IN THE SUPREME COURT OF IOWA 

No. 47 / 04-1584 

Filed June 2, 2006 

RPC LIQUIDATION, 

Appellee, 

vs. 

IOWA DEPARTMENT OF TRANSPORTATION, 

Appellant. 

On review from the Iowa Court of Appeals. 

Appeal from the Iowa District Court for Des Moines County, John G. 

Linn, Judge. 

The Iowa Department of Transportation appeals from judgment 

entered following a bench trial that concluded a material supplier had thirdparty beneficiary status under a construction contract and that the Iowa 

Department of Transportation breached the contract. DECISION OF 

COURT OF APPEALS VACATED; DISTRICT COURT JUDGMENT 

REVERSED AND CASE REMANDED WITH DIRECTIONS. 

Thomas J. Miller, Attorney General, Mark Hunacek, Assistant 

Attorney General, for appellant. 

Robert W. Goodwin, Goodwin Law Office, P.C., Ames, for appellee. 
 2 

LAVORATO, Chief Justice. 

In this breach-of-contract action, we must decide whether several 

contracts conferred third-party beneficiary status on a material supplier. 

Following a bench trial, the district court held that they did. Because, as a 

matter of law, we conclude otherwise, we vacate the court of appeals 

decision, reverse the district court judgment, and remand the case with 

directions. 

 I. Background Facts and Proceedings. 

 The Iowa Department of Transportation (IDOT) had a construction 

project on part of U.S. Highway 218 near Mount Pleasant, Iowa. As a result 

of that project, the IDOT entered into contracts for bridge construction with 

contractors for the work. At issue are contracts that identify Raider Precast 

Concrete, Inc., now known as RPC Liquidation, as a source of material. 

RPC was not a signatory to the contracts. RPC fabricated the beams that 

were used by the contractors in the bridge construction. 

W.W. Transport hauled a load of concrete aggregate from Missouri to 

RPC’s fabrication plant in West Burlington, Iowa. Before this trip, W.W. 

Transport had hauled soybeans from Iowa to Missouri. When the concrete 

aggregate arrived at RPC’s plant, an RPC inspector discovered soybeans in 

the aggregate, apparently because of W.W. Transport’s previous shipment of 

soybeans. The inspector recommended that the aggregate not be used for 

the fabrication of the beams, a recommendation that RPC approved. RPC 

terminated its contract with W.W. Transport to haul coarse aggregate to 

RPC’s plant. 

Several weeks later an IDOT inspector who was on RPC’s premises 

discovered that eleven beams RPC had fabricated showed soybean 

contamination. Later the IDOT rejected ten of the eleven beams because of 

the contamination. 
 3 

RPC and W.W. Transport sued the IDOT. Both plaintiffs alleged that 

they were third-party beneficiaries to the contracts between the IDOT and 

the contractors. RPC alleged that the IDOT’s rejection of the ten beams was 

a violation of the contracts resulting in damages to RPC. W.W. Transport 

alleged that as a result of the IDOT’s rejection of the beams, W.W. Transport 

lost its contract with RPC to haul coarse aggregate to RPC’s plant resulting 

in damages to it. In its answer to the allegations of both plaintiffs, the IDOT 

alleged that the contracts specifically provided that there are no third-party 

beneficiaries and that neither party is a third-party beneficiary to the 

contracts referred to in the petition. 

 The IDOT moved for summary judgment, contending that neither 

party was a third-party beneficiary of the contracts in question. The district 

court denied the motion as to RPC but granted it as to W.W. Transport. 

W.W. Transport has not appealed and is not involved in these proceedings. 

 The case was tried to the court, following which, the court ruled that 

RPC was a third-party beneficiary to the contracts and that the IDOT had 

breached the contracts by rejecting the ten beams. The court awarded RPC 

damages in the amount of $103,589. 

 The IDOT appealed, and we transferred the case to the court of 

appeals, which summarily affirmed the district court ruling. We granted the 

IDOT’s application for further review. 

II. Issues.

The issues are whether RPC was a third-party beneficiary under the 

contracts between the IDOT and the contractors and if so, whether the 

IDOT’s rejection of the beams containing soybeans was a breach of the 

contracts. Because we conclude RPC was not a third-party beneficiary, we 

do not address the damages issue. 
 4 

III. Scope of Review. 

This contract case was brought as a law action. Our review is 

therefore for correction of errors at law. See Fausel v. JRJ Enters., Inc., 603 

N.W.2d 612, 617 (Iowa 1999). The third-party beneficiary question is a 

legal issue, one for the court. Therefore we are not bound by the legal 

conclusions of the district court. Id. 

