In the industrial laundry business we value our customer contracts. Knowing our customers are obligated to five year agreements makes us feel secure. We appreciate that our customers are committed to us and are glad they are not being serviced by our competitors.
But what happens when the customer you want is trapped in a contract with your competitor? Can you encourage them to breach their contract and do business with you? In this article I intend to summarize some key points to consider the next time you visit with potential customers.
In general, the law tries to strike a balance between protecting contracts and promoting free competition. Most of our service contracts have exclusivity clauses where the customer agrees to only rent from you. This is good. It provides you with added security. But your competitors also have exclusivity clauses in their contracts. Remember to keep that in mind.
The first thing to determine when calling on a potential customer is whether or not they have a current valid contract with their laundry supplier. If they do, then you are now on notice. Any evidence of improper interference with that potential customer’s current contract could make you vulnerable to a tortious interference claim. Your competitor would have to prove that you knew that your competitor’s customer was subject to a contractual agreement and you nonetheless induced that competitor’s customer to breach their current contract and enter into a rental agreement with you. The good news is that this works both ways. Therefore, the large national competitor that is improperly calling on your account is also subject to a tortious interference claim from you.
If your competitor is improperly interfering with your customers you should protect your interests by written demand asking them to desist solicitation and discontinue servicing your contract customers. Be specific by outlining exactly which customers they have improperly solicited. If your competitor ignores your demand and continues its improper solicitation you should consider hiring an attorney and pursuing litigation. In evaluating a contract interference case your attorney will determine whether a valid contract exists with a customer, your competitor’s knowledge of that contract, your competitor’s intentional and improper inducement of a breach, and damages.
In conclusion, please note that protecting yourself from a tortious interference claim does not negate your right to solicit business in other ways. For example, you and your competitors can send out regular advertising pieces and solicit in the normal course of business. These acts do not constitute inducement to breach a contract. Ultimately, you and your competitor’s liability will depend on evidence showing that the inducement to breach the contract exceeded minimum levels of ethical behavior.
Have you ever been involved in a tortious interference claim? If so, please share your story.
This article is made available by the lawyer for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. You understand there is no attorney client relationship between you and the lawyer. The content in this article should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.
Serena Putegnat is a practicing Texas attorney. Putegnat owns Model Laundry with her siblings in the Rio Grande Valley.