Brief Fact Summary. Moch Co.’s (Plaintiff’s) building was destroyed by fire, due to a lack of water to fight the fire. Plaintiff sued Rensselaer Water Co. (Defendant) for failing to supply the city with sufficient water.
Synopsis of Rule of Law. One who undertakes to perform a contractual duty for another, and fails to adequately perform this duty, owes no special duty to any third party harmed by his non-performance, unless he specifically agreed to perform for the third party.
Issue. The court addresses Plaintiff’s three theories of liability:
* If one undertakes to perform a contractual duty for another, and fails to adequately perform this duty, is he liable to any third party harmed by his non-performance?
* Will a court generally allow a contractual breach of contract to result in tort liability without a finding of duty owned independent of the contract?
* May an incidental beneficiary recover in tort for a failure to perform a contractual duty?
Held. No to issues (a), (b), and (c). Judgment affirmed.
* A member of the public may not maintain an action against one contracting with the city to furnish water at the hydrants, unless an intention appears that the promisor is to be answerable to individual members of the public as well as to the city for any loss ensuing from the failure to fulfill the promise. The benefit must be one that is not merely incidental and secondary. It must be primary and immediate in such a sense and to such a degree as to establish the assumption of a duty. In this case, the contract did not intend to give a member of the public a right of action against the Defendant. Plaintiff is an incidental third-party beneficiary and as such has no rights under the contract.
* At common law, one who assumes to act, even though gratuitously, may be charged with the duty of acting carefully. However, in this case, Defendant did not bring itself into such a relationship with individual members of the public. At most, Defendant’s failure to supply the city with water was the denial of a benefit to Plaintiff. It was not the commission of a wrong.
* The action is not maintainable as one for the breach of a statutory duty. Defendant is subject to the provisions of the Transportation Corporations Act. The duty imposed upon it under that act is to furnish the city with water. However, if Defendant may not be held liable for a tort at common law, then there is no reason that it may be held for a tort under the statute.
Discussion. Courts are reluctant to turn every contractual breach of contract into a tort. If there is no special relationship or contractual relationship between the parties, there is no tortious liability for withholding benefits under a contract to an incidental beneficiary. This action was not maintainable under tort law either. If the courts were to expand common law liability to Defendant, then there would be a tremendous amount of liability and associated transactional cost. In this case, the court held that Defendant did not undertake a duty to Plaintiff, but rather denied him a benefit.