Related party persuasion: inducing a breach of contract

Related party persuasion

Genee appointed Northamber as its exclusive distributor of audio-visual kit. Genee breached this exclusivity by supplying IES. Mr Singh was sole director of Genee and his wife, Ms Kaur, was sole director of IES.

Northamber brought a claim against Genee for breach of contract, and both Singh and IES for inducing the breach.

Beyond mere facilitation

The Court of Appeal, overturning the judge at first instance, held that IES had induced Genee to commit the breach. Genee had sold products to IES in breach of the exclusivity agreement, an agreement of which IES had knowledge, owing to the relationship between Singh and Kaur. The court stated that IES “went beyond merely facilitating the relevant breaches of contract. It’s involvement was necessary for the breaches to occur because breach of an exclusivity clause requires a counterparty.” 

IES did not just place orders with Genee, it paid the price charged by Genee. IES “operated on the will of Genee”. It was immaterial, the court held, that Genee had already shown itself willing to act in breach of the exclusivity agreement by supplying other customers.

Remember the tort of inducing a breach of contract

The inducement was made out by knowledge of the exclusivity agreement plus the placing of an order. This was a lower threshold than the judge at first instance had thought appropriate. 

Whether as claimant, or to avoid being potential defendant, don’t forget the tort of inducing a breach of contract. Those who are not party to the contract won’t have the benefit of contractual protections like caps and limitations of liability. 

Judgment: Northamber v Genee & Singh