Inducing breach of contract

How BC law treats it

Inducing breach of contract has four elements: a valid and enforceable contract, the defendant's knowledge of it, the defendant's intentional conduct that procures or persuades a party to breach it, and an actual breach that causes damage to the plaintiff. It is an intentional tort, so careless conduct is not enough, and the plaintiff must prove that the contract was actually breached. The unlawful means tort covers interference that does not involve a breach of contract. In A.I. Enterprises Ltd v Bram Enterprises Ltd, 2014 SCC 12, the Supreme Court of Canada narrowed it: the defendant must commit an unlawful act against a third party that would be actionable by that third party (or would be but for the absence of loss), and must intend to cause economic harm to the plaintiff through that act. Lawful competition, however aggressive, is not an unlawful means. Canadian law has no general tort of negligent interference with economic relations and no free-standing tort of interference with prospective business relationships. Pure economic loss caused by negligence is recoverable only in limited categories. Claims are brought by notice of civil claim in the BC Supreme Court, or in Provincial Court or the Civil Resolution Tribunal for smaller amounts, and the two-year basic limitation period under the Limitation Act, SBC 2012, c 13 applies.

What it means for your business

These claims arise when a competitor poaches a key employee bound by a restrictive covenant, lures a supplier away from an exclusive contract, or persuades a customer to break a long-term deal. A BC business that recruits staff or customers from a competitor should check what contracts they are bound by before making an offer. A business that loses a contract to a competitor's interference may have a claim against the competitor as well as the party who breached. Example: A Coquitlam security firm hires a competitor's sales manager knowing his employment contract contains an enforceable non-solicitation clause, then directs him to approach his former clients. The competitor sues the firm for inducing breach of contract in addition to suing the manager.

Risks and common mistakes

Using the US torts of tortious interference with prospective business relationships as if they exist in BC. Suing for interference without proving an actual breach of a valid contract. Assuming that hard but lawful competition is an unlawful means. Recruiting a competitor's employee without checking their restrictive covenants and confidentiality obligations. Waiting too long and missing the two-year limitation period.