IV. Third-Party Beneficiary. 

A. Applicable law. In Midwest Dredging Co. v. McAninch Corp., we 

adopted Restatement (Second) of Contracts section 302 relating to thirdparty beneficiaries. 424 N.W.2d 216, 224 (Iowa 1988). Section 302 

provides: 

(1) Unless otherwise agreed between promisor and promisee, a 

beneficiary of a promise is an intended beneficiary if 

recognition of a right to performance in the beneficiary is 

appropriate to effectuate the intention of the parties and either 

(a) the performance of the promise will satisfy an 

obligation of the promisee to pay money to the beneficiary; or 

(b) the circumstances indicate that the promisee intends to 

give the beneficiary the benefit of the promised performance. 

(2) An incidental beneficiary is a beneficiary who is not an 

intended beneficiary. 

Restatement (Second) of Contracts § 302, at 439-40 (1981) (emphasis 

added). 

 The primary question in a third-party beneficiary case is “whether the 

contract manifests an intent to benefit a third party.” Midwest Dredging, 

424 N.W.2d at 224. Such intent, however, need not benefit a third party 

directly. Vogan v. Hayes Appraisal Assocs., Inc., 588 N.W.2d 420, 423 (Iowa 

1999). In applying section 302, we have noted that the promisee’s intent 

generally controls. Midwest Dredging, 424 N.W.2d at 224. In determining 

such intent, we look to the language of the contract and to the 

circumstances surrounding it. Id. at 225. 
 5 

When two or more parties enter into a contract, they have separate 

purposes and may be stimulated by various motives. Vogan, 588 N.W.2d at 

423. A person claiming to be a third-party beneficiary may not be acutely 

aware of those motives. Id. The general rule is that 

“ ‘[a] third party who is not a promisee and who gave no 

consideration has an enforceable right by reason of a contract 

made by two others . . . if the promised performance will be of 

pecuniary benefit to [the third party] and the contract is so 

expressed as to give the promisor reason to know that such 

benefit is contemplated by the promisee as one of the 

motivating causes of his making the contract.’ ” 

Id. at 423-24 (second alteration in original) (omission in original) (citations 

omitted). 

 When a contract expressly negates the creation of third-party 

beneficiaries, we have rejected the claim that such status exists. See 

Walters v. Kautzky, 680 N.W.2d 1, 4 (Iowa 2004). In Walters, prison 

inmates sued the Iowa State Penitentiary claiming to be third-party 

beneficiaries of an agreement between the Iowa Department of Corrections 

and the state public defender. Id. at 2. The agreement provided that the 

state public defender would provide limited legal assistance to prison 

inmates. Id. at 2-3. “The agreement expressly stated that ‘[t]here are no 

third party beneficiaries to this Agreement. This Agreement is intended only 

to benefit the [Department of Corrections] and the Public Defender.’ ” Id.

(first alteration in original). The agreement provided that the state public 

defender could contract with private attorneys to provide those services. Id.

The state public defender contracted with an attorney to advise inmates at 

the state penitentiary. Id. The attorney refused to provide services 

requested by the inmates because the agreement did not provide for 

performing such services. Id. at 3-4. 
 6 

 In rejecting the inmates’ third-party beneficiary claim, we relied on 

the opening language in section 302 of the Restatement (Second) of 

Contracts: “Unless otherwise agreed between promisor and promisee.” Id. 

at 4. In relying on this language we said: 

The agreement between [the Department of Corrections] and 

[the state public defender] expressly negates an intention to 

benefit the inmates of the institution where the legal services 

were to be provided. Because [the attorney’s] contract served 

as the implementation of [the state public defender’s] 

agreement with [the Department of Corrections], it must be 

viewed as similarly limited as to the persons to be benefited. 

Id. at 4. 

B. Analysis. The contracts between the IDOT and the contractors 

incorporated by reference certain standard specifications. One of these 

specifications, which is central to this appeal, provided in part: 

1107.12 RESPONSIBILITY FOR DAMAGE CLAIMS. 

Notwithstanding the above, it is specifically agreed between the 

parties executing this contract that it is not intended by any of the 

provisions of any part of the contract documents to create in the 

public or any member thereof a third party beneficiary 

hereunder, or to authorize anyone not a party to this contract to 

maintain a suit for personal injuries or property damage pursuant 

to the terms or provisions of this contract. The duties, 

obligations, and responsibilities of the parties to this contract 

with respect to third parties shall remain as imposed by law. . . .

