MIAMI BUSINESS LITIGATION: THIRD-PARTY BENEFICIARY TO CONTRACT

Standing is a legal concept requiring the litigant bringing the lawsuit to have a sufficient stake in the outcome of the controversy that enables the litigant to judicially resolve the controversy. Jamlynn Invs. Corp. v. San Marco Residences of Marco Condo. Ass’n, 544 So. 2d 1080 (Fla. 2d DCA 1989). The standing concept imposes a requirement that the claim be brought by someone who is recognized in law as a “real party in interest.” Brady v. P3 Group (LLC), 98 So. 3d 1206 (Fla. 3d DCA 2012). Contracting parties are generally deemed to be the real parties in interest, and can therefore, sue each other for breach of the underlying contract. Metropolitan Life Ins. Co. v. McCarson, 467 So. 2d 277 (Fla. 1985) (“Unless a person is a party to a contract, that person may not sue—or, for that matter, be sued—for breach of that contract where the non-party has received only an incidental or consequential benefit of the contract.”) However, one does not always need to be a contracting party to possess the standing needed to sue to enforce a contract’s terms. Third-party beneficiaries to a contract possess the requisite standing to sue to enforce a contract even though they are not themselves parties to the contract. Jim Macon Bldg. Contractors, Inc. v. Lake Cnty., 763 So. 2d 1223 (Fla. 5th DCA 2000) (“The right of an intended third-party beneficiary to sue under a contract is recognized in Florida…”). Peter Mavrick is a Miami business litigation attorney, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. 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 litigation, and other legal disputes in federal and state courts and in arbitration.

A third-party contractual beneficiary is one who is specifically intended to be a beneficiary of the contract. Morgan Stanley DW Inc. v. Halliday, 873 So. 2d 400 (Fla. 4th DCA 2004). The contract must “clearly express an intent to primarily and directly benefit the third[-]party or a class of persons to which that party belongs.” Id. Both contracting parties must intend to benefit the third-party. Caretta Trucking, Inc. v. Cheoy Lee Shipyards Ltd., 647 So. 2d 1028 (Fla. 4th DCA 1994) (It “must be shown that both contracting parties intended to benefit the third party. It is insufficient to show that only one party unilaterally intended to benefit the third party.”). Florida’s Supreme Court has long that:

Where a contract shows its clear intent and purpose to be a direct and substantial benefit to third parties, and not merely that third parties might be benefited by it, or that third parties are indirectly or incidentally benefited by it, the third parties who are directly and substantially benefited by the performance of the contract may maintain an action for its breach under the statute as the real parties in interest. If a direct and substantial benefit accrues to persons severally, and they are the real parties in interest, they may maintain an action severally.

Woodbury v. Tampa Waterworks Co., 49 So. 556 (Fla. 1909).

By contrast, incidental beneficiaries to a contract do not have standing to enforce a contract’s terms because the contracting parties did not specifically intend the beneficiary to benefit from the contact. Bozeman v. Hernando Cnty., 548 So. 2d 300, 301 (Fla. 5th DCA 1989) (dismissing the complaint because it indicated that the plaintiff was at most an incidental third-party beneficiary of the stated employment contract).

Florida Power & Light Co. v. Rd. Rock, Inc., 920 So. 2d 201 (Fla. 4th DCA 2006) provides a good example of the level of intent needed to establish a third-party beneficiary contract claim. In Rd. Rock, Inc., the Defendant entered a contract with Elmore that allowed Elmore to:

quarry and remove [ ] rock at his own cost and expense…. Removal of the rock shall be personal to Elmore and his heirs, and Elmore and his heirs shall not sell the rock in the ground or grant any rights with respect thereto or encumber such rock within the area of the lake to any person, firm or corporation, except to a partnership or corporation of which Elmore or his heirs own or continue to own at least a 50% interest thereof.

Id. Sometime thereafter, Road Rock sued the Defendant based on the contract. Road Rock claimed it was a third-party beneficiary to the contract because it was wholly owned by Elmore and formed for the express purpose of removing rocks. Id. The court rejected Road Rock’s argument because the contractual provision allowing Elmore “to transfer rights to an entity in which he owns at least a 50% interest does not show a clear intention of the contracting parties, as expressed within the contract, to primarily and directly benefit Road Rock.” Id.

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