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Donee beneficiaries and the parol evidence rule.

Donee beneficiaries are pretty peculiar. They own the rights created by a contract created by others. Their rights have primacy over the promisee's rights (1) but the promisees have enforceable rights as well. (2) The donee beneficiaries may be totally unaware of these enforceable rights for which they have not given consideration. (3) For purposes of this essay, "donee beneficiary" means any intended beneficiary other than a creditor beneficiary. A creditor beneficiary is a promisor who assumes a debt that "will satisfy an obligation of the promisee to pay money to the beneficiary...." (4) Thus defined, third party donee beneficiaries are of importance in commercial activity, for example, in an agreement between parent and subsidiary to indemnify a class of individuals. (5) Today, the concept of donee beneficiary has expanded from the intent to create a gift, to anytime there is an intent gratuitously to confer a right other than a right caused by the assumption of a debt owed by the promisee. (6)

Parol evidence of one's status as donee beneficiary is the subject of this essay. (7) I do not advocate in this article for any particular version of the parol evidence rule. (8) Once the donee beneficiary is identified, the contract should be subject to the parol evidence rule as any contract. (9) Whether the parol evidence rule in the appropriate jurisdiction is soft or hard, (10) the peculiar nature of the donee beneficiary merits that parol evidence ought to be welcomed and admitted. The status of donee beneficiary should be exempt from all formulations of the parol evidence rule. At the very least, evidence of surrounding circumstances should be admissible as it is in some jurisdictions in donee beneficiary cases. (11)

The generally accepted statement of the parol evidence rule is that an integrated writing may not be varied or contradicted by evidence of any prior promises or conditions. The rule itself is deceptively simple. However, Professor Thayer warned us: "Few things are darker than this, or fuller of subtle difficulties." (12) Why then in most discussions of the rule is Professor Thayer's admonition quoted? The reason is that there are many exceptions and qualifications to the rule. To pick out one of many--a deed absolute in form may be shown to be for security only. (13) As a qualification of the rule, it is submitted that status of a donee beneficiary is unrelated to the policy basis of the parol evidence rule. Donee beneficiaries have standing because typically there is no other human being or entity who has the incentive to hold the promisor to his or her promise that clearly benefits the plaintiff. If there is, judicial economy is promoted by having one law suit instead of two.

Why should the status or identity of donee beneficiaries be exempt from the parol evidence rule? Because the status of a person as a donee beneficiary has nothing to do with the parties themselves adding or subtracting a new promise or condition to their agreement. It is the law that determines who is a donee beneficiary. (14) Just as the law determines what contracts are enforceable, it determines who may enforce them. For example, certain strictures have been placed on donee beneficiaries regardless of an expression of an intent to benefit, whether the restriction involved the nexus between the beneficiary and the promisee, (15) the degree of their relationship, (16) or whether their relationship resembles privity. (17) These strictures have been relaxed but their very existence demonstrates that "Private Ordering" is not the key to the development of the legal treatment of donee beneficiaries.

Let us start our analysis with the Maryland case, what I will call the case of the two towers. (18) Two developers contracted with the owners of two adjoining parcels for ground leases. They sued the ground-lessors because they failed to cooperate in contesting their building permits and in giving estoppel certificates. (Maryland preserves the old English custom of ground leases whereby the landowner retains title to the land; a developer leases the land rather than purchases it and the lessee of the ground pays rent.) Judgment was entered for the ground-lessees for over $36 million. At issue on appeal, among other issues, was a finding of joint and several liability. Joint and several liability would attach only if the jury could find that the defendants were donee beneficiaries of each other.

In determining whether donee beneficiary status attached to the parties, the court looked at the contracts themselves as well as the surrounding circumstances. In so doing the court said:

   This appears to be a deviation from the general rule for
   interpreting contracts, under which we do not consider "extrinsic
   evidence" of the parties' intent unless the language of the
   contract is ambiguous ... "[w]hen the clear language of a contract
   is unambiguous, the court will give effect to its plain, ordinary,
   and usual meaning, taking into account the context in which it is
   used.... If the contract is ambiguous, the court must consider any
   extrinsic evidence which sheds light on the intentions of the
   parties at the time of the execution of the contract." (19)

The court thus stated an exception to what is the most prevalent version of the parol evidence rule.

