Integrating Preliminary Agreements into the Interference Torts

Preliminary agreements have become a common tool in sophisticated negotiations for dealing with a complicated and indeterminate state of the world. Modern courts have recognized them as an intermediate stage of contracting during which certain obligations attach to the conduct and behavior of both parties. However, courts have restricted the level of liability for breach of these obligations to protect the Promisor’s reliance interest rather than the ultimate economic expectation of the transaction. At the same time, modern courts have divided the interference torts into two separate doctrines: one for existing contracts and one for prospective contracts. Courts did so to accommodate the Inducer’s “privilege” to compete, which is believed to be stronger in the absence of a contract. While this division parallels the polar regimes of negotiations and contract in traditional contract law, modern courts have created a middle category in contract law to accommodate preliminary agreements. With the intermediate contracting stage, a preliminary agreement at once represents an existing contract yet contemplates a prospective contract, defying the subdivision of the interference torts into binary categories. This Note brings historical, legal, and policy-based analysis to bear on the proper integration of preliminary agreements into the interference tort doctrines. Harmonizing contract law with tort principles, this Note proposes limiting the measurement of tort damages for interference to reliance damages, which flow from the Promisee’s costs of relying on the preliminary agreement. As with the at-will employment relationship, expectation damages awarding the value of the ultimate transaction should be limited to a party who can prove an independently wrongful act of interference, like a tort, statutory violation, or regulatory violation. The independently wrongful act of interference justifies the increase in liability on independent tort grounds.