Tortious Interference in Tennessee: Inducing a Breach of Contract and Interfering With Business Relationships

When a business loses a contract or a customer because someone outside the relationship stepped in, Tennessee law may provide a claim against that outsider. There are three related theories: a statutory claim for procuring a breach of contract, a common-law claim for inducing a breach, and a tort for intentionally interfering with business relationships. They overlap, but each has its own elements, and the differences decide many cases.

The statute: procurement of breach of contract

Tenn. Code Ann. § 47-50-109 makes it unlawful for any person, "by inducement, persuasion, misrepresentation, or other means," to induce or procure the breach of any lawful contract by a party to it. The person who procures the breach is liable for treble the damages resulting from the breach, and the injured party may sue for the breach and those damages.

Tennessee recognizes both this statutory claim and a common-law claim for inducing a breach of contract (Polk & Sullivan, Inc. v. United Cities Gas Co., Tenn. 1989). Courts describe the statute as declaratory of the common law except as to the amount of damages (Myers v. Pickering Firm, Inc., Tenn. Ct. App. 1997). Because treble damages are a severe penalty, courts have said the statute should not be enforced except upon a clear showing.

The seven elements

To recover for procurement of a breach of contract, a plaintiff must prove:

1. there was a legal contract;
2. the wrongdoer knew the contract existed;
3. the wrongdoer intended to induce its breach;
4. the wrongdoer acted maliciously;
5. the contract was breached;
6. the wrongdoer's act was the proximate cause of the breach; and
7. damages resulted from the breach.

The Tennessee Supreme Court has listed these elements and said they are the same for the statutory and common-law claims (Givens v. Mullikin, Tenn. 2002); the Court of Appeals applied them in Myers v. Pickering Firm, Inc. (Tenn. Ct. App. 1997) and Sugar Creek Carriages v. Hat Creek Carriages (Tenn. Ct. App. 2018).

The contract has to be enforceable

The first element is often where these cases are won or lost. In Sugar Creek Carriages, a Nashville carriage company sued a competitor under § 47-50-109 for procuring a driver's breach of his non-compete. The Court of Appeals agreed the non-compete was unenforceable and held that this was fatal to the procurement claim, because there was no legal contract to breach.

That ties interference claims closely to non-compete law. Whether a non-compete holds up depends on the 2026 statute and the case law described in my article on Tennessee non-compete agreements, including the bar on non-competes for employees earning under $70,000 a year (Tenn. Code Ann. § 50-1-211), which applies to agreements and proceedings covered by the 2026 Act. A non-solicitation or confidentiality agreement is a separate term, analyzed on its own, and may support a claim even where a non-compete does not. A competing employer can face a procurement claim when it hires someone in breach of a covenant: in Buddy Lee Attractions, Inc. v. William Morris Agency, Inc. (Tenn. Ct. App. 1999), a booking agency won a trebled jury verdict against a competing agency that hired one of its agents. The Court of Appeals reversed and ordered a new trial, because there was a factual dispute over whether a later employment agreement had replaced the one containing the covenant.

Contracts that can be ended at will

A relationship that either side can end at any time raises a different problem. Ending an at-will relationship is not a breach, and the Tennessee Supreme Court has described a procurement claim as requiring a legal contract for a designated term (Forrester v. Stockstill, Tenn. 1994). The same decision held, however, that intentional interference with at-will employment by a third party, without privilege or justification, is actionable.

Competition matters most here. In Polk & Sullivan, a gas company dropped its insurance broker after another broker offered identical coverage for much less. The Tennessee Supreme Court called this "a classic example of the free enterprise system at work" and reversed a finding of liability. The Court quoted authority recognizing that where a contract is terminable at will, a competitor generally has the privilege of interfering to acquire the business for itself, so long as it does not use wrongful means.

Interference with business relationships

Many valuable relationships are not contracts at all: repeat customers, referral sources, or a deal still being negotiated. In Trau-Med of America, Inc. v. Allstate Insurance Co. (Tenn. 2002), the Tennessee Supreme Court expressly adopted the tort of intentional interference with business relationships. A plaintiff must prove:

1. an existing business relationship with specific third parties, or a prospective relationship with an identifiable class of third persons;
2. the defendant's knowledge of that relationship, not a mere awareness of the plaintiff's business dealings with others in general;
3. the defendant's intent to cause the breach or termination of the relationship;
4. the defendant's improper motive or improper means; and
5. damages resulting from the interference.

The fourth element is what separates this tort from ordinary competition. The Court said a precise, all-encompassing definition of "improper" is neither possible nor helpful. An improper motive requires proof that the defendant's predominant purpose was to injure the plaintiff. Examples of improper means include conduct that is illegal or independently tortious; violence, threats, or intimidation; bribery; unfounded litigation; fraud, misrepresentation, or deceit; defamation; duress or undue influence; misuse of inside or confidential information; breach of a fiduciary relationship; and conduct that violates an established standard of a trade or profession, such as sharp dealing, overreaching, or unfair competition.