The court noted common easements in the contracts themselves, the specifications detailing a common garage and other common amenities. While this made the status of the tenants as third party beneficiaries plausible, the lessors were held not to be third party donee beneficiaries. (20) Yet the case is significant. Its significance lies not in its holding but its methodology--its willingness to consider extrinsic evidence despite the absence of ambiguity. The competing view is expressed in a Georgia case: "[T]he contracting parties' intention to benefit the third party must be shown on the face of the contract." (21) This view is belied by a number of cases and other authorities.

Most beneficiaries are clearly identified in the contract. (22) In one such case in which the plaintiff was named in the contract, the court said: "Unless the contract is expressly designed for the benefit of a third party, resort, of necessity, must be had to extrinsic evidence to ascertain whether it was the purpose and intent of the parties to the contract to bestow a benefit or gift upon a third party." (23) Other situations of contract enforcement where the identification of a donee beneficiary is exempt from the parol evidence rule are admittedly scant. (24) But they exist. Consider a subordination agreement between purchasers of unbuilt condominiums. A subsequent mortgagee has priority over the vendees' liens whether or not the mortgage instruments claim priority. (25) The admission of the extrinsic evidence of the subordination agreement is refreshing.

Refreshing indeed is a holding that a purchaser of the assets of a corporation promised the selling corporation orally that a particular employee would be retained. In Suciu v. AMFAC Distribution Corporation it was held that the status of the employee as a third party donee beneficiary did not contradict the writing that did not deal with the individual. (26)

Claimants to the status of third party beneficiary have an even easier time in New Mexico. There, in common with most jurisdictions, "[t]he burden is on the person claiming to be a third-party beneficiary to show that the parties to the contract intended to benefit him. He may do so using extrinsic evidence if the contract does not unambiguously indicate an intent to benefit him." (27) A common illustration involves one view of restrictive covenants on the use of land. Under this view, members of the public are donee beneficiaries. (28) The competing view is that restrictive covenants are in the nature of real property interests. (29) Under this view, since conveyances are generally in writing, the parol evidence rule is engaged. According to standardized generalizations about the parol evidence rule, under either theory parol evidence should be inadmissible absent an ambiguity. Under either theory it may be shown, however, that the purchaser is or is not a bona fide purchaser for value. If the purchaser is a bona fide purchaser for value, the purchaser takes free of the restriction; (30) if the purchaser is not, the purchaser takes subject to the restriction. (31) Whether the purchaser qualifies as a bona fide purchaser for value is a matter that involves proof by parol evidence. (32) Either the matter is conceded (33) or is made an issue of, and leads to the admission of parol evidence. How else is the bona fides proved or the fact of value established? Not by the contract alone.

For another example, a stockbroker is required to obtain the customer's signature on an arbitration agreement. Clearing brokers seek to claim third party donee beneficiary status based on the agreement with the stockbroker. Clearing brokers inevitably fail to obtain such status. (34) The cases are significant for making two points: (1) federal law applies (35) and (2) evidence of the surrounding circumstances is admissible. (36)

Most of the reported cases of donee beneficiaries involve releases. (37) Many of the results are unconscionable. Many of them heartwrenchingly so. At common law if one released one of several joint tortfeasors, all were released irrespective of the intent of the parties to the release. This view survived well into the twentieth century. (38) Its spirit lingers on today masquerading as the inevitable result of the parol evidence rule. (39)

Fortunately, the Restatement (Third) of Torts takes an enlightened view. (40) Its Section 24(b) provides: "Persons released from liability by the terms of a settlement are relieved of further liability to the claimant for the injuries or claims covered by the agreement, but the agreement does not discharge any other person from liability." (41) How does this Restatement deal with the parol evidence rule? The Restaters deal with the problem of the parol evidence rule pragmatically rather than doctrinally. Comment g states, in part:

   A frequently occurring problem arises when a plaintiff enters into
   a release with a defendant that releases the defendant and provides
   that it also releases "all persons," or contains similar language
   that appears to constitute a satisfaction of the entirety of the
   plaintiffs claims. The difficulty with these general releases is
   that they are frequently entered into without appreciation of the
   "all persons" language, its implications, or an intent to release
   all potentially liable tortfeasors, who may be unknown or
   unappreciated at the time of the release. (42)

