Business Law: Types of Torts
As an executive, it's important to understand the general concept of torts in business law. Otherwise, you might mistake this legal term as a type of pastry and cost your organization a fortune.
Key Takeaways
In general, a tort is any form of “injury” (emotional. physical, financial) committed by or against an organization or individual.
Business torts involve harm done to the organization's intangible assets, such as its business relationships with clients or its intellectual properties.
Some common categories of business torts include: fraud, breach of fiduciary duty, and unfair competition.
Business Torts
Business Torts or 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 properties.
Tort defined by Cornell Law School:
A tort is an act or omission that gives rise to injury or harm to another and amounts to a civil wrong for which courts impose liability. In the context of torts, "injury" describes the invasion of any legal right, whereas "harm" describes a loss or detriment in fact that an individual suffers.1
Some common categories of Business Torts include:
Fraud
Breach of fiduciary duty
Unfair competition
Misrepresentation
One of the most common kinds of business fraud is the tolerance of 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
Forging work hours
Fiduciary
A fiduciary is the 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, then Breach of Fiduciary Duty occurs. In the business context, this tort most often surfaces with corporations.
Generally, a corporation as officers and directors have fiduciary duties to their shareholders. 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. A number of Business Torts fall under the umbrella of unfair competition. This generally occurs when a company acts in a manner that harms another company.
Unfair Competition
Unfair competition is comprised of: tortious interference, intellectual property infringement, and antitrust issues.
Antitrust violations normally occur when a company attempts to push any competitors out of the market by engaging in predatory pricing schemes or by entering into exclusive rights agreements with suppliers.
Intellectual Property infringement usually takes place when one company violates another company's intellectual property rights. Property commonly infringed includes:
A company's trademarks
Copyrights
Patents
For instance, infringements can occur if a company packages a product so that it looks like the product of a competitor, thereby misleading a consumer into purchasing it.
Tortious interference of Business Torts can be broken down into two categories:
Interference with business relationships
Interference with contract rights
Business relationship interference occurs when a meddling third-party intentionally prevents a company from establishing a business relationship.
Interference with contract rights generally takes place when a meddling third-party convinces a company to breach its contract with another company. Additionally, it can happen if a meddling party prevents the company from fulfilling its contractual obligations to another company.
https://www.law.cornell.edu/wex/tort