When disputes arise between businesses or individuals, legal action sometimes follows. In these cases, business torts often come into play. A business tort is a wrongful act, either intentional or negligent, that causes harm to a business or its reputation. Understanding these common business torts can help you recognize and address potential issues.
Breach of fiduciary duty
Fiduciary duty arises when one party is obligated to act in another party’s best interests, such as in partnerships or between corporate officers and their companies. When someone breaches this duty—by making decisions that benefit themselves over the business—it can cause financial harm. Examples include mismanaging funds or exploiting confidential information for personal gain.
Tortious interference with contracts
This tort occurs when a third party intentionally disrupts a business’s contractual relationship with another party. For example, if someone encourages your client to break their contract with your business for competitive gain, you may have grounds to sue for tortious interference. Protecting your contracts through clear terms and enforceability is essential to avoid this issue.
Fraudulent misrepresentation
Fraudulent misrepresentation involves intentionally misleading another party to gain an advantage. This can occur during business deals, such as exaggerating financial details during a merger. The injured party can sue for damages if they acted based on false information and suffered losses as a result. Always ensure transparency in transactions to minimize risks.
Trade libel and defamation
When false statements damage a business’s reputation or financial standing, it may be considered trade libel or defamation. Trade libel focuses on false statements about products or services, while defamation targets the business itself. Combating these claims often requires evidence that the statements caused measurable harm.
Business torts can disrupt operations and damage reputations, making it important to act quickly when issues arise. Familiarity with these common types of torts allows you to better protect your interests and respond effectively to challenges.