Business torts are not committed against persons or property; rather, the harm done is to intangible assets, such as economic interests or business relationships. Generally, there are three common "business torts": 1) Interference with contractual relations, 2) Interference with prospective business advantage or the tort of "unfair competition", and 3) Fraudulent misrepresentation.
Interference with Contractual Relations
In business, competition is fierce. However, there are certain things that cross the line between legitimate, competitive, conduct and a civil wrong. For example, business' and their agents may not intentionally and maliciously interfere with existing contractual relations between a business and its customers; such conduct is a tort known as "interference with contractual relations".
In Nevada, in order to establish intentional interference with contractual relations, a plaintiff must show: (1) a valid and existing contract; (2) the defendant's knowledge of the contract; (3) intentional acts intended or designed to disrupt the contractual relationship; (4) actual disruption of the contract; and (5) resulting damage.
In the absence of a contract, a plaintiff may still establish the tort of intentional interference with prospective economic advantage by showing: (1) a prospective contractual relationship between the plaintiff and a third party; (2) knowledge by the defendant of the prospective relationship; (3) intent to harm the plaintiff by preventing the relationship; (4) the absence of privilege or justification by the defendant; and (5) actual harm to the plaintiff.
To be considered tortious, a defendant's actions must substantially exceed fair competition and free expression, such as persuading a bank not to lend a competitor any more money.
Interference with Prospective Business Advantage
Similarly, a business or its agents may be held liable if they unfairly interfere with another business' effort to attract clients: such conduct is commonly referred to as "unfair competition" and may also be proscribed by statute. In Nevada, the elements of the tort of intentional interference with a prospective economic advantage are: (1) a prospective contractual relationship between the plaintiff and a third party; (2) the defendant's knowledge of this prospective relationship; (3) the intent to harm the plaintiff by preventing the relationship; (4) the absence of privilege or justification by the defendant; and, (5) actual harm to the plaintiff as a result of defendant's conduct.
Also, in Nevada the prospective relationship need not be a formal contractual relationship, but it must be something presently expected and of pecuniary value to the plaintiff. Furthermore, as to the intent element, the plaintiff must show that the interference with the contractual relation is either desired by the defendant or known to the defendant to be a substantially certain result of his or her conduct.
A fraud is an intentional
misrepresentation, lie or deception made for personal gain or to damage another individual. Fraudulent misrepresentation protects a business or consumers economic interests and the right to fair and honest treatment. For a fraud claim, a plaintiff must establish that the defendant intentionally misrepresented a material fact and the plaintiff relied upon that representation to his financial detriment. For example, if a business submits materially misleading financial statements to an investor to secure a loan and in fact procures that loan as a result of its misrepresentation, that investor will have a fraud claim against the business if the business later defaults on the loan. In Nevada, to prevail on a fraudulent misrepresentation cause of action, the plaintiff must prove:
- A false representation made by the defendant;
- Defendant's knowledge or belief that its representation was false or that defendant has an insufficient basis of information for making the representation;
- Defendant intended to induce plaintiff to act or refrain from acting upon the misrepresentation; and
- Damage to the plaintiff as a result of relying on the misrepresentation.
At common law fraud had nine elements, some of which may also be pertinent in determining fraud under Nevada law, such as the following:
- a representation of an existing fact;
- its materiality;
- claim was in fact false;
- the speaker's knowledge that representation was false;
- the speaker's intent that it shall be acted upon by the plaintiff;
- plaintiff's ignorance the fact or representation was false ;
- plaintiff's reliance on the truth of the representation;
- plaintiff's right to rely upon it; and
- damages suffered by plaintiff.
In Nevada, as in almost all jurisdictions in the United States, each element of a fraud claim must be pled with particularity and proved by clear and convincing evidence (much like 'beyond a reasonable doubt' level of proof required in the criminal law). With respect to damages, fraud cases allow for compensatory, general, special and, in some instances, punitive damages where the conduct was clearly intentional, egregious and the loss great.