Commercial Division Blog

Posted: April 14, 2021 / Categories Commercial, Contracts

Incidental Beneficiaries Cannot Bring Third-Party Beneficiary Claims

On April 1, 2021, the First Department issued a decision in Levin v. Salvini, 2021 NY Slip Op. 02074, holding that incidental beneficiaries to a contract cannot bring third-party beneficiary claims, explaining:

Plaintiffs argue that Levin Brazil/Argentina's claims arise under the Agreement because they are third-party beneficiaries of its noncompete clause. However, the Contributors Agreement does not expressly mention these entities or otherwise demonstrate an intent to confer any benefit on them. Since the Contributors could bring suit for breach of the noncompete clause, Levin Brazil and Levin Argentina are not the only ones who could recover for the breach of contract. Moreover, the Contributors Agreement does not evince a discernible intent to allow recovery for the specific damages to the third parties that result from a breach thereof. Indeed, a provision in the Agreement only allows for the Remaining Contributors, including Levin, to recover damages for any breach. Thus, these entities are, at most, incidental beneficiaries.

(Internal quotations omitted).

Usually, the only parties who have rights under a contract are the parties that signed the contract. As discussed here, sometimes a person who did not sign a contract nonetheless has rights under a contract that it can sue to enforce, but the standard for third-party beneficiary status is high. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client face a situation where you are unsure how to enforce rights you believe you have under a contract.

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