Business law torts are wrongful acts that are committed by or against a business that result in an economic loss to one or more parties. Some types of torts in business law may be intentional, meaning that they were done deliberately.
For example, if a business fraudulently misrepresented what it sells, it is considered an intentional business tort. Other types of business torts may be negligent.
When this occurs, a business may negligently misrepresent something about their services or products that results in harm to the consumer. There are six categories of different types of torts in business, including:
- Tortious interference with contracts or business relationships: This tort arises when one of the parties unlawfully interferes with another party’s business relationship or contract;
- Commercial disparagement: Commercial disparagement, or commercial defamation, occurs when a party makes a derogatory comment or statement about a business with the intent to dissuade other parties from dealing with that business. The statement must indicate that the business is unethical, lacks competence, or is dishonest to constitute business disparagement;
- The individual or business remarking may seek to gain an unfair competitive advantage or a customer may comment in an attempt to injure the reputation of the business;
- To prove commercial disparagement, the plaintiff must prove:
- The statement is false or that the individual who made it acted with reckless disregard as to its truth;
- The statement will cause financial loss; and
- Financial loss has occurred;
- Theft of trade secrets: A trade secret is information that provides economic value to a business. Businesses usually take measures not publicly to disclose the information;
- A trade secret can be a process, such as a recipe or manufacturing technique, a business method, such as a selling strategy, or something the business has spent time and money compiling, like a customer list;
- Fraudulent misrepresentation: Fraudulent misrepresentation occurs when an individual intentionally makes a false statement. The individual making the state intends for the person to whom the statement is made to rely on it. As a result of that reliance, the other party sustains damages;
- Libel in trade: Libel in trade, or trade libel, is the making of defamatory, or false, statements about a product’s goods or services. The statement must be published, which means it must be in writing and be made to a party other than the business itself;
- A business may sue for trade libel if it can show its reputation has been injured due to the libel; and
- Restraint of trade: Restraint of trade is an act that prevents a party from conducting business that they otherwise would have been able to. One common example is price fixing.
What Are Some Examples of Business Torts?
With business torts, the primary legal theory businesses sue for is breach of contract, which falls under contract laws. There are, however, many ways in which businesses may sue a party under tort laws.
Business tort examples include, but are not limited to the following basic torts relating to business enterprises:
- Wrongful interference: Wrongful interference occurs when a party intentionally and wrongfully interferes with the legitimate business interests of another party;
- For example, when a third party tortiously interferes with the contract negotiations of another party or interferes a prospective business opportunity, they may be civilly liable for the interference;
- Unfair competition: Unfair competition is a tort that occurs when a defendant markets a product that is confusingly similar to the plaintiff’s product so that consumers will be confused as to the source of the product;
- Unfair competition claims may also involve civil claims that are filed by consumers based on false advertising;
- Disparagement: Disparagement is a tort that occurs when a party makes false statements regarding the quality of goods or products, which results in a loss of business for the plaintiff;
- There are numerous different types of civil claims that involve disparagement, for example, slander of title or making false negative reviews of a product;
- Disparagement claims are commonly brought under the legal theory of defamation;
- Breach of fiduciary duty: A breach of fiduciary duty occurs when a party acts according to their own self interest, instead of the party to whom they owe a fiduciary duty;
- Computer torts: Many jurisdictions have started to recognize civil claims related to damaging computers or servers as a business tort;
- For example, intentional damage to the hardware or software of a business may be considered a business tort if the act negatively affects the ability of the business to operate; and
- In addition, the negligent use of a computer that results in harm to the hardware, software, or network of a business may also be considered a tort in some jurisdictions.
A business torts attorney can provide a party with a complete list of business torts.
What Are the Remedies for Business Torts?
The law provides for remedies to injured parties in order to discourage individuals from engaging in business torts. One category of remedies is referred to as damages.
Damages are monetary compensation provided to individuals for their losses. Compensation is provided for specific losses and injuries, such as financial losses and lost revenue.
Damages may also be awarded to compensate for the loss of the reputation and goodwill of a business. In certain business tort cases, the court may award punitive damages to the plaintiff.
Punitive damages are awarded to punish the defendant that committed the tort. This is intended to deter the defendant as well as other parties from committing the same tort in the future.
In order for a plaintiff to receive punitive damages, the conduct of the defendant must have been outrageous or malicious. In some cases, the victim of a business tort suffers a loss that cannot be remedied using the payment of money.
This commonly occurs in cases where a defendant continues to commit a wrong. It may also occur when the defendant threatened to commit a wrong in the future.
In these types of cases, the plaintiff may be able to obtain equitable, or non-monetary, relief from the court. This type of relief is awarded when money damages are not sufficient.
One of the most common examples of equitable relief is an injunction. Injunctions are orders that are issued by courts prohibiting a party from doing something or requiring the party to do something.
For example, if an injured party obtains an injunction in a trade libel case, it may require the defendant to stop engaging in the libel. It may also require the defendant to issue an apology or a retraction of their statement.
How Do Torts Affect a Business?
Torts may affect businesses in many different ways. They may result in:
- Lost profits;
- Damaged reputations;
- Loss of market share; and
- Loss of competitive advantage.
Are There Any Factors That Can Affect a Damages Award?
Yes, there are factors that may affect a damages award. For example, if a business is being harmed by another business that is violating their copyright or trademark, but the business does not take any steps to maintain their copyright or trademark, a court may not award that business the full amount of damages that they suffered.
Because of this, it is important for businesses to immediately take actions against a party that may be interfering with the business. If a business is aware that it is being negatively affected by another party’s conduct but does not take any steps to stop that conduct, it may affect their damages award.
Another factor that may affect a damages award is a failure to prove losses with reasonable certainty. In addition, if a plaintiff waits too long to file their claim, they may not be able to recover anything.
The plaintiff must file their lawsuit within the applicable statute of limitations. Generally, any damages a plaintiff suffered as a result of a business tort outside of a two year period may not be recovered.
Do I Need an Attorney?
If you believe your business has suffered a loss as a result of a business tort, you should consult with a torts lawyer. Your business torts lawyer will advise you of your options for recovery as well as represent you during negotiation, mediation, arbitration, or at trial. They can guide you through the process from start to finish.