What is a business tort?
Business torts are civil wrongs that are committed by or against an organization. They frequently involve harm done to the organization’s intangible assets, such as its business relationships with clients or its intellectual property. Some common categories of business torts include:
• Unfair competition
• Fraud and
• Breach of fiduciary duty
What is unfair competition?
Unfair competition arises when treatment by one business entity causes harm to another business entity. Unfair competition includes intellectual property infringement and tortious interference, among other things. Intellectual property infringement usually involves violation of a company’s copyright, patent or trademark rights. Tortious interference includes interference with business or contractual relationships. A claim for tortious interference with a business relationship requires proof of an economic relationship between a party and a third party which has the probability of an economic benefit to the party; with knowledge of such relationship, an opposing party intentionally acts to disrupt the relationship and does so, causing harm to the initial party. Claims for tortious interference with contractual relationships require valid business contracts between a party and a third party; with knowledge of the business contracts, an opposing party intentionally acts to induce a breach or disruption of the contractual relationship and actual breach or disruption of the contractual relationship occurs, causing damage to the initial party.
What constitutes a breach of fiduciary duty?
A fiduciary is a party who is charged with acting in another party’s best interests. If the fiduciary acts in a way that is adverse to the beneficiary’s interests, breach of fiduciary duty occurs. In the business context, this tort most often surfaces with corporations. Generally, a corporation’s officers and directors have fiduciary duties to their shareholders, and a breach of fiduciary duty occurs if an officer or director acts in a manner adverse to the shareholders’ interests. For example, if an officer engages in insider trading, he would be guilty of breaching his fiduciary duties to the corporation’s shareholders.
What is the most common type of business fraud?
The most common type of business fraud is misrepresentation. Misrepresentation transpires when one party intentionally falsifies a material fact in order to induce another party to perform or refrain from performing in a certain manner. In order to prove misrepresentation, the plaintiff must show that he or she relied on the defendant’s misrepresentation and was harmed as a result. Other types of business fraud include embezzling company assets, falsifying financial statements and forging work hours.