It is understood that no subcontractor is a third party 

beneficiary to any contract between the Contracting Authority 

and the prime contractor. Nothing in any special provision or 

any supplemental specification shall be construed as 

eliminating or superseding the requirements of this section. 

(Emphasis added.)

In finding that RPC was a third-party beneficiary, the district court 

first determined that the express disclaimer regarding third party 

beneficiary status in specification 1107.12 did not preclude RPC from 

asserting such status. The court then focused on section 302 of 

Restatement (Second) of Contracts to determine if RPC was an intended 
 7 

beneficiary under that provision. The court concluded that RPC was indeed 

such an intended beneficiary. 

As mentioned, section 302 of the Restatement (Second) of Contracts 

begins with the language “Unless otherwise agreed between promisor and 

promisee.” Pursuant to such language we conclude, contrary to the district 

court, that the disclaimer in specification 1107.12 precluded RPC from 

being a third-party beneficiary. Because of our conclusion, we limit our 

discussion to the disclaimer. Resolving the disclaimer issue requires us to 

construe specification 1107.12. 

In deciding contract issues, our cases have frequently used the terms 

“interpretation” and “construction” interchangeably despite their distinct 

purposes. Connie’s Constr. Co. v. Fireman’s Fund Ins. Co., 227 N.W.2d 207, 

210 (Iowa 1975). Interpretation concerns the meaning of words in a 

contract, an issue for the court unless the meaning depends on extrinsic 

evidence or on a choice among reasonable inferences from such evidence. 

Id. Construction, on the other hand, concerns the legal effect of a contract, 

an issue that as a matter of law the court decides. Id. 

Our task is to construe—that is, determine the legal effect of—

specification 1107.12 and determine whether it provides third-party 

beneficiary status to RPC. That question turns on the parties’ intention. In 

determining the parties’ intention we are bound by what the contract says 

except in cases of ambiguity. State Public Defender v. Iowa Dist. Ct., 594 

N.W.2d 34, 37 (Iowa 1999). And when the contract is not ambiguous, we 

will enforce it as written. Id. 

The court construed the disclaimer on third-party beneficiary status 

in specification 1107.12 this way: 

 Turning to the first sentence of [specification] 1107.12, it 

is clear that a contractor must indemnify the IDOT for any 

claim or lawsuit brought by a person against the IDOT for 
 8 

injuries or damage sustained by a person because of the 

contractor’s acts, omissions, neglect, or use of unacceptable 

materials. The second portion of the indemnification clause 

authorizes the IDOT to retain money from the contractor until 

any such claims or lawsuits are settled. The next sentence of 

the paragraph starts with the phrase “notwithstanding the 

above.” This next sentence deals with third parties, but refers 

back to the preceding sentence. “Notwithstanding” means the 

same as “in spite of.” This sentence must be construed as 

meaning: in spite of the fact that it is agreed a contractor will 

indemnify the IDOT, for any type of claim or lawsuit, no 

member of the public can assert the status of being a thirdparty beneficiary if maintaining a suit for personal injuries or 

property damage. The first two sentences of [specification] 

1107.12 read together require a contractor to indemnify the 

IDOT for any claims or lawsuits brought and in spite of the fact 

that the IDOT has a right of indemnification against a 

contractor, this does not confer upon the public the status of 

third-party beneficiary for any lawsuit against the contractor or 

the IDOT for personal injuries or property damage. These two 

sentences, combined, do not foreclose [RPC] from bringing a 

third-party beneficiary contract claim. [RPC] is not bringing its 

lawsuit against any of the bridge contractors. The issue before 

the Court does not involve the IDOT pursuing indemnification 

from any of the bridge contractors. In addition, [RPC] is not 

alleging the IDOT caused personal injuries or property damage. 

[Specification] 1107.12 does not explicitly bar or prevent [RPC] 

from bringing this third-party beneficiary contract claim. 

(Emphasis added). 

