Interference with Contractual Relations / Inducing Breach of Contract (California Law)

“Intentional interference with contractual relations” and “inducing breach of contract” are types of commercial torts and unfair business practices in California. These torts occur when someone who knows of a binding contract between two or more parties either:

1. intentionally interferes with the performance of the contract or
2. causes one or more parties to breach its terms.

The primary difference between the two causes of action is that inducing a breach of conduct requires proof that the contract was actually breached. Intentional interference with contractual relations, on the other hand, merely requires proof that the defendant successfully interfered with the performance of obligations under a contract.

Otherwise, the causes of action are essentially the same and are frequently asserted together. Both require proof of the existence of a valid contract and the defendant’s deliberate attempt to interfere with it.

Damages for intentionally interfering with contractual relations or inducing breach of contract in California can include, depending on the circumstances:

• Amounts the plaintiff would have received under the contract;
• Extra costs the plaintiff incurred because of the breach or interference with the contract;
• Lost profits that the plaintiff would have made if the contract had been performed; and
• Where the defendant intentionally sought to damage the plaintiff, punitive damages.³

The plaintiff may also be able to sue the party that breached or failed to perform the contract for damages in a California breach of contract suit.

To help you better understand the law, our California personal injury lawyers discuss:

• 1. Elements for “inducing breach of contract”
• 2. Elements of “intentional interference with contractual relations”
• 3. What is a “valid contract””
• 4. Proving knowledge
• 5. Proving intention
• 6. Potential damages?
• 7. Civil vs criminal

1. Elements for “inducing breach of contract”

To recover damages for inducing breach of contract in California, the plaintiff must prove that:

1. The plaintiff was in a valid contractual relationship with a third party;
2. The defendant knew of the existing contract;
3. The defendant intended to induce the third party to breach the contract with the plaintiff;
4. As a result of the defendant’s wrongful acts, the third party did, in fact, breach the contract; and,
5. Because of this actual breach caused by the defendant’s wrongful conduct, the plaintiff suffered compensatory damages.¹

Inducing breach of contract can be abbreviated IBC.

2. Elements of “intentional interference with contractual relations”

To recover damages for intentionally interfering with contractual relations in California, a plaintiff must prove that:

1. The plaintiff had a valid contract with a third party;
2. The defendant knew of the existence of the contract;
3. The defendant intended to disrupt the performance of the contract or knew that disruption of the contractual relationship was substantially certain to occur by his/her independently wrongful conduct;
4. Performance of the contract was actually interrupted or made more expensive or difficult; and
5. Because of the disruption due to the defendant’s interference, the plaintiff suffered damages.²

Intentional interference with a contractual relationship can be abbreviated as intentional IWCR. IBC is a type of IWCR claim.

3. What is a “valid contract”

Under California law, a contract is simply an agreement to do or not to do a certain thing.⁴ It is formed when two or more contracting parties:

• Agree on the essential terms, and
• Promise adequate consideration (such as monetary payment or something else of value).⁵

To be valid, a contract must

• have a lawful objective and
• be entered into by parties who can legally enter into contracts.

Parties who cannot legally enter into contracts include minors under age 18 (unless legally emancipated) and people who have been declared incompetent by a court of law.

Many contracts do not need to be in writing to be an enforceable contract. Verbal agreements are enforceable under California law unless a statute requires them to be in writing.

For instance, Civil Code 1624, California’s “statute of frauds,” lists certain contracts that must be in writing in order to be valid. These include (but are not limited to):

• Sale of real property;
• Lease of real property for more than a year;
• Contracts for a loan of more than $10,000;
• Agreements to assume someone else’s debt;
• Wills;
• Certain contracts to buy or sell securities; and
• Contracts that are incapable of being performed within a year.

Federal laws may also require certain types of contracts to be in writing — for instance, the transfer of copyright under 17 U.S.C. § 204(a).

Note, however, that if no valid contract existed, the plaintiff may still be able to sue for intentional interference with economic prospects.

An experienced California injury lawyer can help you determine whether you have the right to sue and, if so, what causes of action your complaint should allege.

4. Proving knowledge

In order to be liable for inducing breach of contract or intentional interference with contractual relations, the defendant must have known about the contract.⁶

Evidence that can be used to prove the defendant’s knowledge of a contract can include (but is not limited to):

• Testimony of the parties and other witnesses;
• Emails and text messages sent by the defendant; and
• Internal notes and memoranda made by the defendant or the defendant’s agents or employees.

5. Prove intention

In order to win a case for intentional interference with contractual relations or inducing breach of contract, the plaintiff must prove that the defendant’s actions were intentional.

California courts have frequently refused to hold a defendant liable when someone breached a contract with the plaintiff because of the defendant’s negligence.

However, this outcome has not always been consistent and may depend on the jurisdiction in which you are bringing suit.

An experienced California injury attorney can examine the specific facts of your case and help you determine which cause(s) of action may apply.

6. Potential damages

To recover for intentional interference with contractual relations or inducing breach of contract, a plaintiff must be able to prove he or she suffered damages as a result of the defendant(s)’ actions. Such damages can include:

• Loss of profits,
• Expenses incurred, or
• Similar concrete evidence of injury.⁷

If the defendant’s attempts to disrupt or induce a breach did not result in economic harm – or if the damages sought cannot be tied to the breach – the plaintiff cannot recover.

Can I recover damages for pain and suffering?

Pain and suffering damages are rare in California in cases of inducing breach of contract or interfering with contractual relations.

However, when damage is very personal – such as when the breach results from intentional harm to reputation – they may be available.

Is it possible to get punitive damages?

California Civil Code 3294 allows the award of punitive damages in a personal injury case when the defendant’s conduct involves intentional acts of malice, oppression, or fraud.

In cases of interference with contractual relations or inducing breach of contract, punitive damages are most often rewarded when the defendant intentionally tried to damage the plaintiff.

7. Civil vs criminal

No. But depending on the facts of the case, defendants who interfere with contractual relations could possibly face fraud charges.

See also our article on intentional interference with prospective economic relations in California. This tort is also called intentional interference with prospective economic advantage (IIWPEA) or intentional interference with prospective economic relationship.⁸

Live in Nevada? See our article on intentional interference with contractual relations in Nevada. This article was prepared by our California personal injury attorneys.

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