[WSBAPT] Off Topic - Contract issue

[Eric Nelsen]

A couple thoughts, nothing definitive--

 

C's promise not to sue H is binding because there is mutual consideration
between C and H. So the promise is binding on C; if C sues A, that's a
breach of C's agreement with H. It's a little odd to have a promise to H
that doesn't directly benefit H, but there could be reasons that H
indirectly benefits.

 

Regardless, A could be considered a third-party beneficiary to the
contract between H and C, which gives A direct rights to enforce.

 

Alternatively, if H sued for the breach, what are H's damages? Zero unless
H is somehow responsible for A's loss or liability. That might be via
subrogation. A has paid out in full on the claim, and just sent part of
the money to C and part to H. If C sues A, then A probably could turn to H
and demand reimbursement for any additional payments that A has to make to
C.

 

Third possibility--regardless of subrogation, perhaps there is an
indemnification agreement between H and A that you're not aware of--for
example, A might have agreed to send the payments to H (instead of C under
the assignment) in return for H's indemnification.

 

But the bottom line, I think, is that if the contract between H and C is
supported by mutual consideration, the fact that C's promise not to sue A
doesn't directly benefit H does not mean it would be unenforceable. The
only question would be who could enforce it: only H, or perhaps A as well
is A is a third-party beneficiary.

 

Sincerely,

 

Eric

 

Eric C. Nelsen

SAYRE LAW OFFICES, PLLC

1320 University St

Seattle WA  98101-2837

phone 206-625-0092

fax 206-625-9040

 

 

 

 

From: wsbapt-owner at lists.wsbarppt.com
[mailto:wsbapt-owner at lists.wsbarppt.com] On Behalf Of Paul Grant
Sent: Wednesday, February 26, 2014 8:43 AM
To: WSBA RPPT Probate & Trust Discussion Forum
Subject: [WSBAPT] Off Topic - Contract issue

 

I apologize in advance that this will sound like a law school exam!  I
need some assistance for a client that is signing a settlement
agreement....

Contractor (C) does some work for Homeowner (H) and has a contract.  The
work was being done via an insurance claim adjuster (A - the Insurance
Company).  Contract states that H assigns to C all payments from A.  Life
is good and C is doing work and A is directly paying C per the assignment.
Imagine that H and C didn't see eye-to-eye!  A stops paying C for billed
work and instead pays H directly.  H pockets the money and now H and C are
trying to make this all go away.  

H wants C to agree to not sue A as part of the settlement (gee-whiz, do
you think A is guiding H in the background).  My question is that if C
later wants to pursue a suit against A for not honoring the assignment can
A hide behind the agreement that they had no privity in?  I need some
basic info to try and give a full picture of the possibilities before
client signs anything.

I do not see how the agreement between H and C can bind C to not go after
another third-party with an independent course of action.  Does anyone
have some thoughts to help me on what I am missing? 

PS:  I am not trying to determine what course of action, if any, C may
have against A, I'm just stumped at the thought that the settlement
agreement could foreclose any possible action against A when they are not
a part of the agreement or settlement.



Paul H. Grant - JD, LL.M

Planning with Purpose, Inc
Lynnwood, WA 98036
425-939-9948
www.planningwithpurposeinc.com

Estate Planning. Business Planning. Wealth Succession.

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