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II) Indirect Inducement to Breach a Contract

The foundation principle in Lumley v. Gye has been extended to include indirect inducements to breach a contract. The courts have, however, taken care to keep the liability for indirect inducement to breach a contract within reasonable limits. This has been achieved, in large part, by requiring that the indirect inducement is by independently illegal means and that the breach of contract is a necessary consequence of the defendant's illegal act. The other requirements of knowledge of the contract, an intention to cause a breach of the contract, and damage mirror those of the parent tort. [Note 200: Thomson (D.C.) & Co. v. Deakin, [1952] Ch. 646 (C.A.); and Garry, above note 190.] It is, nevertheless, important to emphasize the requirement of intention. Although the means may be indirect, the aim and target of the conduct must always be to secure a breach of contract.

The key to the tort of indirect inducement to breach a contract is the requirement of conduct that is independently illegal. This contrasts with direct inducement, which is, in itself, an illegal act. The emphasis on illegal means in this branch of the tort is necessary to prevent it from making accepted market practices illegitimate; examples of such practices would be cornering the market in a particular commodity and thereby forcing other suppliers to breach their contracts with customers, or calling a legal strike that causes the employer to default on contracts with its customers. [Note 201: Fleming, above note 138 at 760-61.]

Indirect inducement to breach a contract by unlawful means can arise in a variety of ways, including stealing tools from a contractor which are essential to the performance of a contract with a third party, the physical restraint or intentional injury of a contracting party in order to cause a breach of contract, the direct inducement of employees to break their contract with their employer in order to prevent the employer from performing a contract with the plaintiff, and breach of contract by a supplier to cause the purchaser to default on a contract with a subpurchaser.

The requirement that the breach of contract is a necessary consequence of the indirect inducement emphasizes the importance of causation. Given that the conduct inducing the breach is indirect and sometimes quite remote from the damage, clear proof is required to show that the contractual default was caused by the defendant's illegal conduct and that the breach was unavoidable.

Justification plays an even more minor role in this branch of the tort, given the emphasis on the need to show an illegal act.

iii)

Interference with a Contract by Unlawful Means without Causing Breach

Canadian courts have further extended the protection of contractual links by adopting [Note 202: See P. Burns, "Tort Injury to Economic Interests: Some Facets of Legal Response" (1980) 58 Can. Bar Rev. 103 at 119.] the view of Lord Denning, expressed in Torquay Hotel Co. v. Cousins, [Note 203: [1969] 2 Ch. 106 (C.A.).] that liability extends to "a case where a third person prevents or hinders one party from performing his contract, even though it be not a breach." [Note 204: Ibid. at 138.] This may arise through a direct inducement to interfere with a contract or by an indirect inducement to interfere with a contract by illegal means. The defendant must intend to interfere with the contractual performance and there must be knowledge of the contract and damage caused by the defendant's conduct. The novelty of this branch of the tort is the absence of a breach of contract. It applies to all situations where performance of a contract has been interfered with but it is particularly pertinent to situations where an induced breach of contract is excused by a valid and appropriately worded exemption clause. It is difficult to find a good reason to excuse the defendant because of the fortuitous presence of an exemption clause of which the defendant may not have been aware.

This extension of the tort of inducement to breach a contract to cases of interference with performance of the contract is a modest and incremental extension of liability provided that it is controlled by the need to show interference with a fully fledged contractual relationship. However, the emphasis on illegal means and the abandonment of the need for a breach of contract has led to a certain looseness in its application, and it has led to the suggestion that the Torquay principle may extend to protect contractual expectancies and economic interests as well as contractual relationships. There is now, however, less need to rely on strained extensions of the Torquay principle to achieve a wider protection of economic interests. The focus of attention has moved to the nascent tort of interference with economic interests by illegal means.

d) Intentional Interference with Economic Interests by Unlawful Means

It was noted earlier that in Allen v. Flood [Note 205: Above note 171.] the House of Lords declined to formulate any general, all-embracing principle in respect of improper or unacceptable market practices. In lieu thereof, the nominate torts have developed as discrete categories of liability. It has, however, become apparent that there is a fundamental unity to most of these pockets of tortious liability which is largely consistent with the spirit of Allen. With the exceptions of the anomalous tort of simple conspiracy and the tort of direct inducement to breach a contract, all of the torts require proof of both an intention to harm the economic interests of the plaintiff and independently illegal conduct by the defendant. Indeed if one characterizes the wrongfulness of a person who directly induces a breach of contract as intentional conduct that causes another to commit an illegal act (the breach of contract), there is an even greater unity among the discrete heads of liability. [Note 206: T. Weir, Economic Torts (Oxford: Oxford University Press, 1997) at 29-30.] This commonality has led to the development of a general tort of intentional interference with economic interests by illegal means. [Note 207: See Lineal Group Inc. v. Atlantis Canadian Distributors Inc. (1998), 42 O.R. (3d) 157 (C.A.); 671122 Ontario Ltd v. Sagaz Industries Canada Inc. (1998), 40 O.R. (3d) 229 (Gen. Div.).] Its essential elements are the intention to injure the plaintiff, interference with the plaintiff's economic interests by illegal means, economic loss caused thereby, and an absence of justification. This general tort remains true to the spirit of Allen because it continues to define the limits of freedom of competition and the pursuit of economic self-interest by the legality of the means used.

Although the basic framework of the tort is clear, there are many issues that remain to be clarified. [Note 208: See H. Carty, "Intentional Violation of Economic Interests: The Limits of Common Law Liability" (1988) 104 L.Q. Rev. 250.] The concept of economic interests awaits clear definition. It probably includes any interference with trade, business, livelihood, and economic expectancies short of contract. It has not been settled if constructive intent is sufficient to satisfy the element of intent. There is also some doubt about the meaning of "unlawful means" for the purpose of this tort and the scope of justification has yet to be addressed. Nevertheless, the tort has considerable potential to achieve some integration and rationalization of the conventional heads of liability and to establish a more principled development of the nominate business torts that control improper market practices.

CHAPTER 4, INTENTIONAL TORTS

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