the “statute of frauds,” some contracts in Tennessee must be written and signed).
What is malice? How does a plaintiff prove that a defendant acted with malice? It is helpful to first understand what a plaintiff does not have to prove to prove the element of malice. A plaintiff does not have to prove, under Tennessee law, that the defendant induced the breach of contract out of ill will.
A plaintiff can prove malice if it proves that the defendant acted intentionally and without legal justification. Interference is without legal justification if it is done to injure the plaintiff or to benefit the defendant at the expense of the plaintiff. While it can be very difficult to prove that a defendant acted to hurt a plaintiff, in many cases, it is not nearly so difficult to prove that the defendant intended to benefit itself knowing that the plaintiff’s financial interest would be harmed.
Can a corporation or other legal entity in Tennessee be liable for inducing its subsidiary to breach a contract? For example, if a parent corporation causes a subsidiary to breach a contract with an officer of the subsidiary, can the parent corporation be liable for that breach.
In Tennessee, the answer to that question depends upon whether the subsidiary is wholly owned by the parent entity or not. If the subsidiary is wholly owned, the parent company cannot be liable for interference with contract. If the subsidiary is not wholly owned, the parent entity can be held liable.
What if someone interferes with an at-will employment relationship? Can that party be liable considering the fact that an at-will employment relationship can be ended at any time by either the employer or the employee? Yes. In Tennessee, intentional interference with an at-will employment relationship can result in liability.
To prevail under the Tennessee statute which makes it illegal to induce a breach of contract or to interfere with a contract, the plaintiff must prove its case by “clear and convincing evidence.” This is worth remembering since it is a higher burden of proof than the usual “preponderance of the evidence” burden of proof.
Lastly, in Tennessee, a party can also be liable for the business tort called interference with prospective economic advantage. That cause of action allows a plaintiff to recover where there was not a contract between the plaintiff and the third party under certain circumstances.