Commercial tort claims: Overview, definition, and example
What are commercial tort claims?
Commercial tort claims refer to legal claims made by a business or individual arising from wrongful acts or harm caused by another party, which result in financial loss or damage to the business. These claims are related to business activities or commercial transactions and can involve issues like fraud, breach of fiduciary duty, misrepresentation, or interference with contractual relationships.
For example, a company may file a commercial tort claim against a competitor for intentionally interfering with a key client relationship, causing significant financial harm.
Why are commercial tort claims important?
Commercial tort claims are important because they provide businesses with a legal avenue to recover damages for wrongful acts that harm their operations, reputation, or financial standing. For SMBs, these claims are particularly critical in protecting their rights, assets, and business relationships in cases of fraud, unfair competition, or other intentional misconduct.
In contracts, clauses related to commercial tort claims often specify how such claims are handled, assigned, or secured, especially in financing agreements where lenders may take a security interest in these claims.
Understanding commercial tort claims through an example
Imagine an SMB discovers that a former employee has shared confidential trade secrets with a competitor, leading to a significant loss of clients. The SMB files a commercial tort claim against the former employee and the competitor for misappropriation of trade secrets and interference with its business relationships.
In another scenario, a supplier misrepresents the quality of raw materials sold to a manufacturer, resulting in defective products and financial losses. The manufacturer files a commercial tort claim against the supplier for fraudulent misrepresentation and seeks compensation for the damages caused.
An example of a commercial tort claims clause
Here’s how a commercial tort claims clause might appear in a financing agreement:
“As collateral for the Obligations under this Agreement, the Borrower grants the Lender a security interest in all Commercial Tort Claims, whether existing as of the date hereof or arising thereafter, including without limitation any claims described in Schedule A. The Borrower shall provide written notice to the Lender of any newly arising Commercial Tort Claims and take all necessary steps to perfect the Lender’s security interest in such claims.”
Conclusion
Commercial tort claims provide businesses with a means to recover damages caused by wrongful acts that harm their operations or financial standing. For SMBs, these claims are a vital tool for protecting their interests and seeking justice in cases of fraud, misrepresentation, or other intentional misconduct. A well-drafted commercial tort claims clause ensures clarity and enforceability in contracts, particularly in financing or security agreements, safeguarding the rights and assets of all parties involved.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.