 Contrary to the district court’s reasoning, which RPC relies on here to 

uphold the court’s ruling, we agree with the IDOT that the above italicized 

language in specification 1107.12 unambiguously conveys two ideas. First, 

there are no third-party beneficiaries to the contracts. The phrase “public 

or any member thereof” is broad enough to express this idea. Second, none 

of the provisions of the contracts is intended to authorize a non-signatory to 

the contracts to maintain a suit for personal injuries or property damage 

pursuant to the terms or provisions of the contracts. The use of the word 

“or” clearly expresses the intent of the parties that they meant these two 

separate ideas. 
 9 

In contrast, the district court’s construction (the language only meant 

that “no member of the public can assert the status of being a third-party 

beneficiary if maintaining a suit for personal injuries or property damage”) 

conveys only the second idea. The court’s construction effectively renders 

the first idea (there are no third-party beneficiaries to the contract) 

meaningless and redundant. We therefore conclude that the first idea 

clearly expresses the intent of the parties to exclude anyone from having 

third-party beneficiary status. Such exclusion therefore necessarily 

includes RPC. See Iowa Fuel & Minerals, Inc. v. Iowa State Bd. of Regents, 

471 N.W.2d 859, 863 (Iowa 1991) (holding that a contract is construed as a 

whole and that it is assumed in first instance that no part of it is 

superfluous; an interpretation that gives a reasonable, lawful, and effective 

meaning to all terms is preferred to an interpretation that leaves a part 

unreasonable, unlawful, or of no effect); accord Restatement (Second) of 

Contracts § 203(a), at 92-93; 17A Am. Jur. 2d Contracts § 377, at 364-66 

(2004). 

We likewise reject the district court’s construction that the use of the 

word “notwithstanding” conveys the meaning that 

in spite of the fact that it is agreed a contractor will indemnify 

the IDOT, for any type of claim or lawsuit, no member of the 

public can assert the status of being a third-party beneficiary if 

maintaining a suit for personal injuries or property damage. 

We do so for two reasons. First, we have already construed specification 

1107.12 as prohibiting third-party beneficiaries to the contracts. The 

prohibition against third-party beneficiary status is therefore not limited, as 

the district court concluded, to members of the public bringing lawsuits 

against the contracting authority for personal injuries and property damage. 

Second, we think the word “notwithstanding” is used to avoid any 

implication of a third-party beneficiary status from the indemnification 
 10 

language in the first part of specification 1107.12. This intent to avoid such 

an implication is emphasized by the use of the following italicized language 

in the clause prohibiting third-party beneficiary status: 

Notwithstanding the above, it is specifically agreed between the 

parties executing this contract that it is not intended by any of 

the provisions of any part of the contract documents to create in 

the public or any member thereof a third party beneficiary 

hereunder, or to authorize anyone not a party to this contract 

to maintain a suit for personal injuries or property damage 

pursuant to the terms or provisions of this contract. 

(Emphasis added.) Clearly the language “the provisions of any part of the 

contract” and “pursuant to the terms or provisions of this contract” was 

intended to refer back to the indemnification provision. 

The district court noted that RPC did not bring its lawsuit against any 

of the bridge contractors and that the IDOT did not pursue indemnification 

from them. Like the IDOT, we think that if either scenario were the case, 

that fact proves nothing regarding whether anyone can be a third-party 

beneficiary to the contracts. 

 RPC also relies on this part of the district court reasoning to uphold 

the court’s ruling: 

This conclusion [relating to the court’s determination 

that specification “1107.12 does not explicitly bar or prevent 

[RPC] from bringing this third-party beneficiary contract claim”] 

is further supported by the next sentence of the paragraph 

which reads as follows: “The duties, obligations, and 

responsibilities of the parties to this contract with respect to 

third parties shall remain as imposed by law.” The law in Iowa 

requires the Court to determine whether the contract as a 

whole manifests an intent to benefit a third party. The first two 

sentences of [specification 1107.12] do not negate third-party 

beneficiary claims in a contract action. The third sentence 

then requires the obligations of the contractor and the IDOT, 

with respect to third parties, to remain as imposed by law. 

We likewise reject this reasoning because we have already 

determined, contrary to the district court’s conclusion, that specification 
 11 

1107.12 by express language bars the public or any member thereof, which 

includes RPC, from claiming third-party beneficiary status concerning the 

contracts. Additionally, the language “The duties, obligations, and 

responsibilities of the parties to this contract with respect to third parties 

shall remain as imposed by law” does not change this determination. As 

the IDOT points out, such language merely directs the parties to existing 

law to determine what, if any, obligations are owed to an intended 

beneficiary. Although such language appears somewhat redundant or 

superfluous, it in no sense establishes an intent to create third-party 

beneficiary status or to negate the third-party beneficiary disclaimer 

language in specification 1107.12. Later in this opinion, we point out that 

the use of redundant or superfluous language is not always outcomedeterminative. 

