When a transaction or business partnership goes bad there is often a contract that may provide a remedy to the aggrieved party. However, a breach of contract claim may not be the only recourse. After reviewing the duties and remedies for breach available under the contract, it is always good practice to look for claims and remedies that may exist outside of the contract document.
While contract law aims to compensate a party for its loss resulting from a breach of the contract, there is another body of law, called tort law, which seeks to compensate the victim and to deter and punish the wrongdoer independently of any applicable contract. Generally, a tort is committed when one party wrongs another. In a breach of contract claim, an aggrieved party can only recover damages available under the contract, but by also bringing a tort claim, the aggrieved party may be able to reach other potential wrongdoers who are not parties to the contract, and the aggrieved party may be entitled to recover punitive damages.
Fraud is a good example of a tort claim that occurs all too frequently in the business context. Although there are multiple elements to fraud, the cornerstone of any fraud claim is a misrepresentation by the wrongdoer. Georgia has also recognized fraud by concealment, which allows an aggrieved party to hold a wrongdoer liable for the failure to disclose a material fact when there exists a duty to disclose that fact.
Tortious interference is also not uncommon with commercial transactions. This tort claim arises when a third-party interferes with the contractual or business relations of two primary parties. Tortious interference is broad and allows for recourse even when the interference is with prospective business relationships, which means an aggrieved party can sue a wrongdoer for interfering with their efforts to procure new business.
When thinking about these torts and others, it is important to remember another important tool: just as there can be criminal conspiracy, there exists the possibility of a civil conspiracy. A civil conspiracy requires an agreement between two or more people to accomplish a tort. To successfully prove a civil conspiracy, an aggrieved party must show that an underlying tort actually occurred. Proving conspiracy may allow an aggrieved party to recoup its losses from multiple wrongdoers rather than only one, which obviously can be a major advantage.
Although asserting a breach of contract claim is often the easiest and most apparent cause of action in the business context, there are a number of business torts that allow an aggrieved party a much larger range of remedies against an expanded field of possible wrongdoers. Also, the possibility of punitive damages can increase leverage in settlement talks. It stands to reason that a CEO armed with this knowledge can better serve the interests of his/her company.
Ken Hodges is a partner in the law firm of Ashe, Rafuse & Hill in Atlanta.