FORT LAUDERDALE BUSINESS LITIGATION: THIRD-PARTIES ENFORCING NON-COMPETE AGREEMENTS

A third-party can enforce a contract even though it is not a party to that contract if the contracting parties expressly intended to primarily and directly benefit the third-party. Bochese v. Town of Ponce Inlet, 405 F.3d 964 (11th Cir. 2005) (“Under Florida law, a third party is an intended beneficiary of a contract between two other parties only if a direct and primary object of the contracting parties was to confer a benefit on the third party.”). One should not assume all contractual benefits befalling a third-party allows that third-party to enforce the contract because the benefit may only be incidental. Id. (“If the contracting parties had no such purpose in mind, any benefit from the contract reaped by the third party is merely ‘incidental,’ and the third party has no legally enforceable right in the subject matter of the contract.”) (collecting cases). Therefore, the court must determine whether the contracting parties entered the agreement for the direct and substantial purpose of conferring a benefit on the third-party. Id. Peter Mavrick is a Fort Lauderdale business litigation attorney. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.

Ordinarily, the contract does not need to contain an express third-party beneficiary provision to allow that third-party to enforce the contract because courts look to the nature or terms of a contract to determine whether the contracting parties’ manifested an intent to benefit the third-party. Jenne v. Church & Tower, Inc., 814 So. 2d 522 (Fla. 4th DCA 2002) (“Florida law looks to “nature or terms of a contract” to find the parties’ clear or manifest intent that it “be for the benefit of a third party.” (citing Am. Sur. Co. of New York v. Smith, 130 So. 440 (Fla. 1930)). However, restrictive covenants are an exception to the rule. Florida Statute § 542.335 requires that “the restrictive covenant expressly identif[y] the person as a third-party beneficiary of the contract and expressly state[ ] that the restrictive covenant was intended for the benefit of such person.” Therefore, a third-party cannot enforce a restrictive covenant unless the contract contains an express provision allowing that third-party to do so. See Cellco P’ship v. Kimbler, 68 So. 3d 914 (Fla. 2d DCA 2011) (“The undisputed evidence was that Alltel and Cellco did not merge and that Alltel did not assign the restrictive covenant rights to Cellco. As a result, Cellco cannot enforce the Alltel–Kimbler agreement because it is not a party to the agreement nor is it a third-party beneficiary, assignee, or successor in interest.”).

Tusa v. Roffe, 791 So. 2d 512 (Fla. 4th DCA 2001) illustrates this point of law well. Tusa was a pizza restaurant and entered a contract with Roffe to rent commercial space needed to make and sell pizzas. Id. The lease contract prohibited Roffe from leasing other property on the premises to anyone who sold pizza. Id. About two months later, Roffe leased space to KKA, which also sold pizza. Id. The Roffe/KKA lease contained a provision prohibiting KKA from selling pizzas. Id. Tusa quickly discovered KKA was a pizza restaurant and commenced a lawsuit against KKA and Roffe to stop KKA from selling pizza. Id. The court dismissed Tusa’s lawsuit against KKA because the Roffe/KKA lease did not contain a provision expressly identifying Tusa as a third-party beneficiary to the contract. Id. However, the court also determined Roffe breached the Roffe/Tusa lease because Roffe allowed KKA to open a pizza restaurant on premises in violation of Tusa’s restrictive covenants. Id. (“The only reasonable interpretation of the covenant’s language that would support its protective purpose is if Roffe was prohibited from leasing space to another restaurant that sold pizza in the same building as Tusa’s restaurant.”).

Peter Mavrick is a Fort Lauderdale business litigation lawyer, and represents clients in Miami, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.