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Cleveland Business & Commercial Law Blog

Tortious interference with business relationships: what is it?

In the individual context, a tort occurs when one person cause harm to another that is the result of a breach of ordinary or reasonable care owed to that other person. Being artificial persons, businesses can be liable for torts as well: either for wrongs done against individuals, or for wrongs committed toward another business, known appropriately as business torts.

Most of the time business torts are the result of one business taking free market competition too far. Unfair competition is one species of business tort; so is wrongful interference, which can be defined as one business deliberately attempting to harm the contractual relationship of another business, or to try to supplant that contractual connection. Wrongful interference is more than simply competing with another company for the same contract, which is legitimate. It frequently consists of a business attempting to sabotage the contractual relations of a competitor.

Why should I consider alternative dispute resolution?

The next chance you get to review one of your business contracts, or even a purchase order or order acknowledgment form, take a look at its provision for what forum to use if a dispute arises about its terms, conditions and performance obligations. Chances are that you will see a choice of law clause, but not a reference to court jurisdiction.

In fact, many if not most business-to-business contracts today, and many contracts between businesses and consumers, have mandatory alternative dispute resolution mechanisms built into them.

Competing lawsuits raise contract interpretation questions

Contracts with the state of Ohio will often involve two layers: the prime contract with the company responsible for project completion, and one or more subcontracts between that company and other companies it uses to help do the work. A recent dispute between two companies engaged in a project to raze some old buildings has called into question how each of them perceived its role in the prime-and-subcontractor relationship.

The project involved work to be done for the Ohio Department of Transportation and the city of Cincinnati. At least part of the project took the form of a minority-owned business set-aside contract under the Department of Transportation's "EDGE" (Encouraging Diversity, Growth and Equity) program. One of the two companies involved in the dispute is evidently a minority-owned business.

Careful planning can reduce the possibility of business disputes

Creating and operating a business is among the most challenging and rewarding activities that any entrepreneur can engage in. The prospect of making a good living by providing a valuable product or service is compelling, but at the same time if things go wrong then resolving business disputes with partners, customers, government entities or even your own employees can turn thoughts of business profitability into ones of business survival.

Unless you are doing business as a sole proprietor, something you will need to take into account is that the form of your business – whether it be an LLC, an S corporation, partnership or a C Corporation – will not only involve ordinary managerial concerns but also legal ones. Depending upon your goals and requirements, you will need to decide which type of legal entity status will be the best fit for you and your company not only in terms of how you serve your market but also how you protect yourself.

When does the Uniform Commercial Code apply to a contract?

If you do business in the state of Ohio, you likely deal with contracts. Depending on the nature of the transaction, the applicable law can be either the original, common-law based structure or the more recent Uniform Commercial Code (UCC) as it has been adopted by this state. But how do you know which body of law governs your agreement?

A business and commercial law firm experienced with the UCC can assist you in making sure that your contract properly includes and addresses UCC-specific considerations, as well as help you to interpret those considerations if the need arises.

What is an integration clause?

Negotiating a contract between two businesses can become a drawn-out process, and it is not uncommon for the parties to the agreement to have held multiple meetings in which proposed terms were discussed or written down, oral understandings were exchanged, or even a memorandum of understanding put together before multiple drafts of the agreement itself are passed back and forth. Sometimes even the last, signed version of the contract may still be subject to different interpretations, which has led to the question of what effect those prior negotiations and understandings may have if a dispute arises.

The legal term for the use of such external sources to help explain (or to contradict) what the two sides agreed to is “parol evidence”.  How or whether such evidence can be introduced depends on factors including whether the agreement is governed by the Uniform Commercial Code (UCC) as it has been adopted under Ohio law, and whether the final agreement contains what is known as an “integration clause.”

Choice of law provisions in contracts: why they matter

If your company does business with international partners, and especially if these transactions involve buying and selling goods, you may discover that to many foreign business people the American penchant for detailed contracts that seek to anticipate and address as many problem areas as possible is puzzling if not irksome. In the interest of trying to maintain a spirit of harmony during the negotiation process you may be tempted to scale back on some of the details, but one that you should always insist upon is a clearly understood choice of law provision.

International business transactions often carry the promise of great profitability, but if difficulties or disputes arise they can quickly become more complicated when the other side is using a legal system that is different from the one that you are accustomed to. Understanding exactly in advance which country's law will govern in the event of a misunderstanding, or whether an alternative dispute resolution mechanism will be used instead of litigation, will help to either avoid trouble or to expedite finding a solution.

What is the contractual effect of unilateral and mutual mistakes?

Parties to an agreement, particularly a business agreement, do not operate in an environment of perfect knowledge. Sometimes after entering into a contract either or both of the parties to it may realize that a mistake has occurred in the way the contract was written or in the business assumptions that formed the basis for entering into it. When mistakes are made, what is the legal effect on the contract and the parties' rights and obligations under it?

Contract mistakes can generally be broken down into two main types: mutual and unilateral.

Lawsuit alleges breach of contract by Ohio hospital

The Cleveland Clinic, which holds the lease for a 100-year-old hospital in Lakewood, Ohio, announced that it wanted to close the facility in 2016, 10 years before the end of its lease in 2026. The city and several council members have signed on as plaintiffs in a lawsuit against the clinic and several other defendants, alleging breach of contract and breach of fiduciary duty, among other charges.

The lawsuit contends that the clinic has already begun to cut services at its Lakewood Hospital and send patients to other facilities it operates, a practice the plaintiffs' attorney refers to as "gross mismanagement." The suit demands $400 million damages and for the hospital to remain open until the end of its current lease in 2026.

When cooperation turns to litigation, we can help

One of the advantages that commercial transactions have at the outset is the convergence of interests between the business partners: everybody is interested in making money. But sometimes after the ink is dry on the contract what began as a case of great expectations can break down into something that you did not anticipate or want, and you can find yourself seeking a way to salvage the situation or even to get out of it.

Simply put, there are businesses in Ohio, in other states and especially in foreign countries that see business relationships as zero-sum transactions. What do you do when the company you engaged to make your products in another country starts making and selling knock-offs of its own? What is your remedy when the distributor to whom you assigned exclusive territorial rights in one state or country starts selling outside its territory? How should you respond when it becomes apparent that your contract partner is stealing your intellectual property? 

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