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Third party liability for breach of contract? Court of Appeal considers tort of inducing breach of contract

Posted on 2 July 2024


The recent Court of Appeal judgment in Northamber Plc v Genee World Limited & Ors provides a useful reminder of the potential liability of third parties for inducing or procuring a breach of contract between others. This article examines the decision and what it means for parties, particularly those conducting business in competitive and tightknit markets.


Northamber is a trade-only distributor of IT equipment to educational establishments. In 2017 it entered into an exclusivity agreement with Genee, an importer of AV displays, under which it became the sole distributor of Genee's products in the UK.

However, Northamber subsequently discovered that Genee had been distributing IT equipment directly to resellers in breach of the exclusivity agreement, including to a company called IES. Mandeesh Kaur, the sole director of IES, was married to Ranjit Singh, the sole director of Genee.

Northamber issued proceedings against Genee for breach of the exclusivity agreement, and against Mr Singh and IES for inducing that breach. Although it was successful as against Genee and partially successful against Mr Singh, at first instance the High Court rejected the claim against IES for inducing breach of contract.

Northamber appealed.

The tort of inducing breach of contract

In order to establish a third party's liability for the tort of inducing breach of contract, it is necessary to establish:

  1. A breach of contract;
  2. That the third party induced the contract breaker to breach the contract by persuasion, encouragement, or assistance in the actual breach;
  3. That the third party knew of the contract and knew that their conduct would have that effect;
  4. That the third party intended to induce the breach of contract either as an end in itself or as the means to achieving some further end; and
  5. That the third party had no lawful justification for their conduct.

The decision

At first instance, the judge held that all the requirements of the tort were satisfied, save for element (2). By virtue of Mrs Kaur's knowledge, IES knew about the existence of the exclusivity agreement, and had sufficient intention for the tort. However, the only acts of inducement relied upon by Northamber were IES's acts of placing orders with Genee in circumstances where Genee had already breached the exclusivity agreement by supplying products to other entities in the UK. In the judge's view simply giving Genee a further opportunity to breach the exclusivity agreement in this way was not sufficient to constitute inducement or persuasion by IES.

The Court of Appeal disagreed.

The Court noted that the tort amounts to "accessory liability" for breach of contract, and is based on the general principle that a person who procures another to commit a wrong incurs liability as an accessory. Provided that the third party's acts of encouragement or persuasion have a sufficient causal connection with the breach of contract and that the third party intended to induce a breach of contract, the third party will be found liable, whether the contract breaker is a willing party to the breach or not. The Court of Appeal also observed that the authorities establish the tort can be engaged simply where the third party had dealings that they knew to be inconsistent with the counterparty's contractual obligations.

In this case, the Court of Appeal concluded that, by placing orders and being willing to pay for products in circumstances where IES had the necessary intention and knowledge of the exclusivity agreement through Mrs Kaur, IES had induced Genee's breach of contract. In order for Genee to breach the exclusivity agreement it needed a willing purchaser, and so IES' involvement was necessary for the breach of the exclusivity agreement to occur. It was immaterial that Genee had previously breached the agreement by supplying other resellers, as each sale to anyone other than Northamber constituted a separate breach.

The Court also rejected IES' argument that it had been justified in placing orders directly with Genee on the basis that it was seeking to avoid breaching contracts with its own customers. On the evidence the first instance judge had concluded that IES's actions were predominantly aimed at pursuing its own economic interests, and that was not a lawful justification. As IES accepted, it needed to establish an equal or superior legal right to that asserted by Northamber, and on the judge's findings, it could not.


The Court of Appeal's judgment is an important reminder of the scope of the tort of inducing breach of contract and confirmation that, where a third party has entered into a transaction in the knowledge and intention that it will result in a breach of separate and pre-existing contractual obligations, they can be found liable as an accessory to the breach.

While the decision leaves open the question of whether mere facilitation of an infringing act can be sufficient to engage the tort, it is clear that in competitive sectors where contractual arrangements are well known to market participants, parties should exercise particular care. However, they can also take comfort from the fact that they will only be found liable for the tort of inducing breach of contract if it can be shown that they had sufficient knowledge that their actions would result in a breach.

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