Employment of a standardized form of release is likely to contain the "all persons" phrase. (43) Years ago, the parties, not represented by lawyers, would go to a stationery store for a legal form for a general release. (44) The clerk would go to a filing cabinet containing legal forms supplied by Julius Blumberg & Co. Today the internet and the photocopy machine have dictated that Julius Blumberg & Co. sells general release forms online for nine dollars. (45) A free form is, however, available on the internet from Rocket Lawyer. (46) The sample general release releases the releasee "and any and all persons, firms, corporations liable or who might be claimed to be liable...." (47) This language is not generally read. If it is read, it is often dismissed as the necessary legal jargon to employ the form.

In addition to the idea that the parol evidence rule has no application to the status of donee beneficiary, there are a number of ways to the same result. Several jurisdictions hold that unless a party is specifically mentioned in a release he or she is not released. (48) Such statutes at least protect the releasor from unintended releases. Some jurisdictions which are particularly aware of the boilerplate nature of general releases refuse to apply the parol evidence rule to such releases. (49) Some other jurisdictions adopt the rationale that the parol evidence rule is irrelevant to a stranger to the contract. (50) It has been suggested that if the broad form of release does not reflect the intention of the parties, an action of reformation should be brought. (51) It should be remembered that the "[b]urden is on third party who neither negotiated nor gave consideration" for the contract "to prove that it was an intended beneficiary of the release." (52) Such proof adverse to plaintiffs has been made. (53) This essay is neutral. The parol evidence may or may not show that the plaintiff is a person intended to be released.

Like the case of the two towers where the alleged beneficiary sought to enforce the contract, releases are consensual arrangements. No one should be released without expressed intent. Expressed intent is not to be found in the pre-printed form purchased or found on the internet unless evidence is produced that the parties meant what the forms generally say. The parol evidence rule is not applicable to identification of donee beneficiaries.


* Distinguished Professor Emeritus, Fordham University School of Law.

(1.) See Septembertide Publ'g., B.V. v. Stein & Day, Inc., 884 F.2d 675, 679-80 (2d Cir. 1989); Paolucci v. Damini, 390 N.Y.S.2d 295, 296 (N.Y. App. Div. 1976). In Paolucci, the beneficiary released the promisor. Paolucci, 390 N.Y.S.2d at 296. If we assume that the performance has been rendered, the beneficiary is free to give it away or dispose of it in any manner. Id. The same economic result is achieved by the release. In Septembertide Publishing, the beneficiary prevailed against a secured creditor for much the same reasons. Septembertide Publ'g, 884 F.2d at 679-80.

(2.) See Drewen v. Bank of Manhattan Co. of City of N.Y., 155 A.2d 529, 531-32 (N.J. 1959); Croker v. New York Trust Co., 156 N.E. 81, 83 (N.Y. 1927); Edward Yorio & Steve Thel, Contract Enforcement: Specific Performance and Injunctions [section] 2.4.5 (rev. 2d ed. Supp. 2012); Restatement (Third) of Restitution and Unjust Enrichment [section] 47, cmt. e (2011).

(3.) See Gulla v. Barton, 149 N.Y.S. 952, 953 (N.Y. App. Div. 1914).

(4.) See Restatement (Second) of Contracts [section] 302, at 440 (1979). The Introductory Note to Chapter 14 (Contract Beneficiaries) states; "the terms 'donee' beneficiary and 'creditor' beneficiary carry overtones of obsolete doctrinal difficulties...." Restatement (Second) of Contracts, supra at 438. This Article avoids doctrinal difficulties by labeling as a "donee beneficiary" if the purpose of the promisee was to make a gift or to confer a right on a third person by contract without consideration. The Restatement (Second) did not abolish the term. It is still in common use.

(5.) Commercial Ins. Co. of Newark, N. J. v. Pacific-Peru Const. Corp., 558 F.2d 948, 950-51 (9th Cir. 1977); see Joseph M. Perillo, Calamari & Perillo on Contracts [section] 17.9 (6th ed. 2009). Other examples are payment bonds and performance bonds. Perillo, supra.

