What does the legal term 'defamation' encompass?

Defamation is specifically concerned with the harm to an individual's reputation through false statements made about them. This legal concept includes both spoken defamation, known as slander, and written defamation, known as libel. The core of a defamation claim hinges on the necessity of proving that the statements made were indeed false and caused harm to the individual's reputation, resulting in damages. The other options listed do not pertain to this legal definition: harm to physical property relates to tort law but not defamation, emotional distress from a breach of contract falls under contract law rather than reputation, and illness from negligent acts typically addresses personal injury law, again separating it from the realm of defamation. Thus, the focus on reputational harm through false statements is what makes the correct answer precise in defining defamation.