Only Strangers to a Contract Can Interfere with It.

You can’t interfere with your own contract. A contract is a bargained-for exchange that may entitle you to certain benefits, like money, products, or services. If you do not realize the benefit of your bargain because the other party does not honor the agreement, you may be entitled to sue for breach of contract. What you probably cannot do, if all we’re talking about is disappointed economic expectations resulting from the failure of one party to fulfill his end of the bargain, is sue for tortious interference with contract. From the moment tortious interference became recognized as a cause of action in Virginia in 1985, the claim has been available only against strangers to the contract at issue. In other words, if the person causing the interference is a party to the contract, the appropriate claim for the plaintiff to bring is for breach of contract and not tortious interference.

Under Virginia law, a claim for tortious interference consists of the following four elements:

  1. the existence of a valid contractual relationship or business expectancy;
  2. knowledge of the relationship or expectancy on the part of the interferor;
  3. intentional interference inducing or causing a breach or termination of the relationship or expectancy; and
  4. resultant damage to the party whose relationship or expectancy has been disrupted.

(See Schaecher v. Bouffault, 290 Va. 83 (2015)). In the 1985 case of Chaves v. Johnson, the Virginia Supreme Court explained that these elements can only be asserted against someone outside the contractual relationship:

One who intentionally and improperly interferes with the performance of a contract…between another and a third person by inducing or otherwise causing the third person not to perform the contract, is subject to liability to the other for the pecuniary loss resulting to the other from the failure of the third person to perform the contract.

More recently, the Virginia Supreme Court had the opportunity to revisit the issue in Francis Hospitality, Inc. v. Read Properties, LLC, decided just a couple of weeks ago on November 21, 2018. This was a case that began in Lynchburg General District Court, found its way to Lynchburg Circuit Court, and eventually got appealed to the Virginia Supreme Court, where the judgment was mostly reversed. Here’s what happened, according to the opinion:

Back in 2002, a real estate broker helped Delta Educational Systems negotiate and enter into a commercial lease for 21,600 square feet of office space in Lynchburg. The lease agreement entitled to broker to a monthly fee for the duration of the lease, including extensions, and the lease was extended through September 30, 2017. In 2010, the brokerage’s commercial real estate division was sold to Read Properties in a transaction that included a transfer of rights under the lease agreement.

For a while after the sale, the monthly leasing fees were paid to Read Properties. But in March 2014, the landlord sold the property to Francis Hospitality, and although the sale was supposedly subject to the lease agreement, Read Properties did not receive another payment. In fact, Read eventually learned that Francis chain-297842_960_720-300x225Hospitality (the new landlord) and Delta (the tenant) entered into an amendment to the lease agreement in which they eliminated the obligation to pay a leasing fee. Read Properties was supposed to get those fees every month for another three years, so it sued.

The right it sued to enforce was a contract right: a right to receive monthly leasing fees, as specified in the original lease agreement. And it did sue for breach of the lease agreement. But it also sued for tortious interference with contract, as well as for statutory business conspiracy, a claim that allows treble damages and recovery of attorneys’ fees. This strategy was successful at the trial level and the court awarded not only the leasing fees due under the agreement, but also an amount three times that much in light of what it found to be a conspiracy to breach the agreement, plus an award of attorneys’ fees. The Virginia Supreme Court reversed and set aside that portion of the judgment, leaving only a judgment for the $34,020 in leasing fees that were owed.

The landlord and tenant could not have tortiously interfered with the broker’s rights under the lease agreement because they were themselves parties to that agreement (or at least successors in interest to the original parties). The court noted that tortious interference claims are designed to enforce a common law duty to refrain from interfering with the contractual and business relationships of another–a duty that does not arise from the contract itself. As stated in Fox v. Deese, 234 Va. 412, 427 (1987), “a person cannot intentionally interfere with his own contract.” If that’s what appears to be happening, the person is likely breaching or violating the contract, but not “interfering” with it for purposes of establishing a separate claim for tortious interference.

“An action for tortious interference with a contract or business expectancy,” the court wrote, “does not lie against parties to the contract, but only lies against those outside the contractual relationship, i.e., strangers to the contract or business expectancy.”

And because the tortious-interference claim was also being used by the plaintiff as the requisite unlawful act to support its claim for statutory business conspiracy, the Virginia Supreme Court held that the conspiracy claim must also fail.

 

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