What Is Tortious Interference With a Contract or Business?

Tortious interference makes an outsider liable for intentionally wrecking someone else's business dealings. California recognizes two versions. Interference with contract applies when a defendant who knew about an existing contract intentionally induced a breach or disruption of it. Interference with prospective economic advantage protects relationships that had not yet ripened into contracts, but requires something more: the defendant's conduct must be independently wrongful, unlawful by some measure beyond the interference itself, such as fraud, misrepresentation, or a statutory violation.

The distinction matters because competition is not a tort. California expects businesses to chase each other's customers; it does not permit them to do it by inducing breaches of existing contracts or through independently unlawful means. Defendants who are parties to the contract cannot be liable for interfering with their own agreement, though they may be liable for breach.

These claims appear constantly in departing employee disputes, broker and commission fights, deals that collapsed after a competitor whispered in the buyer's ear, and campaigns to poach a rival's key relationships. Damages can include the lost contract's value and, in egregious cases, punitive damages.

Two Different Torts, Two Different Standards

California recognizes interference with contractual relations and interference with prospective economic advantage, and the difference is not cosmetic. Interference with an existing contract requires a valid contract, the defendant's knowledge of it, intentional acts designed to induce breach or disruption, actual breach or disruption, and damages.

Interference with a prospective relationship, where no contract exists yet, requires all of that plus proof that the defendant's conduct was independently wrongful, meaning unlawful by some measure other than the interference itself. That extra element makes prospective advantage claims meaningfully harder to plead and to prove.

The Independent Wrongfulness Requirement

The independent wrongfulness requirement is the heart of most defenses. Competition, even aggressive competition, is not actionable. Offering a better price, hiring a competitor's employee where no enforceable restriction applies, or persuading a customer to switch are generally lawful.

California has also extended the independent wrongfulness requirement to claims of interference with at-will contracts, reasoning that an at-will relationship carries no assurance of future performance and is closer to a prospective relationship than to a fixed-term contract. Conduct that typically qualifies as independently wrongful includes fraud, defamation, trade secret misappropriation, and breach of a separate legal duty.

The Stranger Rule

A party to the contract generally cannot tortiously interfere with its own contract; that is a breach of contract claim, not a tort. The defendant must be a stranger to the relationship.

That principle regularly defeats claims against corporate officers, agents, and affiliated entities acting within the scope of their roles, since they are typically not treated as strangers to their own company's contracts. Whether a parent company, a manager, or a broker is a stranger for these purposes is often the pivotal question, and it is worth resolving before filing rather than on demurrer.