The Tuckers owned an RV that they insured through American Family. On August 26, 2012, their RV was struck by lightning and damaged. The Tuckers reported the damage to American Family.
In March 2013, American Family contacted Raper to discuss repairs to the RV, and arrangements were made to have the RV delivered to Raper’s facility.
After inspecting the damage, Raper submitted a repair estimate to American Family, which accepted the offer.
In the fall of 2013, because the RV also sustained transmission damage, Raper delivered the RV to Clarke. Clarke also submitted a repair estimate to American Family. American Family also accepted Clarke’s offer to repair the transmission.
In early 2014, Raper advised American Family and the Tuckers that the repairs to the RV were complete. However, when the Tuckers attempted to drive the RV, they found electrical issues still persisted and returned the RV to Raper’s facility. Raper later advised the Tuckers the batteries of the RV had been hooked up backwards, causing further damage to the electrical system, which Raper agreed to fix. In July 2015, Raper had yet to repair the electrical issues with the RV, causing American Family to declare the RV a total loss due to the damage it sustained.
On June 10, 2016, the Tuckers filed their complaint against Raper and Clarke. The Tuckers alleged they were third-party beneficiaries of a contract between American Family and Raper and that Raper breached the contract by failing to repair the RV. The Tuckers also alleged gross negligence against Raper. As to Clarke, the Tuckers alleged they were third-party beneficiaries of a contract between American Family and Clarke and that Clarke breached that contract.
In their motions to dismiss, both Raper and Clarke asserted the Tuckers’ alleged status as third-party beneficiaries must be founded on a written contract. On December 7, 2016, the trial court issued its order, dismissing the Tuckers’ lawsuit. The Tuckers now appeal.
JUDGE KOLGER Both Raper and Clarke assert “a third-party beneficiary claim requires a written contract with a specific provision conferring third-party beneficiary rights to the [Tuckers].” Brief of Appellee Tom Raper, Inc. at 15; see also Appellate Brief of Appellee Clarke Power Services, Inc. at 13. To support their argument, both parties cite to language from our supreme court discussing the circumstances in which a third-party beneficiary may sue to enforce a contract. Our supreme court has stated, “To be enforceable, it must clearly appear that it was the purpose or a purpose of the contract to impose an obligation on one of the contracting parties in favor of the third party. It is not enough that performance of the contract would be of benefit to the third party. It must appear that it was the intention of one of the parties to require performance of some part of it in favor of such third party and for his benefit, and that the other party to the agreement intended to assume the obligation thus imposed. The intent of the contracting parties to bestow rights upon a third party must affirmatively appear from the language of the instrument when properly interpreted and construed.”
Raper and Clarke assert this language mandates a written contract to bestow rights upon a third party. We disagree.
The language from Cain cited by Raper and Clarke directs a court, where there is a written contract, to focus on the parties’ intent and whether the contract manifests a clear intent to impose an obligation on a contracting party for the benefit of a third party. And when a court is called upon to interpret or construe a written contract to determine the parties’ intent (as was our supreme court’s task in Cain), the intent to benefit a third party must be clear from the language of that contract. But nothing from Cain or this language, or other authorities cited by Raper or Clarke, forecloses the possibility that two or more parties may orally contract with the intent to benefit a third party. It is a well-established legal principle a contract may be oral as well as written. DiMaggio v. Rosario, 52 N.E.3d 896, 905 (Ind. Ct. App. 2016), trans. denied.
The Tuckers’ complaint alleged they were third-party beneficiaries of two separate contracts but did not specifically plead the existence of a written contract and their allegations can reasonably be construed as based on oral contracts. Further, as noted above, third-party beneficiary status is not solely dependent upon a written contact. Therefore, we conclude the trial court erred in dismissing the Tuckers’ complaint.
CRITICAL THINKING:
What is the single most important fact in this case? Why do you think so? What reasoning caused the Court to decide that a contract existed even though there was no written contract?
ETHICAL DECISION MAKING:
Suppose this case had not gone to trial, but instead Raper and Clarke each decided after meeting with the Tuckers that an oral contract with clear signals of intent to benefit a third party existed in this situation. What ethical guideline might have convinced them that they were doing the right thing?