Brief Fact Summary.
Plaintiff is employed as a college basketball referee. Defendant is a storeowner that sells sports memorabilia, specializing in the University of Iowa. Plaintiff was called to referee a game between Purdue University and the University of Iowa. During the game, Plaintiff made a call that resulted in Purdue’s victory in the game. Plaintiff brought suit to enjoin Defendant from making T-Shirts with his caricature. Defendant counterclaimed on the grounds that Plaintiff lacked the standard of care necessary to referee the college basketball game as a third party beneficiary.
Synopsis of Rule of Law.
Contracting parties must specifically intend for a third party to be a direct beneficiary of the contract for the third party to be able to enforce the contract by filing suit.
Whether a duty arises out of the parties relationship is always a matter of law for the court.View Full Point of Law
Plaintiff, Bain works as a referee for college basketball games. Defendant, Gillispie, operates a store that sells novelty; specialized University of Iowa sports memorabilia, in Iowa City, Iowa. Defendant’s store is a private, for profit enterprise, which has no affiliation with the University of Iowa. Thereafter, Plaintiff was called to be a referee at a University of Iowa versus Purdue University game. At the game, Plaintiff made a call that resulted in a win for Purdue University. Defendant and University of Iowa fans blamed Plaintiff for the University of Iowa’s loss. After the game, Defendant began selling T-Shirts with Plaintiff’s caricature being hung by a noose. Plaintiff brought suit against Defendant seeking an injunction and actual and punitive damages. Defendant counterclaimed on the grounds that Plaintiff negligently breached the standard of competence required to referee a college basketball game, and Defendant was entitled to third party beneficiary damages under Plaintiff’s contract with Big Ten Athletic Conference, Plaintiff’s employer. The trial court granted Plaintiff’s motion for summary judgment.
Whether a third party may file suit to enforce the contract between the two contracting parties.
No, a third party may not file suit to enforce the contract between the two contracting parties, unless the contracting parties specifically intended for the third party to be a direct beneficiary under the contract.
In this case, Defendant is not a third party beneficiary under Plaintiff and Big Ten Athletic Conference’s contract. The contracting parties, Plaintiff and Big Ten Athletic Conference did not anticipate or intend that Defendant would directly benefit from the contract. To directly benefit under a contract, the contracting parties must intend to make a gift or owe a duty to that individual. Under negligence law, a breach of a legal duty occurs when the actor does not conform the require standard of conduct, causing unreasonable risks that were foreseeable at the time of contract formation. Here, Plaintiff did not breach his duty of negligence to Defendant because Plaintiff did not owe Defendant a duty. Plaintiff did not foresee that Defendant would be harmed by his employment. Likewise, at the time of contract formation between Big Ten Athletic Conference and Plaintiff, the record does not suggest that the parties intended that Defendant benefit from the contract. Therefore, Defendant may not enforce a third party beneficiary action against Bain. The trial court’s holding is affirmed.