Intentional Interference With Contractual Relations
Contracting is a way of life for virtually every business in the world and Nevada is no exception. In Nevada, each party to a contract is afforded certain assurances under the law that their contractual relations and expectations will not be interfered with by others who are not a party to the contract. Unfortunately, all too often a situation arises where one discovers that their expectation has been disrupted by the conduct of a third person or party. When such interference occurs, it is actionable by the party whose contract has been interfered with, so long as certain requirements are met and the injured party acts within the appropriate time period to bring a claim.
What The Law Requires
The intentional interference with contractual relations does not exist unless all six of the following elements exist:
- There must be an actual contract between the claimant and another party;
- The person who interfered must have knowledge of the contract or have been reasonably expected to know of its existence;
- The actions of the third party were intended to disrupt the contractual relationship or to cause the other contracting party to breach the contract;
- There must be an actual disruption of the contract;
- The disruption or breach was caused by the interference; and
- There must be resulting damages.
Knowledge Of The Contract And Intent
The law requires that the person alleged to have interfered with contractual relations be aware of the existence of an actual contract and intentionally induces one of the parties to breach the contract. For example:
A property owner has entered into a contract with a custom home builder to build a residence. A competitor learns of the project through a friend at the building department when the custom home builder submits his plans for approval. The competitor obtains a copy of the plans from his friend and contacts the property owner and induces him to breach the contract by offering to undercut the original builder’s price by ten percent. The original builder has already incurred the expense of hiring the architect and engineers to prepare the plans and specifications for the project. However, due to the competitors offer to charge ten percent less for the home, the owner breaches the contract with the original builder, resulting in a loss of the anticipate profits by the original builder.
In this instance the competitor that induced the owner to breach his contract was aware of the existence of the contract, he intended his conduct to disrupt the contract and his original builder, the owner breached the contract with his original owner as a result of the competitor’s promise to build the residence for a lower price, which all resulted in damages to the original builder. Here, all six elements have been met.
On the other hand, if the person has no knowledge of the existence of the contract or their actions were not intended to induce a breach, they cannot be held liable, even if his actions result in an actual breach of the contract. Thus, an inquiry into the motive or purpose of the individual is necessary and the inquiry will typically focus on the persons ultimate purpose or the objective that they are seeking to achieve and who they intend to harm. Knowledge of the contract is insufficient to establish that the party intended to disrupt the contractual relationship. Rather, there must be evidence that the person intended the other party to the contract to breach the contract.
Three Year Time Limit
Contractual relations are business interest and have been deemed by the courts to be personal property. As such, an action for interference with business interests are the same as for taking personal property. Therefore, the three-year statute of limitations under Nevada Revised Statute 11.190(3)(c) applies to these claims. This means that an injured party must bring an action within three years of the date on which they became aware, or should have become aware, of the conduct complained of. A failure to bring an action with the three-year time period is a bar to bringing any such claim.
Nevada’s Interference with Contractual Relations laws are complicated. The Wright Law Group, P.C. has more than 25 years of experience prosecuting and defendant civil cases involving interference claims and is well equipped to assist you in handling your case. Please call us at 702-405-0001 to schedule a consultation or email us.