The term “business tort” refers to a cause of action that a person or company brings in civil litigation against another person or entity that arises out of some wrongdoing in a business context.
Business torts are often used when a contract does not exist, but a legal duty to act in a certain way does. In other words, a tort is not a breach of contract. A tort occurs when one party has a reasonable duty (based on society’s rules of what is decent and what is not) to another party and breaches that duty. A tort generally requires (1) a duty set by some standard (i.e. such as a doctor using standard of care, or a bank acting in a manner that other reasonable banks in its industry would act with), (2) a breach of that duty, (3) which causes (4) damages – or financial loss.
Examples of business torts are:
- Negligent Misrepresentation
- Fraudulent inducement
- Constructive Fraud
- Negligent Inducement
- Breach of Fiduciary Duty
Fraud is a cause of action that has several elements that must be proven in order to successfully win a lawsuit based on a claim of fraud. Fraud requires:
- Proof that the fraudster (person who committed the fraud or the ‘defendant’ in this case) made a statement about a certain fact;
- that the person knew was false;
- and the false statement was made with the intention to get someone else (in this case the Plaintiff) to rely on the false statement for the financial or other gain of the fraudster;
- and because of the reliance on the statement, the Plaintiff was injured financially or otherwise.
Breach of Fiduciary Duty
Breach of Fiduciary Duty applies when dealing with a business situation where the defendant party had a legal obligation or duty to act in a certain way in regards to the Plaintiff. For example, members of an LLC must not take certain actions that harm the other member or the LLC itself. If a member of an LLC does something to hurt the company, the other member or the company itself may sue the violating member for breach of fiduciary duty.
A fraudulent misrepresentation is when one party makes false statements to get another party to enter into a contract with them when that fact or facts are not true. Fraudulent misrepresentation has an overlap with various types of fraud causes of action.
Tortious Interference with a Contractual Relationship
Tortious interference with a contractual relationship occurs when a party interferes with a contract entered into by two other parties. In this case, the Plaintiff must show that:
- A valid contract existed between the plaintiff and a third party;
- The defendant knew about the contract;
- The defendant took actions intended to induce the third party to breach the contract it had with Plaintiff;
- And the Plaintiff suffered financial loss or damages as a result of this action by Defendant.
A common example of tortious interference with a contractual relationship is when a company hires an employee who they know has an enforceable non-competition agreement with their former employer.
Parikh Law, P.A.
Parikh Law, P.A. is a boutique business law firm in Orlando, Florida. We have handled many complex business tort cases. Each case is different and unique. If you believe that you have a business tort case, or have been accused of a business tort, call our office today to speak to a qualified business law attorney.