Torts are civil wrongs. Business torts, more specifically, are civil wrongs causing damage to economic interests. A business tort must result in an actual loss to the party bringing the action, who is known as the “plaintiff”.
For business torts, the amount of damages awarded to the plaintiff is generally equal to the amount of money required to return the plaintiff to the position they were in before the wrong took place. However, for intentional business torts, damages are often “at large”, meaning they are not capable of being easily quantified since they include compensation for non-material losses. These losses, such as loss of reputation or injured feelings, are assessed by considering all the relevant circumstances.
Some common business torts that will be discussed in this article are a breach of contract, negligent misrepresentation, conspiracy, intimidation, unlawful interference with economic relations, and abuse of process.
Business Law Torts | Breach of Contract
Breach of contract occurs when one party to a contract fails to perform their duties required under the contract.
An example of a breach of contract is where a tenant signed a lease agreement but is refusing to pay the rent.
To establish a breach of contract, the plaintiff must prove
1. There was a valid contract, and
2. the defendant breached the contract.
For a contract to be valid, it must include an offer, an acceptance, consensus, certainty of terms, and consideration.
If the plaintiff proves that there was a breach of contract, they may be entitled to the express remedies listed in the contract, damages, or equitable remedies such as specific performance. Specific performance is where the court orders a party to perform its obligation under a contract.
Business Law Negligence And Torts | Negligent Misrepresentation
The tort of negligent misrepresentation occurs when a plaintiff suffers a loss as a result of its reliance on an unintentional false representation made by the defendant.
An example of negligent misrepresentation is where the seller of a house tells a potential purchaser that the roof is in good condition without investigating whether that is true.
If the potential purchaser then relies on that representation in deciding to buy the house, the seller may be liable for negligent misrepresentation if the roof collapses shortly after the sale.
To establish negligent misrepresentation, the plaintiff must prove
1. A representation was made by the defendant;
2. The defendant owed the plaintiff a duty of care based on a special relationship;
3. The representation was false or misleading;
4. The defendant was negligent in making the representation;
5. The plaintiff reasonably relied on the representation; and
6. The plaintiff suffered a loss as a result.
The misrepresentation may be either written or oral. In some cases, even omissions or misrepresentations by implication may be sufficient.
The plaintiff must prove that their reliance on the misrepresentation resulted in actual loss. Further, the plaintiff must show that “but for” the defendant’s negligent misrepresentation, the loss would not have occurred.
If the plaintiff is successful in proving negligent misrepresentation, it may receive damages or, if the misrepresentation induced the plaintiff to enter into a contract, the contract may be rescinded.
Define Business Torts | Conspiracy
The tort of conspiracy occurs when two or more persons form and carry out an agreement to injure a third party.
For example, Corporation A and Corporation B would be liable for conspiracy in the following situation. Corporation A is a supplier of materials used by Corporation B and Corporation C to manufacture competing products. Then corporation C enters into a contract with Corporation A to obtain materials. Corporation B then reaches an agreement with Corporation A to pay a higher price for their materials if they refuse to honor their contract with Corporation C. As a result, Corporation C is unable to manufacture their products and fill their orders.
There are two distinct types of conspiracy:
(1) predominant purpose conspiracy;
(2) unlawful means conspiracy.
Predominant purpose conspiracy
1. There is an agreement by two or more defendants to pursue a course of action;
2. The predominant purpose of the defendants’ conduct is to cause injury to the plaintiff; and
3. The plaintiff suffers injury.
Unlawful means conspiracy
1. There is an agreement by two or more defendants to pursue a course of action;
2. The conduct in question is itself unlawful;
3. The conduct is directed at the plaintiff;
4. The defendants know, or ought to know, that damage would likely result; and
5. The plaintiff suffers injury.
Both types of conspiracy require an agreement by two or more defendants to pursue a course of action. This agreement only needs to be a joint plan, not a formal contract. The existence of an agreement can be proven either by direct evidence or inference.
If a plaintiff proves that it suffered a loss as a result of a conspiracy, it may be entitled to damages or an injunction.
