An Introduction To Economic Torts

ECONOMIC TORTS

A class of torts are grouped under the heading of “economic torts”. With a rapidly expanding economy, Indian courts are likely to engage with greater number of economic torts cases in near future. Economic torts are a powerful remedy for specific business problems. English and Indian courts are very conservative in expanding the category of recognised torts. Hence, economic torts remain a category that is well recognised but narrowly bounded in the precedents.

Examples of recognised economic torts are: conspiracy, intimidation, procuring a breach of contract, deceit, malicious falsehood and intentional harm (interference with economic and other interests). The tort of passing-off that prevents unfair competition also fits in this category,  but it is distinct enough with a long history of its own. In economic torts, unlike other torts, the injury is purely economic. The loss in economic torts being purely monetary, no claim lies for  damages caused by injury to defendant's property or person. The remedy for economic torts is money damages. The history of economic torts is rooted in a reaction to trade unions’ expansion and it is only a few decades old. In many common law jurisdictions, the trade union aspect is now a part of statutory labour law.

Since 1980s, three categories of economic torts are well recognised. The first category is of direct interference. Here, the defendant is liable for inducing breach of contract and at times breach of statutory or fiduciary duties. The second category is intentional interference with plaintiff’s business or profession through unlawful methods. The third category is the tort of lawful means category that needs malice in defendants’ method though the means are lawful. Courts have narrowly confined these torts to specific situations contrasted with the wide ranging tort of negligence. (See, John Eldridge, et al. , Economic Torts and Economic Wrongs, 2021)

Let us consider the key economic tort: inducing or procuring a breach of contract. Winfield and Jolowicz in their classic book ‘Tort’ (2014, edn.) state a familiar pattern in this tort: “D commits a tort against C if, without lawful justification, he induces or procures A to break A’s contract with C”. Breach is a necessity for this tort. Mere interference in performance is not sufficient for this tort. Knowledge of the contract is also necessary but does not extend to the details of contract. Intent to cause a breach is also required. Inducement through persuasion is required but excludes merely advice. 

The other important economic tort is intentionally causing loss by unlawful means. An example is thus: If A uses unlawful means against B that hampers B’s ability to deal with C and where A intends to cause loss to C, then A has committed a tort against C. This tort of intentionally causing loss by unlawful means requires that A has an intention to attack C through A. 

Indian courts have dealt with economic torts at regular intervals. For example, the Delhi High Court in Pepsi Foods v. Bharat Coca-Cola, 1999 SCC OnLine Del 530, considered the economic torts of: conspiracy, unlawful means, interference in business, and inducement to breach of contract. Some other cases can be found dealing with economic courts decided by the Indian courts. A few of these have been in the domain of employment law’s overlap with non-compete contract clauses. 

To conclude, economic torts offer a unique set of remedies that deal with business and contractual issues. The economic loss sustained by economic torts is at times impossible to remedy by contract remedies. In such instances, the economic torts offer an important tool to remedy civil wrongs. 

#The author Hasit Seth is based in Mumbai and works as an independent counsel in commercial litigation and arbitrations. A version of this article was first published in Clasis Law's monthly newsletter's April 2022 issue.