Businesses compete for business; that is expected. One of the principles of the free market is that healthy competition leads to better products and services at a better price to consumers. But not all competition is healthy. When a participant in the marketplace engages in improper conduct (e.g. deception, threats, improper influence), to harm the business relations of a competitor, that conduct can be actionable.
Intentional Interference
Most states, including California and Hawai’i, recognize a claim against a third party — a person or entity who is not a party to the actual or prospective contract — who intentionally and wrongfully interferes with the performance of, or the ability to enter into, a contract. That law is well settled. What happens if the third party, who is not one of the contracting parties, has an interest in the contract? Can the claim still be brought? In a case of first impression before the California appellate court for the fourth district, the court was asked to determine the limits of a third-party’s relationship with a potential tort-feasor.
Subcontractor Sues Property Owner After Being Dismissed
In Caliber Paving Co., Inc. v. Rexford Industrial Realty & Management, Inc. (Sep. 1, 2020, No. G058406) Cal.App.5th [2020 Cal. App. LEXIS 837], a
subcontractor was replaced on a construction job and sued the general contractor (for breach of contract) and the owner of the property (for intentional interference with the contract). The trial court granted summary judgment for the property owner on the grounds that the property owner was not a stranger to the contract. The trial court reasoned that as the owner, the contract between the general contractor and the subcontractor involved improvements to his property.
Court of Appeals Finds Property Owner “Stranger to the Contract”
On appeal, the trial court’s decision was overturned. The appellate court held that the property owner was a non-party to the contract, regardless of any social or economic interest in the contractual relationship. Since a triable issue of fact had been raised (whether the property owner interfered with the contract by directing the general contractor to kick the subcontractor off the job and hire somebody else), the subcontractor could proceed with his claim.
Takeaway
This case may provide guidance to those benefiting from contractual arrangements where a contract has been made with one party, yet the work is being performed by another. If you need assistance with the drafting of your business contracts, or are involved in a business dispute, Contact CASHMANLAW today for a free consultation to see how we might help you with the drafting of your important business contracts, or understanding the legal consequences of those already in place.
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