What business owners, executives, and professionals should know about business torts and protecting a business

Business torts: An overview

A common part of managing and running a business is encountering legal disputes. One sector of business disputes business owners, executives, and professionals should be familiar with are business torts, or legal wrongs caused by or to a business as a result of unlawful activities.

Commonly encountered business torts include:

• Fraud: Deliberate deception to achieve unlawful gain. This can occur in various ways, such as misleading descriptions of products or services.
• Defamation: Making false statements about a business that harm its reputation intentionally. This includes both slander, which is spoken defamation, and libel, which is written defamation.
• Tortious Interference: When a third party intentionally disrupts a business relationship or contract, causing harm to a business. For example, if a company were to convince a client to break contract with a competitor.
• Unfair Competition: Actions that deceive consumers, such as false advertising or trademark infringement, leading to a loss for a business competitor.
• Breach of Fiduciary Duty: This occurs when a party with a fiduciary responsibility, or the obligation to act in the best interest of another party, fails to do so, often leading to financial damage.

These claims, when liability is proven, can result in financial loss, reputation damage, and further legal problems. In order for businesses to avoid being victims or instigators of business torts, being informed, prepared, and utilizing legal counsel create an essential foundation for success.

Identifying risks for business torts

To protect your business, it is important to monitor signs of being a victim of a business tort or identify vulnerabilities where your methods could unintentionally lead to one.

Methods to do this include reviewing all business contracts thoroughly to ensure terms are being honored by all parties. For example, if it is found that a third party is interfering with any contractual relationships, there may be grounds for a tortious interference claim.

Another important habit is to monitor competitors’ business practices. If they are producing false advertising or other forms of unfair competition, it can potentially affect your business, giving you grounds to take legal action against them.

Conducting internal compliance audits is crucial for maintaining legal standards, ethical practices, and avoiding liability for business torts. Regular evaluations of things such as marketing strategies and general operations are important to ensure they are not misleading customers or interfering with competitors’ contracts because even unintentional actions could lead to a tort claim.

Best practices to protect your business from business torts

By taking proactive measures, business owners can significantly reduce the risk of being involved in or accused of business tort claims.

An effective strategy is to invest in properly training staff to raise awareness of what constitutes a business tort and to emphasize the importance of maintaining ethical business practices. Additionally, establish and enforce policies that outline legal compliance and ethical behavior throughout your business.

Most importantly, consulting legal experts is a crucial ongoing practice for businesses. Seeking legal advice preventatively can often prevent small issues from growing into costly legal disputes. By taking these measures, you can protect your business from the risks associated with business torts and ensure its long-term success.