(6.) See Restatement (Second) of Contracts [section] 302, Reporter's Note (1981); Note, The Third Party Beneficiary Concept: A Proposal, 57 Colum. L. Rev. 406, 423-24 (1957).

(7.) Willamette-Western Corp. v. Columbia Pac. Towing Co., 466 F.2d 1390, 1393 (9th Cir. 1972). By status as a donee beneficiary 1 mean whether or not the party is an intended donee beneficiary. Once that status has been determined, the contract is subject to the parol evidence rule. Id.

(8.) My views were expressed in John D. Calamari & Joseph M. Perillo, A Plea for a Uniform Parol Evidence Rule and Principles of Contract Interpretation, 42 Ind. L.J. 333 (1967).

(9.) McCarthy v. Azure, 22 F.3d 351, 362 (1st Cir. 1994); Suciu v. AMFAC Distrib. Corp., 675 P.2d 1333, 1338 (Ariz. Ct. App. 1983). The normal rules of contract interpretation apply. McCarthy, 22 F.3d at 362.

(10.) Eric A. Posner, The Parol Evidence Rule, the Plain Meaning Rule, and the Principles of Contractual Interpretation, 146 U. PA. L. REV. 533, 534 (1998). Posner coined the felicitous dichotomy between hard and soft versions of the parol evidence rule meaning a version that excludes most evidence and a version that welcomes extrinsic evidence. Id.

(11.) O'Connor v. R.F. Lafferty & Co., Inc., 965 F.2d 893, 901 (10th Cir. 1992); Trans-Orient Marine Corp. v. Star Trading & Marine, Inc., 925 F.2d 566, 573 (2d Cir. 1991); Septembertide Publ'g, B.V. v. Stein & Day, Inc., 884 F.2d 675, 679 (2d Cir. 1989); In re Laketown Wharf Mktg. Corp., 433 B.R. 401, 415 (Bankr. N.D. Fla. 2010); Braddock Fin. Corp. v. Wash. Mut. Bank, 637 F. Supp. 2d 924, 930 n.3 (D. Colo. 2009) ("There is a lack of clarity as to the extent to which surrounding circumstances may be considered."); Polesuk v. CBR Sys., Inc., No. 05-CV8324(GBD), 2006 WL 2796789, at *15-16 (S.D.N.Y. 2006); Suciu v. AMFAC Distrib. Corp., 675 P.2d 1333, 1338 (Ariz. Ct. App. 1983); CR-RSC Tower I, LLC v. RSC Tower I, LLC, 56 A.3d 170, 213 (Md. 2012); Raritan River Steel Co. v. Cherry, Bekaert & Holland, 407 S.E.2d 178, 182 (N.C. 1991); Ridder v. Blethen, 166 P.2d 834, 836 (Wash. 1946); cf. Fourth Ocean Putnam Corp. v. Interstate Wrecking Co., Inc., 66 N.Y.2d 38, 45-6 (N.Y. 1985) (finding parol evidence shows plaintiff is not an intended beneficiary). Compare Trans-Orient Marine Corp., Inc., 925 F.2d at 573 (holding that "it is permissible for the court to look at the surrounding circumstances as well as the agreement"), with Debary v. Harrah's Operating Co., 465 F. Supp.2d 250, 263 (S.D, N.Y. 2006) (finding "the parties' intention 'to benefit the third party must appear from the four comers of the instrument'").


(13.) Gosselin v. Better Homes Inc., 256 A.2d 629, 638 (Me. 1969); Anderson v. Kimbrough, 741 So.2d 1041, 1046 (Miss. Ct. App. 1999); Adrian v. McKinnie, 639 N.W.2d 529, 533 (S.D. 2002); 11 WILLISTON ON CONTRACTS [section] 33:47 (4th ed. 2014); see Martin Fogelman, The Deed Absolute as a Mortgage in New York, 32 FORDHAM L. REV. 299, 301-03 (1963). Parol evidence is also "admissible to show that a mortgage absolute on its face was in fact intended to secure future advances." Gosselin, 256 A.2d at 638.

