In every business disagreement, there is the possibility for the dispute to develop into a troublesome and costly legal mess. For this reason, it is vital to understand your legal rights and to have a competent business litigation lawyer on your side, looking out for your best interests. Legal cases involving business disputes are collectively referred to as business torts. Please read on to learn more about business torts and the different types of cases included in this broad class of civil lawsuits.
What are Business torts?
Typically, business torts involved complex disputes arising out of complex and multi-party business relationships. In many cases, business lawsuits are considered intentional torts because the offending party has intentionally caused some harm to the other. These cases do not necessarily involve injury directly committed against a person or property, but rather involve losses related to intangible business assets, including economic interests, business relationships, and assets of good will and business reputation.
What do business tort attorneys do?
Business tort attorneys are qualified and experienced to both prosecute and defend against claims involving commercial interests and contracts. Business tort attorneys practice in many types of cases including those involving breach of contract, breach of fiduciary duty, defamation, and more. Please read on to learn more about the types of cases handled by business litigation lawyers.
Types of Business Torts
In a business tort involving fraudulent misrepresentation, a qualified attorney will help protect their client’s economic interests and their right to fair and honest treatment in the business world. Fraudulent misrepresentation, also called simply fraud or deceptive business practice, involves one party intentionally misrepresenting a material fact, a fact upon which the claimant relied, which resulted in harm to the claimant.
For example, a fraud business tort may arise in a real estate case where the financial advisor or other real estate professional fails to inform the buyer of an existing toxic chemical hazard on the property s//he is purchasing. Similarly, if a business provides false information to a bank in order to secure a business loan, that business can be held liable for the losses the bank suffers when the business later defaults on that loan.
Fraud can also involve deceptive or injurious acts that exceed fair competition. Unfair competition business torts can involve any of the following (or other similar acts):
- Trademark infringement: violating a company’s exclusive rights to their trademark
- Product disparagement: discrediting a competitor’s product
- False advertising: making misleading statements in marketing
- Infringement of a trade secret
- Infringement of the right of publicity
See also Intellectual Property for more information on business torts involving a company’s right to certain intangible assets, which may be fraudulently misrepresented or otherwise compromised by another party.
Interference with Contractual Relations
Interference with contractual relations is a type of business tort wherein one party obstructs or otherwise meddles in the contractual relationships of another party. In such cases the injured party can seek compensation from the other for its intangible or material losses.
In business tort cases involving interference with contractual relations, the plaintiff (i.e. the injured party) must show the following elements of the claim:
- 1. A valid contact existed between the claimant and a third party.
- 2. The defendant had knowledge of this contract and its terms.
- 3. The defendant intentionally committed acts that disrupted or caused a breach in this contract.
- 4. This breach or disruption caused harm to the claimant.
The claimant must then show what damages were caused as a result of the defendant’s interfering with the contractual relationship between them and the third party. Furthermore, these damages must be shown to extend beyond fair competition and free expression.
An example of interference with contractual relations would be one party convincing a bank not to lend their competitor any money.
To learn more about contract disputes, please also see our resources on contract litigation.
Interference with Prospective Business Advantage
A business tort case may also arise involving interference with prospective business advantage. These business lawsuits involve protecting the economic interests of a party whose interests have not yet formalized into a contractual relationship.
In an interference with prospective business advantage lawsuit, the elements of the business tort are as follows:
- 1. There existed between the claimant and a third party a business relationship, which involved some probable future economic benefit or advantage to the claimant.
2. The defendant was aware of the existence of such a business relationship.
3. The defendant committed actions that were intended to disrupt this relationship.
4. This relationship was, in fact disrupted.
5. This disruption involved damages suffered by the claimant, such as the dissolution of the business relationship or other loss of likely economic advantage.
In addition to intentional acts committed by the defendant, and actionable case may also involve a defendant’s negligence, or their failure to act with due care. This is known as negligent interference with prospective economic advantage.
Defamation: Libel and Slander
Defamation involves damaging the reputation of another party either through written or oral communication. The former is known as libel, while the latter is called slander. If one business or other party defames another business or business individual, the injured party may be able to seek reparation for their lost intangible assets—the damage to their reputation—through a business tort.
Libel is false and unprivileged written, printed or visual publication that exposes a person or business to hatred, contempt, ridicule, or disgrace, or which causes such party to be shunned or avoided, or injures that party in their occupation.
Slander is false and unprivileged oral publication, which injures a party with respect to their office, profession, trade or business. Such statements can be made on radio, television, or by other methods. This offence is actionable when it results in damages such as the reduction of a business’s profits or when it causes potential or current clientele to avoid or shun the offended business.
Breach of fiduciary duty
Breach of fiduciary duty is another actionable offense under business tort law. A fiduciary duty requires one party to act in the best interests of another party. This duty exists between parties whenever the relationship involves a special confidence, trust, or interest. A fiduciary (the party with the obligation to act towards the other’s best interest) must knowingly accept that trust and confidence. A party holding a fiduciary role is held to a high standard of honesty and full disclosure in regard to the other party and must not obtain a personal benefit at the expense of that party.
Examples of fiduciary duty include the duty of a corporation’s board members to act in the best interest of its shareholders or an insurance company’s fiduciary duty towards those it insures.
A breach of fiduciary duty can occur when a fiduciary acts or fails to act (negligence) in a way that is contrary to, or otherwise harms, the client’s (or other party’s) interest. Likewise, a fiduciary that acts in its own interests at the expense of the other party may also be in breach of their fiduciary duties.
Other business tort case types:
- Partnership disputes
- Real estate litigation
- Shareholder litigation
- Trusts, wills and estate planning litigation
- Intellectual property disputes
- Contract litigation
- Securities fraud
- RICO (racketeering)
- Corporate management and control cases
- Employment disputes
- Disputes over confidentiality and non-compete agreements
- Franchise disputes
- Business dissolution
Learning more about Business torts
If you find yourself or your company in a business related dispute, it is wise to seek early counsel from a qualified and experience business torts attorney. To increase your chances of a successful legal case, it is important to have a competent business torts litigator on your side. While you may be reluctant to take that next step in involving legal counsel in an already messy business dispute, it is truly the best and only way to adequately protect your interests.
To learn more about business torts and your legal rights and options, please contact the qualified attorneys at The Oshman Firm for a free no-obligation and confidential consultation to determine your best course of action.