Types Of Torts In Business Law | Intimidation
The tort of intimidation occurs where the defendant threatens to commit an unlawful act and in doing so causes loss to the plaintiff.
An example of intimidation is where a company enters into a contract with a supplier to obtain materials it requires to manufacture its products. After entering into the contract, the supplier, knowing that the company cannot obtain the materials elsewhere and knowing it has orders to fill, advises the company that if they did not pay more than the agreed-upon price for the materials, the supplier will not fulfill the terms of the contract.
Two-party intimidation is where the plaintiff is threatened directly and suffers a loss. Three-party intimidation is where a third party is threatened and as a result, the plaintiff suffers a loss.
The tests for two-party and three-party intimidation are the same
1. Coercion of another person to do or refrain from doing an act;
2. The use of a threat as a means of compulsion;
3. The threat was to use unlawful means;
4. The person threatened complied with the demand;
5. Intention to injure the plaintiff; and
6. The plaintiff suffered damage as a result of the threat.
If a plaintiff proves that it suffered a loss as a result of intimidation, it may be entitled to damages or an injunction.
Unlawful Interference With Economic Relations
The tort of unlawful interference with economic relations occurs where the defendant intentionally interferes with a plaintiff’s economic interests by committing an unlawful act against a third party.
An example of unlawful interference with economic relations is where two business partners jointly own a building that one partner wants to sell and the other does not. The unwilling
partner blocks physical access to the building and files baseless certificates of pending litigation against the title of the building in order to prevent the sale. These delays deter willing purchasers and when the building is eventually sold, it is at a lower price than the original offers.
To establish the tort of unlawful interference with economic relations, the plaintiff must show:
1. The defendant intended to injure the plaintiff’s economic interests;
2. The defendant interfered with the actions of a third party in which the plaintiff had an economic interest;
3. The interference was by illegal or unlawful means; and
4. The plaintiff suffered economic loss or harm as a result.
The defendant must have actually intended to injure the plaintiff; mere reckless or negligent interference is not enough. However, the primary purpose of the defendant’s actions need not be to injure the plaintiff, it must only be one of the defendant’s purposes.
The “unlawful means” by which the interference took place will only be considered unlawful if it is actionable by the third party, not only by the plaintiff.
If a plaintiff proves that it suffered a loss as a result of unlawful interference with economic relations, it may be entitled to damages or an injunction.
Abuse of Process
The tort of abuse of process occurs when someone misuses the process of the court to coerce another person to do something entirely outside the scope of the legal claim.
An example of abuse of process is where an individual registers a certificate of pending litigation on the title of a property to tie the property up and prevent it from being sold to anyone else as a negotiation tactic regarding an unrelated agreement.
To establish the tort of abuse of process, the plaintiff must demonstrate that
1. It has been subjected to a legal process by the defendant;
2. There was collateral or improper purpose in bringing the action;
3. A definitive act or threat was made in furtherance of the collateral or improper purpose; and
4. Some measure of special damage resulted.
A bad or vindictive motive on the part of the defendant is not sufficient, there must be collateral or improper purpose that is entirely separate from the intended purpose of the legal proceeding, such as blackmail or extortion.
If a plaintiff proves that it was injured as a result of abuse of process, it may be entitled to damages or an injunction.
In conclusion, you can also watch videos about Canadian law that we created.
Business Torts FAQ
Do I need a business lawyer?
It will depend on your situation. The best thing for you to do is to get a free consultation with a lawyer. You can then learn about the process and the costs.
Does legal aid help with business law?
No, it does not.
Is business law provincial or federal?
It’s actually both. That is what makes it so confusing. Every province has their own provincial laws. There can also be municiple laws.
What questions should I ask the business lawyer?
It’s better to tell the lawyer about your case and answer the lawyers questions. Let the lawyer determine what is important in your case. They know what the courts will want to see.
How much does a lawsuit cost?
You should plan to spend at a minimum $2500 on legal fees. The fees can go up quickly the longer it goes on.
What are my legal rights?
It will depend on your situation. The lawyer or paralegal will explain your rights.