(14.) See Seaver v. Ransom, 120 N.E. 639, 640-41 (N.Y. 1918). Compare Lucas v. Hamm, 364 P.2d 685, 689 (Cal. 1961) (holding that intended beneficiaries of a will who lose their testamentary rights because of the attorneys failure to properly fulfill his obligations under the contract with the testator may recover as third-party beneficiaries), with In re Estate of Pascale, 644 N.Y.S.2d 887, 893-97 (Sur. Ct. N.Y. 1996) (holding that the petition was lacking a cognizable cause of action and absent fraud, collusion, malicious acts lawyers are not liable to third parties, not in privity). Seaver is instructive in this context because the court itemizes the particular kinds of ties between the putative beneficiary and the promisee needed to create a third party beneficiary. Seaver, 120 N.E. at 640-41.

(15.) Dail v. Campbell, 12 Cal. Rptr. 739, 742 (Cal. Ct. App. 1961) (noting the apparent overwhelming authority); Vrooman v. Turner, 69 N.Y. 280, 282 (N.Y. 1877) (holding that grantee was not liable for assuming a mortgage when grantor was not liable). Contra Schneider v. Ferrigno, 147 A. 303, 304 (Conn. 1929); Casselman's Adm'x v. Gordon & Lightfoot, 88 S.E. 58, 59 (Va. 1916). "Due on sale" clauses became a standard part of the mortgage documents making the issue moot.

(16.) Seaver, 120 N.E. at 640. In cataloging intended third party beneficiaries, the court had this to say about donee beneficiaries:

   The close relationship cases go back to [an] early King's Bench
   case (1677), long since repudiated in England.... The natural and
   moral duty of the husband or parent to provide for the future of
   wife or child sustains the action on the contract made for their
   benefit. "This is the farthest the cases in this state have gone,"
   says Cullen, J., in [a] marriage settlement case....

Id. at 640 (citations omitted).

(17.) Prudential Ins. v. Dewey, Ballantine, Bushby, Palmer & Wood, 80 605 N.E.2d 318, 319-20 (1992).

(18.) CR-RSC Tower I, LLC v. RSC Tower I, LLC, 56 A.3d 170 (2012).

(19.) Id. at 458 n. 61 (citing John L. Mattingly Construction Co. v. Hartford Underwriters Ins. Co., 999 A.2d 1066, 1074 (2010)).

(20.) 3 Tiffany Real Property [section] 862 (3d ed. 2013). The editors of Tiffany sum up the case in these terms.

   Evidence was insufficient to support joint and several liability of
   landlords to developer-tenants for breach of ground leases with
   respect to two parcels of property on which joint development was
   planned under a third-party beneficiary theory. The leases were
   clearly entered into first and foremost for the benefit of ...
   parties that signed them, merely referenced easements running
   between the two parcels of land at issue, plans for development of
   common areas, and overall site plans mentioning both developments,
   and made no reference to any duties owed third parties under
   contract or to any form of mutual reliance.


(21.) CDP Event Servs., Inc. v. Atcheson, 656 S.E.2d 537, 539 (Ga. Ct. App. 2008) (quoting Brown v. All-Tech Inv. Grp., 595 S.E.2d 517, 524 (Ga. Ct. App. 2004)).

(22.) E.g., Detroit Bank & Trust Co. v. Chicago Flame Hardening Co., 541 F. Supp. 1278 (N.D. Ind. 1982).

(23.) Ridder v. Blethen, 166 P.2d 834, 836 (Wash. 1946).

(24.) Pittman v. Providence Wash. Ins. Co., 394 So. 2d 223, 224 (Fla. Dist. Ct. App. 1981), rev. denied, 402 So. 2d 612 (Fla. 1981) ("Both parties agree that when purchased, it was the intention of the county commission not to cover the sheriffs department and the department was specifically exempted from coverage by the language of the purchase proposal submitted by the county commissioners. The language of the policies, as delivered, did not specifically exempt the sheriffs department."). Contra Chase Manhattan Bank v. First Marion Bank, 437 F.2d 1040, 1046 (5th Cir. 1971) (indicating that under N.Y. UCC parol evidence rule course of dealing and trade usage are admissible to throw light on a subordination agreement). The holding in Pittman but not the reasoning is applauded. The contracting parties were the County Commissioners and the insurance company. Pittman 394 So. 2d at 224. The reasoning was that the parol evidence rule "cannot be invoked by a stranger to such contract." Id.

