RealAnswers

A reader asks:

If a Seller executes a backup contract, is that tortious interference in the primary contract?

This is a situation that both the original buyer, the backup buyer and the seller as well as all the agents involved need to be addressing with their attorneys. The one obvious answer though is “Not always.” If it were always tortious interference for a backup contract to be executed, there would be a lot less backup contracts (approaching zero!).

The law is going to vary by jurisdiction, which is one reason that an answer on a website is no substitute for speaking with local counsel, but here’s some interesting information from Findlaw on tortious interference in one jurisdiction (Georgia) just as “food for thought”:

The courts have further defined the claim of tortious interference to require proof that the defendant did the following: (1) acted improperly and without privilege; (2) acted purposefully and maliciously with intent to injure; (3) induced a third party or parties not to enter into or continue a business relationship with the plaintiff; and (4) caused the plaintiff some financial injury…

Defenses to tortious interference claims include various privileges, such as the privilege of fair competition. It has long been recognized that fair competition is always legal.

One thing is clear – the seller can’t have committed tortious interference. The seller might have committed breach of contract, of course.

If the seller didn’t breach the primary contract, for example if the financing contingency date had passed with no loan commitment, it would be hard to maintain that there was an interference by the backup buyer. It’s hard to claim interference at that point, if the primary contract is no longer valid. If the backup buyer convinced the seller to exercise a contingency to void the primary contract, maybe.

Those elements of intent, purposefulness and malice are going to be tough as well. Plus, a backup contract buyer is likely to be covered by some of the defenses – not least the fair competition defense mentioned. Of course, a good attorney might well be able to convince a court otherwise.

Interference With Contractual or Business Relations: The Business Claim

Three bottom lines here:

• If it were commonly considered interference to enter a backup contract, the practice would be a lot less commonplace.
• If there’s reason to think there might be a claim, it’s worth consulting a lawyer. A good lawyer may want a fee for the consultation, but the answer you get is going to be worth a lot more than the answer of a nonlawyer writing on a website, with no specifics and merely speculating for his own entertainment and that of his readers.
• No Professional Advice
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Thoughts for my fellow real estate agents in this situation:

• Chances are the cost of a quick legal consultation, if any, will be pretty minimal compared to the sums involved in a real estate transaction.  If my buyer felt he’d been shafted, I’d encourage him to get that consultation.
• I’d make sure the client understands that I am still on his side.  My service doesn’t end because an attorney’s service begins.  Consider accompanying the client to that legal consultation for moral support and to be able to provide information, if needed.
• Before speaking to the client’s attorney, check with your E & O company, company attorney or your own attorney.  Consider having your attorney, or your company’s, go with you or available by phone during the client’s legal consultation.