If you asked the average entrepreneur what a business tort is, chances are they would not be able to answer the question. Some may think that it is a baked good, and others would understand that it is the basis for a lawsuit. Regardless, knowing what business torts are can be helpful for the prudent small business person so that when a lawsuit is filed, they may have a basic understanding of what they are being accused of.
With that we offer this post with some basic definitions of common business torts.
Fraudulent misrepresentation – This claim is commonly known as fraud or deceit, and is based on the notion of giving a business a legal remedy for harms stemming from false statements or representations by a defendant company. Essentially, if a company intentionally makes a statement that is materially false, and another company relied on such a statement and was harmed by it, the aggrieved company could seek damages.
Interference with prospective business advantage – This claim is based on the notion thatwhen a business relationship has been formed, but has not yet been formalized in a contract, a third party may not interfere with that relationship. This claim essentially requires an aggrieved company to show that the accused third party knew about the company’s business relationship, that the third party disrupted the relationship, and that the aggrieved company was harmed.
Interference with contractual relations – In the same vein, this claim is based on finding a remedy to a contract that was breached because of the actions of a third party to thwart the contractual relationship between two companies.