22 Interference with a Contractual Relationship
A. Definition
Interference with a contractual relationship is a tort cause of action separate and apart from any cause of action arising from the contract itself. The South Carolina Supreme Court has said:
The theory of this doctrine is that the parties to a contract have a property right therein, which a third person has no more right maliciously to deprive them of, or injure them in, than he would have to injure their property. Such an injury without sufficient justification, amounts to a tort for which the injured party may seek compensation by an action in tort for damages.1
B. Elements
The elements of a cause of action for tortious interference with an existing contractual relationship are:
(1) a contract
(2) knowledge of the contract by the tortfeasor
(3) intentional procurement by the tortfeasor of the contract's breach
(4) absence of justification
(5) damages.2
C. Elements Defined
1. A Contract
There must be a valid and enforceable contract for a cause of action for tortious interference with an existing contractual relationship to exist.3 If there is no contract, there is no cause of action.4 A contract terminable at will satisfies the requirement5 as will, apparently, an oral contract.6
2. Knowledge of the Contract by the Tortfeasor
The plaintiff must show the defendant had knowledge of the contract at issue.7 It would appear that the defendant's knowledge of the existence of a contract may be implied.8
3. Intentional Procurement by the Tortfeasor of the Contract's Breach
For a cause of action to arise a breach must be intentionally procured.9 It is not necessary that the defendant intend harm, only that he or she intend to interfere with the contract.10
South Carolina does not recognize a cause of action for "recovery of pure pecuniary harm resulting from a tortfeasor's negligent interference with the plaintiff's contractual relations."11 (emphasis added). Regardless of the defendant's behavior, there must actually be a breach of the underlying contract before there can be an interference with an existing contractual relationship.12 Where a third party had fully performed its obligations under an agreement by delivering a check to the plaintiff, the defendant, by attaching the check, did not procure a breach because the third party did not breach.13
4. Absence of Justification
The absence of justification may be inferred. Where the plaintiff had attempted in good faith to resolve a prior dispute with the defendant, there was an adequate basis to infer that the defendant interfered in the contract without justification.14
It may be difficult to separate tortious interference from legitimate business competition. One decision suggested a defendant might argue its actions constituted proper, and therefore justifiable, business competition.15
Interference is justified when it is motivated by a legitimate business purpose.16 The good faith exercise of a legal right by a party to a contract provides no basis for an action for intentional interference with a contract despite the fact it causes a third party not to perform another contract with the plaintiff.17 Where, for example, the plaintiffs purchased property from the defendants, and then sold portions of the property to third parties who were to make payments directly to the defendants to pay the mortgage held by defendants, the court held as a matter of law that the defendants' communication to the third parties that payments - some of which had been late - would no longer be accepted and that the defendants intended to foreclose on the plaintiffs was justified.18
5. Damages
An essential element of the tort of interference with a contractual relationship is that damages resulted from the breach.19 Where the damages alleged are lost profits, the plaintiff must prove: "(1) that it is reasonably certain that profits would have been realized but for the tort and (2) that such lost profits can be ascertained and measured from the evidence produced with reasonable certainty."20
D. Defenses
The statute of limitations applicable to any injury of the rights of another not arising on contract is three years for actions arising on or after April 5, 1988, and six years for those arising before that date.21 Since interference with a contractual relationship is a tort action separate from any contract action the plaintiff may have, presumably the statute of limitations for contract actions does not apply.
The South Carolina Supreme Court has said that a trial court erred in directing a verdict in favor of a County School District based on the intent to harm exception to the waiver of immunity in the Tort Claims Act because, while harm may result from an intentional interference with an existing or prospective contract, it is not necessary that the defendant intend that harm, but only that the defendant intend to interfere with the contract.22
A cause of action for interference with a contractual relationship is premised on the tortious behavior of a defendant not a party to the contract. The plaintiff is not protected from the actions of the other party to the contract. Therefore, it is a defense to the action that the defendant is a party to the contract or an agent of the defendant.23
Failure to mitigate damages may apparently be a defense.24 Immunity under a federal statute may also serve as a defense.25
E. Damages
In addition to actual damages for the loss of the value of the contract,26punitive damages may also be awarded.27 There is authority for mental anguish to be an element of damages,28 although the proposition has been seriously questioned.29
--------
Notes:
[1] Chitwood v. McMillian, 189 S.C. 262, 1 S.E.2d 162, 163 (1939). South Carolina also now recognizes a cause of action for intentional interference with prospective contractual relations. Crandall Corp. v. Navistar Int'l Transp. Corp., 302 S.C. 265, 395 S.E.2d 179 (1990); D. R. Horton, Inc. v. Wescott Land Company, LLC, 398 S.C. 528, 730 S.E.2d 340 (Ct. App. 2012) (cause of action for tortious interference with prospective economic advantage recognized in South Carolina as intentional interference with prospective contractual relations).The elements of the cause of action are: (1) intentional interference with the plaintiff's potential contractual relations, (2) an improper purpose or improper methods, and (3) injury to the plaintiff. Brown v. Stewart, 348 S.C. 33, 557 S.E.2d 676 (Ct. App. 2001) (no evidence to suggest any purpose or motive by appellant other than protection of his rights as minority shareholder and investor); United Educational Distributors, LLC v. Educational Testing Service, 350 S.C. 7, 564 S.E.2d 324 (Ct. App. 2002) (allegations must present facts that give rise to some reasonable expectation of benefits from alleged lost contracts); Santoro v. Schulthess, 384 S.C. 250, 681 S.E.2d 897 (Ct. App. 2009) (if defendant acts for more than one purpose, improper one must predominate to create liability; plaintiff failed to establish any prospective contractual relations where she did not testify as to any specific prospective purchaser who would have made offer on property but for existence of defendant's claims; there can be no finding of intentional interference with prospective contractual relations if there is no evidence to suggest any purpose or motive by defendant other than proper pursuit of his or her own contractual rights with third party). See also Hein-Muniz v. Aiken Regional Medical Centers, 905 F. Supp. 2d 729 (D.S.C. 2012) (finding improper interference with "prospective economic relationships").
[2] DeBerry v. McCain, 275 S.C. 569, 274 S.E.2d 293 (1981). See also Kinard v. Crosby, 315 S.C. 237, 433 S.E.2d 835 (1993); Camp v. Springs Mortgage Co., 310 S.C. 514, 426 S.E.2d 304 (1993); Cooper v. Laboratory Corp. of Am. Holdings, 150 F.3d 376 (4th Cir. 1998). Vortex...
