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Johnson v. Holms Tuttle Lincoln-Mercury, Inc

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Brief Fact Summary. Defendant sold the Calderas a car with insurance. Caldera said he wanted insurance that covered public liability. Defendant did not sell Caldera public liability car insurance. Three weeks later, Caldera was in a car accident when Plaintiffs were injured.

Synopsis of Rule of Law. A party who is an intended beneficiary to a contract may sue for damages if one of the parties breaches the contract even if that person is not aware of the contract come to be part of the class of persons designated to benefit from the contract at the time of the contract is made.

Points of Law - Legal Principles in this Case for Law Students.

The test for determining whether a contract was made for the benefit of a third person is whether an intent to benefit a third person appears from the terms of the contract.

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Facts. The Calderas approached Defendant about buying a car. They said that they wanted full coverage auto insurance. The lower court found that the Calderas and Defendant had a meeting of the minds where they agreed that the Calderas would buy public liability auto insurance.
Some time later, the Calderas discovered the policy they bought from did not include public liability insurance.
Three weeks after buying the car and insurance, Mr. Caldera was in a car accident in which Plaintiffs were injured.
Both Plaintiffs obtained judgments against Mr. Caldera that remain unpaid.

Issue. May Plaintiffs recover damages from Defendant for failing to sell the Calderas public liability auto insurance despite the promise to do so?

Held. Yes
Clearly, Plaintiffs, who were injured in a car accident involving Mr. Caldera’s car were intended beneficiaries of the contract with Defendant to buy public liability auto insurance.
One need not know about the contract, nor be known to the contracting parties as long as, at some point, one becomes part of the class of person the contract was meant to benefit. In this case, that class of person is a person injured in a car accident with the Caldara’s car.

Discussion. An intended beneficiary is a member of any class that a contact is meant to benefit even if the primary purpose of the contract is for the benefit of one of the contractors.

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