Thursday, May 03, 2007

What's Wrong With Inducing Breach of Contract?

On Andy's recommendation, I took a glance at the House of Lords' decision in OBG Limited v. Allan, in which they return to the always-murky waters of the intentional economic torts. Unusually for English jurisprudence, these played quite a role in British political history, because a century ago they brought the courts into conflict with the nascent trade union movement, contributing to the formation of the Labour Party.

I see the point to a tort for using unlawful means to damage someone else's economic interests. I do not quite understand the modern rationale for a tort of "inducing breach of contract", when the inducement is otherwise legal.

Under the doctrine of privity, contracts generally only give rise to legal obligations/rights between the parties to that contract. I understand the problem with the "rights" part of that doctrine, and am happy that our Supreme Court has relaxed it. Despite my protestations of incrementalism, I'd be even happier if they just abolished it. But while I can see why A and B could agree to create rights for C, I have trouble with the idea that they could agree to impose obligations on D, without D being in on the arrangement.

But it seems to me that the tort of inducing breach of contract does precisely that. It isn't necessary if D does something otherwise illegal. So D's "inducement" must be something D could rightfully do if the contract between A and B never existed. But that means A and B have agreed to restrict what D can do without liability.

Of course, if D does something otherwise lawful that causes B to breach its contract, then A should have a remedy -- but against B, its unfaithful contractual partner, not against the interloper D.

I suspect the injustice of imposing a liability on D it did not agree to has meant that "inducing breach of contract" has been rarely found except if D was doing something that would be stinky anyway. But then the whole thing leads to uncertainty and should just be gotten rid of. To the extent that the House of Lords seem to be emphasizing the distinction between inducing breach of contract and unlawful economic injury, I think they are making a mistake.

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