National Phonograph Company v Edison

National Phonograph Co Ltd v Edison Bell Co Ltd [1908] 1 Ch. 335

Tort – Inducing breach of contract and fraud – Interference with Contractual Relation – Violation of Legal Right – Damages

Facts:

The plaintiffs were manufacturers who sold wholesale goods to factors upon the terms of an agreement which provided that only factors who had signed the agreement could sell the plaintiff’s goods. The goods also had to be sold at a fixed price. The defendant company employed other defendants, to obtain the plaintiff’s goods from other factors who were signatories to the agreement, by fraudulently holding themselves to be independent dealers. The purchasers who had fallen victim to fraud and suffered loss as a result.

Issues:

Whether the transaction between the defendant and the factors gave the plaintiffs any cause of action against the defendant company.

Held:

Held, upon affirming the appeal it was found that the plaintiffs were entitled to an injunction and damages in respect of the transactions between the defendant company and the factors. The defendant company was found to have committed fraud and therefore, induced the factors to sell the retailer’s goods to them. Had they approached the factors without the use of fraud, they would have unlikely been able to sell the goods, as the factors knew the penalties for breaching their contracts. The actions of the defendant were unlawful and were deliberate. The defendant would have been aware that the action would cause loss to the plaintiff. The defendants had interfered without justification with the contractual relations existing between the plaintiffs and the factors, thereby causing damage to the plaintiffs.