Business Law 11th Edition by Kenneth Clarkson,Roger LeRoy Miller,Gaylord Jentz,Frank Cross

تمرين 2

Midwestern Indemnity Co. v. Systems Builders, Inc.
Court of Appeals of Indiana, 2004. 801 N.E.2d 661.
SHARPNACK, Judge.
This appeal arises out of a contract for the construction of an addition to an industrial building and the collapse of that addition due to an accumulation of snow on its roof. The plaintiff and appellant is Midwestern Indemnity Company ("Midwestern"), which brought suit [in place] of Louise Litwick and Action Steel, Inc. ("Action Steel"), to recover the amount it paid to its insureds for damage to their property incurred by the collapse of the addition. The defendant and appellee is Varco-Pruden Building ("Varco-Pruden"), a subcontractor of Systems Builders, Inc. ("Systems Builders"), the general contractor for the construction of the building addition. Varco-Pruden designed and erected the addition.* * *
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* * * Litwick, in her capacity as the owner of Action Steel, entered into a contract with Systems Builders for the construction of an addition to a commercial building. Systems Builders was the general contractor and agreed to erect a building designed and manufactured by Varco- Pruden.* * *
The construction of the building addition was completed in the summer of 1995. On January 16, 1996, a snowstorm hit the Indianapolis area and a portion of the addition collapsed. Action Steel was insured by Midwestern under a policy issued after completion of the construction. Midwestern paid $1,391,818.90 to Action Steel for the loss.* * *
On January 16, 1998, Midwestern [which, because it paid for the loss, stood in the place of] Action Steel, filed an amended complaint for damages to recover what it had paid. The complaint asserted * * * claims against Varco-Pruden * * *.
Varco-Pruden filed [a motion] for summary judgment [arguing in part that it was a third party beneficiary of the waiver clause in the contract between Action Steel and Systems Builders]. * * *
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The trial court granted Varco-Pruden's * * * motion * * *.
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Here, the construction contract includes language indicating that if Action Steel obtained property insurance after project completion it would waive its rights against contractors and subcontractors. Specifically,* * * Section 11.3.5 of the construction contract discusses the acquisition of property insurance after project completion and provides that "if after final payment property insurance is to be provided on the completed Project through a policy or policies other than those insuring the Project during the construction period, the Owner shall waive all rights in accordance with the terms of Subparagraph 11.3.7 [the waiver clause]." Further, Section 11.3.1 addresses the extent of property insurance and provides that "[t]his insurance shall include interests of the Owner, the Contractor, Subcontractors and Sub-subcontractors in the Work." Varco- Pruden, as the designer, manufacturer, and supplier of the pre-engineered building system used in the construction of the building addition, was a subcontractor within the meaning of Section 11.3.1 of the construction contract. Moreover, Section 11.3.7 * * * provides that "[t]he Owner and Contractor waive all rights against (1) each other and any of their subcontractors, subsubcontractors, agents and employees." * * *
* * * A person or entity who is not a party to a contract may directly enforce that contract as a third party beneficiary if: (1) the parties intend to benefit a third party; (2) the contract imposes a duty on one of the parties in favor of the third party; and (3) the performance of the terms of the contract renders a direct benefit to the third party. [Emphasis added.]
Varco-Pruden argues that it has satisfied the first element, which requires that the parties intended to benefit a third party. The plain reading of the construction contract indicates that Action Steel intended to benefit Varco-Pruden. * * * Accordingly, the first element is satisfied because when Action Steel purchased property insurance after the project was completed, it intended that subcontractors, such as Varco-Pruden, would benefit from the waiver * * * clause.
Varco-Pruden also argues that it has satisfied the second element, which requires that the contract impose a duty upon one of the parties in favor of the third party. Here,* * * Section 11.3.5 of the construction contract provides that if Action Steel purchased property insurance after project completion, it agreed to waive its right * * * with respect to subcontractors such as Varco- Pruden. Accordingly, the second element is satisfied because the construction contract imposed a duty upon Action Steel in favor of Varco-Pruden.
Finally, Varco-Pruden argues that it has satisfied the final element, which requires that the performance of the terms of the contract render a direct benefit to a third party. Again, the construction contract provides that if Action Steel purchased property insurance after project completion it would waive its right * * * with regard to subcontractors, thereby requiring that it render a direct benefit to those subcontractors, namely Varco-Pruden. Varco-Pruden has satisfied all three elements of the third party beneficiary test. Thus, Varco-Pruden is a third party beneficiary and can enforce the waiver * * * clause contained within the construction contract.
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For the foregoing reasons, we affirm the judgment of the trial court granting Varco-Pruden's [motion] for summary judgment.
1. For what reasons did the state intermediate appellate court uphold the lower court's summary judgment
2. If the collapse of the building had been due to the negligence of a subcontractor, how might that party argue successfully against recovery