Brief Fact Summary.
Rensselaer Water Co. (Defendant) had a contract with the city of Rensselaer to supply its water, including for fire hydrants. A fire started and Defendant failed to supply sufficient water. The fire spread to the warehouse of H. R. Moch Co. (Plaintiff) and it was destroyed. Plaintiff has sued Defendant under two theories: (1) breach of contract and (2) common-law tort.
Can a defendant be held liable by a third party for damages resulting from defendant’s breach of contract?
No, the Court held the defendant cannot be held liable by third parties for damages resulting from their breach of contract either as a breach of contract or common-law tort claim.
While there was a benefit to the public from this water contract, the benefit was secondary. For Defendant to have a duty to third parties, their benefit must have been obvious and intentional – the primary reason for the contract.
Similarly, there is no duty to third parties merely by entering into this contract for the claim to succeed as a common-law tort. The Court said extending duty out this far would be too problematic and expansive. The Court does not want to force parties to involuntarily assume duties by means of entering into a relationship with one other party.