Common defenses

• Privilege and justification: interference is justified when the conduct was lawful, was carried out in a lawful manner, and had some real tendency to bring a reasonable advantage to the actor. The Tennessee Supreme Court has framed the question as whether the defendant was acting in the due exercise of its own right to carry on business (Polk & Sullivan, quoting Hutton v. Watters, Tenn. 1915).
• Competition: a competitor that wins away business held under an at-will relationship, or business that was only prospective, is generally exercising a privilege, unless it uses wrongful means (Polk & Sullivan); and a claim over a relationship that is not a contract fails without an improper motive or improper means (Trau-Med).
• Parties and corporate agents: these claims are aimed at outsiders. The statute targets a person who induces a breach "by any party thereto," and a party that simply breaks its own contract answers for breach of contract. When an employee sued two corporate directors for procuring his discharge, the Tennessee Supreme Court held the claim could proceed only if the directors stood as third parties to the employment relationship, and it looked to their intent, motive or purpose, and means. Officers, directors, and employees who act within the general range of their authority, and are substantially motivated by an intent to further the corporation's interest, share the corporation's immunity. Finding no evidence that the directors acted outside that interest, the Court dismissed the case (Forrester v. Stockstill). Similarly, a parent corporation is privileged to cause its wholly owned subsidiary to break a contract, but it loses that privilege if it acts against the subsidiary's economic interests or uses wrongful means, such as fraud, misrepresentation, threats, or defamation, and the plaintiff must prove the privilege was lost (Waste Conversion Systems, Inc. v. Greenstone Industries, Inc., Tenn. 2000).
• No enforceable contract: if the underlying contract is void or unenforceable, the procurement claim fails (Sugar Creek Carriages).
• Statements in litigation: statements made in the course of judicial proceedings, and relevant to them, are absolutely privileged, and the Court of Appeals has held that the privilege also bars a procurement claim based on defamatory statements of that kind (Myers v. Pickering Firm, Inc.). The Tennessee Supreme Court later treated the privilege as a defense to defamation, however, and declined to extend it to a claim for interference with business relationships that was not based on defamation (Trau-Med). How far the privilege reaches can depend on how the claim is framed.

Treble damages, punitive damages, and election

Under § 47-50-109, damages are trebled when a procurement of breach is proven. The Court of Appeals has read the "clear showing" requirement to mean that the jury must find each element by clear and convincing evidence before damages are trebled, while compensatory damages on the common-law claim require only a preponderance of the evidence (Buddy Lee Attractions). The Tennessee Supreme Court has described the statute as substituting treble damages for punitive damages and has said treble damages are mandatory upon a clear showing that the defendant induced the breach (Polk & Sullivan).

Plaintiffs often plead both the statutory claim and the common-law claim with a request for punitive damages. The Court of Appeals has held that a plaintiff who succeeds on both must elect between the remedies, because the law does not allow double redress for a single wrong (Buddy Lee Attractions). Punitive damages on a common-law claim require clear and convincing proof that the defendant acted maliciously, intentionally, fraudulently, or recklessly, and they are generally capped at the greater of two times the compensatory damages or $500,000, with limited exceptions (Tenn. Code Ann. § 29-39-104).

Filing deadlines

Section 47-50-109 does not contain its own limitations period, and Tennessee courts do not pick a deadline based on the name of a claim. In Benz-Elliott v. Barrett Enterprises, LP (Tenn. 2015), the Tennessee Supreme Court held that a court must identify the gravamen of each claim, considering first its legal basis and then the type of injury for which damages are sought.

Before that decision, the Court of Appeals focused mainly on the type of injury. Where an employee alleged he lost a contract for continued employment, the three-year period for injuries to property applied (Tenn. Code Ann. § 28-3-105). Where the employment was at will, there was no property interest, and the one-year period for injuries to the person applied (Tenn. Code Ann. § 28-3-104(a)(1)(A); Sudberry v. Royal & Sun Alliance, Tenn. Ct. App. 2008). The Court of Appeals has also applied the three-year period to a claim for interference with a business relationship that caused business and property losses (Collins v. Greene County Bank, Tenn. Ct. App. 1995), and the Tennessee Supreme Court has said in a footnote that claims for interference with contract have a three-year period (Tigg v. Pirelli Tire Corp., Tenn. 2007). One question remains open: a federal appeals court noted, without deciding, that the one-year period for actions for statutory penalties (Tenn. Code Ann. § 28-3-104(a)(1)(C)) might apply to a treble-damages claim under § 47-50-109 (Misco, Inc. v. United States Steel Corp., 6th Cir. 1986). I am not aware of a Tennessee appellate decision since Benz-Elliott that settles the limitations period for these claims, so the deadline for a particular claim is not always clear.

Interference claims turn on the contract, the relationship, and what the other side actually did. If an outsider has disrupted a contract or customer relationship, or you have been accused of doing so, my office can review the facts and the contract. If a non-compete is involved, see Tennessee non-compete law after the 2026 Act.

Educational disclaimer: This article provides general Tennessee educational information only and is not legal advice for any specific contract, relationship, or dispute.