Subcontractors Usually Are Not Third Party Beneficiaries of Contracts Between General Contractors and Owners

SUBCONTRACTORS USUALLY ARE NOT THIRD PARTY BENEFICIARIES OF CONTRACTS BETWEEN GENERAL CONTRACTORS AND OWNERS

By: Larry R. Leiby, Esq. and Robert S. Tanner, Esq.

About the Author: Larry Leiby, Esq. was the founder and first chairman of the Florida Bar Construction Law Committee in 1976. He is the author of the Florida Construction Law Manual. He is Board Certified in Construction Law and was on the Construction Law Certification Committee that creates and grades the tests for construction law board certification. He was awarded the lifetime achievement award by the Florida Bar Construction Law Committee and teaches construction law at the Florida International University College of Law. He can be reached at leiby@mkpalaw.com. For more information, please visit www.mkpalaw.com.

Generally, a person cannot claim benefits under a contract to which he is not a party, unless he can establish that the contracting parties intended him to be a third-party beneficiary. "A party is an intended beneficiary only if [both] parties to the contract clearly express an intent to primarily and directly benefit the third party or a class of persons too which that party claims to belong." Getting an incidental or consequential benefit from the contract is not enough. Since owners and general contractors typically intend for subcontractors to primarily and directly benefit from the prime contract, which is to say that typically subcontractors typically only receive an incidental or consequential benefit from the prime contract, subcontractors usually cannot claim to be third-party beneficiaries of the prime contract.

In Esposito v. True Color Enterprises Constr., Inc., 2010 WL 4103170 (Fla. 4 th DCA Oct. 20, 2010), Chris and Lorraine Esposito ("Owners") contracted with a general contractor ("Contractor") to have a home built for them. Contractor entered a contract with True Color Enterprises Constr., Inc. ("Subcontractor") for painting. Owners sued Subcontractor on the allegation that Subcontractor failed to secure the home before leaving one day, which allowed an arsonist to enter the home and set fires that caused significant damage to the home. Subcontractor took the position that it was a third-party beneficiary of the contract between Owners and Contractor and asked the trial court to dismiss the complaint based on some provisions of that contract. The trial court agreed and dismissed Owners' case against Subcontractor. Owners appealed.

The appellate court found that, "Nothing in the [Owners' contract with Contractor] demonstrates an intent to primarily and directly benefit [Subcontractor]." The appellate court found that, as is usually the case with prime contracts, the contract between Owners and Contractor "primarily and directly benefited only the [Owners], who would receive a new home, and [Contractor], who would receive [payment]." Although the contract made several references to subcontractors as a class, those references concerned only allocation of responsibilities and risk. Accordingly, the appellate court reversed the trial court and basically reinstated Owners' negligence claim against Subcontractor.