(25.) See In re Laketown Wharf Mktg. Corp., 433 B.R. 401, 416-17 (Bankr. N.D. Fla. 2010).

(26.) Suciu v. AMFAC Distrib. Corp., 675 P.2d 1333, 1336-37 (Ariz. Ct. App. 1983) (stating that the plaintiff, not a signatory, was not bound by the contract's integration clause).

(27.) Dona Ana Mut. Domestic Water Consumers Ass'n v. City of Las Cruces, 516 F.3d 900, 907 (10th Cir. 2008) (quoting Tarin's, Inc. v. Tinley, 3 P.3d 680, 686 (N.M. Ct. App. 1999)).

(28.) See 3 TIFFANY REAL PROPERTY, supra note 20, at [section] 861. This view is espoused by Tiffany. He states:

   The doctrine, properly regarded, appears to be closely analogous to
   that by which the equitable right to specific performance of a
   contract is enforced as against a subsequent holder of the
   property, not a bona fide purchaser for value, by a decree
   requiring him to make a conveyance in conformity to the contract,
   as well as to the doctrine that a trust may be enforced as against
   a purchaser from the trustee under like circumstances. Such a right
   as to the use of land, created by contract and capable of
   enforcement as against a subsequent holder of the land, resembles
   likewise an equitable lien created by a contract subjecting the
   land to a pecuniary claim by way of security for the claim.


(29.) Bristol v. Woodward, 167 N.E. 441, 446 (N.Y. 1929). The conflicting views are laid out by Judge Cardozo in Bristol. Id. at 445-46. New York, like Judge Cardozo, appears not to have definitively chosen its rationale.

(30.) See State v. Anderson, 170 N.E.2d 812, 815-16 (Ind. 1960); Oliver v. Schultz, 885 S.W.2d 699, 701 (Ky. 1994); Davis v. Robinson, 127 S.E. 697, 704 (N.C. 1925).

(31.) Tidewater Investors, Ltd. v. United Dominion Realty Trust, Inc., 804 F.2d 293, 294-6 (4th Cir. 1986); 3 TIFFANY REAL PROPERTY, supra note 20, [section] 861.

(32.) See generally McCormick Harvesting Mach. Co. v. Griffin, 90 N.W. 84 (Iowa 1902).

(33.) Dempsey v. D.B. & M. Oil & Gas Co., 112 F. Supp. 408, 412 (D. Ky. 1953) (stating the purchaser admitted he was not a bona fide purchaser for value).

(34.) O'Connor v. R.F. Lafferty & Co., Inc., 965 F.2d 893, 901 (10th Cir. 1992) ("Thus, the key inquiry when determining whether a nonsignatory to an agreement is a third party beneficiary is the intent of the parties.") (citing McPheeters v. McGinn, Smith & Co., 953 F.2d 771, 773 (2d Cir. 1992)); Mowbray v. Moseley, Hallgarten, Estabrook & Weeden, Inc., 795 F.2d 1111, 1115-17 (1st Cir. 1986)).

   A majority of courts, when presented with facts similar to the case
   at bar, have found that an introducing broker is not a third party
   beneficiary to a customer agreement between a clearing broker and
   an investor. See, e.g., McPheeters, 953 F.2d at 773; Mowbray, 795
   F.2d at 1117; Wilson v. D.H. Blair & Co., Inc., 731 F.Supp. 1359,
   1362-63 (N.D.Ind.1990); Lester v. Basner, 676 F.Supp. 481, 484
   (S.D.N.Y.1987); Billue v. Hyer, Bikson & Hinsen, Inc., No.
   88-2331-S, [1989 WL 21280,] 1989 U.S.Dist. LEXIS 2415 (D.Kan. Feb.
   15, 1989); Kelly v. Robert Ainbinder & Co., Fed.Sec.L.Rep. (CCH)
   [[paragraph]] 94,963, p. 95391 [1990 WL 26809] (S.D.N.Y.1990);
   Antinoph v. Laverell Reynolds Sec., Inc., Fed.Sec. L.Rep. (CCH)
   [[paragraph]] 94765 [1989 WL 67332] (June 19, 1989). However, the
   Eighth Circuit allowed a trading broker who was not party to a
   margin agreement to enforce the arbitration clause as a disclosed
   agent of the clearing house and as a third party beneficiary.
   Nesslage v. York Sec., Inc., 823 F.2d 231, 233-34 (8th Cir. 1987).

