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Proving Intentional Interference With Contract In Tennessee

Tennessee recognizes both a statutory and a common law cause of action for intentional interference with contract, also sometimes called procurement of breach of contract or tortious interference with contract. The statutory cause of action is found at Tenn. Code Ann. ยง47-50-109.

To say that the public policy of Tennessee frowns on parties who interfere with the contracts of others is probably putting it mildly. A party who wins an intentional interference with contract case is entitled to the pretty rare remedy of treble damages (three times the damages which it would receive just for its breach of contract case). Tennessee business owners should have more than a passing knowledge of this tort as, in the heat of competition, what might seem like just a savvy move to obtain new business or a new employee might cause a lawsuit.

A useful way to consider how to try and stay out of the crosshairs of an intentional interference with contract case is to consider what a plaintiff must prove to win a lawsuit for intentional interference with contract in Tennessee:

1. EXISTENCE OF A LEGAL CONTRACT BETWEEN PLAINTIFF AND THIRD PARTY: The contract does not necessarily have to be in writing as most contracts in Tennessee can be verbal and still be enforceable.

2. KNOWLEDGE OF THAT CONTRACT BY THE DEFENDANT: Under Tennessee law, the plaintiff does not have to prove that the defendant had actual knowledge of the specific terms of the contract which were breached. Where plaintiffs have proven merely that the defendant knew of the contract, Tennessee courts have found that the defendant had a duty to learn whether its actions would have caused a breach of the terms of the contract. A Tennessee case discussing this element is Wells Fund I v. The Shoe Show of Rocky Mount, Inc. (Tenn. Ct. App. 1993).

3. and 4. THE DEFENDANT MUST HAVE INTENDED TO INDUCE THE BREACH AND MUST HAVE ACTED “MALICIOUSLY.” To prove knowledge and malicious intent, all a plaintiff must prove is that the defendant intentionally acted to do something for which there was no legal justification. What does that mean? As Tennessee case law bears out, all it means is that the defendant intentionally did an act that it knew would benefit it at the expense of the defendant. The term “malicious intent,” at least as used in intentional interference cases, is archaic, confusing and unfortunate. Even lawyers can easily assume that, to prove malicious intent in an intentional interference case, a plaintiff must prove that the defendant engaged in the act to hurt the plaintiff and/or had ill will. The reality is that the malice element can easily be met by a plaintiff even if the defendant acted strictly for its own financial gain without giving one bit of conscious thought as to whether its act would hurt the plaintiff. See, Crye-Leike Realtors, Inc. v. WDM, Inc. (Tenn. Ct. App. 1998).

5. THE CONTRACT MUST BE BREACHED. Lawyers who handle breach of contract cases and intentional interference cases know that the causes of action for breach of contract and intentional interference go hand-in-hand. To prevail on a cause of action for intentional interference with contract in Tennessee, a plaintiff must prove that its contract with the third party was breached. A party cannot be held liable for intentional interference with contract for breaching a contract to which it was a party. A claim for intentional interference can be brought only against a person or entity who was not a party to the contract.

6. THE DEFENDANT’S ACT MUST BE THE PROXIMATE CAUSE OF THE BREACH. The plaintiff must prove, at the very least, that some act of the defendant caused or contributed to the third party’s decision to breach the contract with the plaintiff. The act could be inducement, persuasion, misrepresentation or any other act, however characterized, that caused or contributed to the breach. In Tennessee, cases establish that a plaintiff can prove this element by proving that the defendant knew, or was on notice, that its entering into a contract with the third party would result in a breach by that third party of its contract with the plaintiff. On the other hand, a defendant which had no knowledge whatsoever of the contract between the third party and the plaintiff, and had no reason to know or expect such a contract existed, cannot be held liable for intentional interference with contract.