Board of Education of Community School District No. 220 v. Village of Hoffman Estates

Brief Fact Summary.

Board of Education of Community School District No. 220 (plaintiff) sued Village of Hoffman Estates (defendant) seeking a declaratory judgment.

Synopsis of Rule of Law.

A beneficiary to a contract has no right in the agreement until they are identified to the contract and until that point the principal parties to the contract can make any modification they deem necessary.

Facts.

Defendant entered into a contract with two groups of developers where the defendant was to hold money paid to them by the investors in an escrow account. According to the contract the parties were required to use their best efforts to annex a school district 5 years after the contract became effective and subsequently the money in escrow would go to that school district. Before the 5 years was to expire, the defendants modified the contract and extended the period to annex the district. Under the contract, if the school district was not annexed after the 5 years, the money in escrow would go to the plaintiff.

Issue.

Whether beneficiary to a contract has rights in the agreement until they are identified to the contract and until that point the principal parties to the contract can make any modification they deem necessary.

Held.

No. A beneficiary to a contract has no right in the agreement until they are identified to the contract and until that point the principal parties to the contract can make any modification they deem necessary.

Discussion.

When there are multiple beneficiaries to a contract, those parties will have no rights until one of the beneficiaries is identified. While it is true that beneficiaries have rights in a contract made for their benefit this is not the case where there are multiple beneficiaries. Here, there were 2 beneficiaries to the contract and the plaintiff has no rights in the agreement until the 5-year period ends. Thus, the defendant was free to modify the contract.