O'Connor, 965 F.2d at 901-02.

(35.) See generally, 9 U.S.C. [section][section] 1-16 (2012). The issue was the application of the Federal Arbitration Act. Id.

(36.) O'Connor 965 F.2d at 901 (citing McPheeters 953 F.2d at 773; Mowbray 795 F.2d at 1115-17; Northern Natural Gas Co. v. Grounds, 666 F.2d 1279, 1287 (10th Cir. 1981), cert, denied, 457 U.S. 1126 (1982)). The court said:

   An intent to benefit the third party must be apparent from the
   construction of the contract in light of all surrounding
   circumstances to qualify that party as a third party beneficiary.
   Thus, the key inquiry when determining whether a nonsignatory to an
   agreement is a third party beneficiary is the intent of the


(37.) R.W. Gascoyne, Applicability of parol evidence rule in favor of or against one not a party to contract of release, 13 A.L.R. 3d 313 (1967); Anne M. Payne, Release of one joint tortfeasor as discharging liability of others under Uniform Contribution Among Tortfeasors Act and other statutes expressly governing effect of release, 6 A.L.R. 5th 883 (1992); E. H. Schopler, Release of one joint tortfeasor as discharging liability of others: modern trends, 73 A.L.R. 2d 403 (1960). It is the subject of extensive A.L.R. annotations.

(38.) See generally RESTATEMENT (FIRST) OF TORTS, [section] 855 (1939); Adams v. Dion, 509 P.2d 201 (1973); Breen v. Peck, 146 A.2d 665 (1958). The common law rule was adopted in the Restatement (First) of Torts, [section] 855, supra. It was, for example, the law of Arizona, only overruled by Adams, 509 P.2d at 203. For its history, see Breen v. Peck, 146 A.2d 665 (1958).

(39.) Tolbert v. Kelly, 305 P.3d 192 (Utah Ct. App. 2013) (finding settlement barred parties who did not attend mediation where agreement was reached); White v. General Motors Corp., 541 F. Supp. 190 (D. C. Md. 1982); cf. Williams v. Greene, 506 P.2d 64 (Utah 1973). This view is still alive as to parties to the same lawsuit. Tolbert, 305 P.3d at 193; White, 541 F. Supp. at 194-5; cf. Williams 506 P.2d at 65-66. The parol evidence rule was applied in White which showed that plaintiff was represented by counsel throughout the negotiations. White, 541 F. Supp. at 191.

(40.) See also Payne, supra note 37. Also enlightened are a number of statutes and decisions collected in Payne.

(41.) Restatement (Third) of Torts: Apportionment of Liability [section] 24(b) (2000) (emphasis added).

(42.) Id. at [section] 24(b) cmt. g.

(43.) See, e.g., Pemrock, Inc. v. Essco Co., Inc., 249 A.2d 711 (Md. 1969); see also Oxford Commercial Corp. v. Landau, 12 N.Y.2d 362 (N.Y. 1963). The claimant in Pemrock suffered windstorm damage and his insurer claimed that the damage was mostly due to faulty construction. Pemrock, 249A.2d at 712. The court described the settlement as "a release in favor of all of mankind." Id. In Oxford, a negotiated release was crafted by lawyers which barred "any suit, against any person whomsoever" except three named parties. Oxford Commercial Corp., 12 N.Y.2d at 364. The court ruled correctly, explaining the surrounding circumstance that this was a negotiated release, "[i]t is too well settled for citation that, if a written agreement contains no obvious or latent ambiguities, neither the parties nor their privies may testify to what the parties meant but failed to state." Id. at 365. Unfortunately, this case has been cited in cases where the language was boilerplate.

(44.) Lawyers also employed various "Blumberg forms." (Type in a search request for "Blumberg form" on Lexis or Westlaw).

(45.) See New York Legal Forms--Release, BLUMBERG EXCELSIOR, m/invoice.cgi?rm=view_cluster;cluster_id=1768659, [] (last visited Jan. 5, 2014). Quantity discounts are available.

(46.) Rocket Lawyer,, [] (last visited May 31,2014).

(47.) Id. To locate the sample General Liability Release of Claims complete the following steps: 1. go to the Rocket Lawyer homepage 2. click on the "personal" link at the top of the page 3. click on the letter "G" on the "Browse by Letter" bar 4.

(48.) Bjork v. Chrysler Corp., 702 P.2d 146, 151 (Wyo. 1985); McMillen v. Klingensmith, 467 S.W.2d 193 (Tex. 1971); Young v. State, 455 P.2d 889, 893 (Alaska 1969). Contra Morison v. Gen. Motors Corp., 428 F.2d 952, 952-54 (5th Cir. 1970), cert, denied, 400 U.S. 904 (1970) (holding that contrary result interferes with rights of contribution created by the Act). But see Auer v. Kawasaki Motors Corp., 830 F.2d 535, 539 (4th Cir. 1987), cert, denied, 485 U.S. 905 (1988) (concluding amended Act made contribution issue moot but third persons are intended beneficiaries). In Wyoming, under the Uniform Contribution Among Tortfeasors Act, a release containing the "all persons" language is not controlling. Bjork, 702 P.2d at 150.

(49.) See Ricupero v. Wuliger, Fadel & Beyer, No. 1:91CV0589, 1994 WL 483871, at *7 (N.D. Ohio Aug. 26, 1994); Sims v. Honda Motor Co., Ltd., 623 A.2d 995, 1003 (Conn. 1993). "Moreover, the defendants have offered parol evidence consistent with the clear terms of the contract indicating that David intended Polly's promise to benefit the attorneys." Ricupero, 1994 WL 483871 at *7. The court explained by stating that the parol evidence rule barred inconsistent language not consistent evidence. Id.

(50.) See Deckard v. Gen. Motors Corp., 307 F.3d 556, 563 (7th Cir. 2002); Douglas v. U.S. Tobacco Co., 670 F.2d 791, 796 (8th Cir. 1982); Alexander Mfg., Inc. v. 111. Union Ins. Co., 666 F. Supp. 2d 1185, 1208 n.4 (D. Or. 2009); Miller v. Liberty Mut. Ins. Co., 393 F. Supp. 2d 399, 407 (S.D. W.Va. 2005); Neves v. Potter, 769 P.2d 1047, 1054 (Colo. 1989); Pittman v. Providence Wash. Ins. Co., 394 So. 2d 223, 224 (Fla. Dist. Ct. App. 1981), rev. denied, 402 So. 2d 612 (Fla. 1981); Haire v. Parker, 957 N.E.2d 190, 197-98 (Ind. Ct. App. 2011); State ex rel. Normandy Orthopedics, Inc., v. Crandall, 581 S.W.2d 829, 834 (Mo. 1979);. Citicasters Co. v. Bricker & Eckler, L.L.P., 778 N.E.2d 663, 668 (Ohio Ct. App. 2002) (stating defendant did not qualify as a stranger); cf. Thompson v. Allstate Ins. Co., 673 S.E.2d 227, 231 (Ga. 2009) (quoting Lackey v. McDowell, 415 S.E.2d 902, 903 n.l (Ga. 1992)). "Except for determining which persons are covered or bound by the release, '[p]arol evidence is always admissible against a stranger to the release...Thompson, 673 S.E.2d at 231.

(51.) Alexander v. Kirkham, 365 So. 2d 1038, 1040-41 (Fla. Dist. Ct. App. 1978) (bringing such an action successfully); Johnson v. City of Las Cruces, 521 P.2d 1037, 1038 (N.M. Ct. App. 1974) (suggesting the plaintiff sought reformation too late).

(52.) Hansen v. Ford Motor Co., 900 P.2d 952, 954 (N.M. 1995).

(53.) See generally Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321 (1971).
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Title Annotation:Symposium on Contracts
Author:Perillo, Joseph M.
Publication:St. Thomas Law Review
Date:Jun 22, 2014
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