 Finally, RPC relies on this part of the district court reasoning to 

uphold the court’s ruling: 

 The first sentence of the second paragraph of 

[specification] 1107.12 contains a clear pronouncement that no 

subcontractor is a third-party beneficiary to the contract. 

IDOT specification 1101.03 defines the term “subcontractor.” 

The parties agree that [RPC] is not a subcontractor for the 

purpose of this lawsuit. [RPC] is a “source of material” for the 

bridge construction project. If the IDOT intended to eliminate a 

source of material as a third-party beneficiary, then the logical 

place to insert the term would be the sentence which excludes 

subcontractors from the third-party beneficiary status. 

Because a source of material is not specifically excluded from 

third-party beneficiary status, then the obligations of the IDOT 

and the contractor, with respect to third parties, should remain 

as imposed by law. Again, this goes back to construing the 

contract as a whole to determine if [RPC] is an intended 

beneficiary. In construing [specification] 1107.12, [RPC] is not 

explicitly barred or excluded as a third-party beneficiary in 

pursuing its contract claim against the IDOT. 

 In short, the court reasoned that because no subcontractor is a thirdparty beneficiary, any entity other than a subcontractor would be a third-
 12 

party beneficiary. As the IDOT asserts, this reasoning might be valid if the 

only contractual provision relating to third-party beneficiary status was the 

one that excluded subcontractors. See Maytag Co. v. Alward, 253 Iowa 455, 

460, 112 N.W.2d 654, 656 (1962) (recognizing that the rule expressio unius 

est exclusio alterius applies in the construction of contracts); Black’s Law 

Dictionary 620 (8th ed. 2004) (defining expressio unius est exclusio alterius 

as a “canon of construction holding that to express or include one thing 

implies the exclusion of the other, or of the alternative”). The court’s 

reasoning ignores the third-party beneficiary disclaimer language in the 

preceding paragraph. See Estate of Pearson ex rel. Latta v. Interstate Power 

& Light Co., 700 N.W.2d 333, 343 (Iowa 2005) (“We construe a contract in 

its entirety by considering all of its pertinent provisions.”); see also 5 

Margaret N. Kniffin, Corbin on Contracts § 24.28, at 317 (Joseph M. Perillo 

ed., rev. ed. 1998) (“If a clearer source of information concerning the parties’ 

intentions is available, the court will decline to apply the maxim [expressio 

unius est exclusio alterius].”). 

 The IDOT, however, concedes that reading the two provisions 

together—the third-party beneficiary disclaimer and the subcontractor 

language—does provide some “mild redundancy.” The IDOT explains away 

this redundancy to our satisfaction. It notes that the paragraph on 

subcontractors goes on to say: “Nothing in any special provision or any 

supplemental specification shall be construed as eliminating or superseding 

the requirements of this section.” The IDOT explains that this paragraph, 

taken as a whole, was clearly intended to respond to our decision in 

Midwest Dredging. 

 In Midwest Dredging, we took notice of several special provisions of 

the contract between the IDOT and the contractor that overrode the 

provisions of the contract and that required hydraulic dredging. 424 
 13 

N.W.2d at 225. These special provisions led us to conclude that the 

dredging contractor, as a third-party beneficiary, could enforce an implied 

warranty by the IDOT that a pit designated by the IDOT could be 

hydraulically dredged in accordance with its plans and specifications. Id. 

Ultimately, it was discovered that the dredging was not feasible. Id. at 219. 

The IDOT asserts here that the subcontractor language in specification 

1107.12 was meant—even at the risk of redundancy—to ensure this 

situation would never arise again. 

 Restatement (Second) of Contracts section 203, standards of 

preference in interpretation, provides in relevant part the following: 

 In the interpretation of a promise or agreement or a term 

thereof, the following standards of preference are generally

applicable: 

(a) an interpretation which gives a reasonable, lawful, 

and effective meaning to all the terms is preferred to an 

interpretation which leaves a part unreasonable, unlawful, or 

of no effect. 

Restatement (Second) of Contracts § 203(a), at 92-93 (emphasis added); 

accord Fashion Fabrics of Iowa, Inc. v. Retail Investors Corp., 266 N.W.2d 22, 

26 (Iowa 1978). The key words in this provision are “generally” and 

“preferred,” implying that some redundancy and superfluousness are to be 

considered harmless. 

Comment (b) to this section notes that “[s]ince an agreement is 

interpreted as a whole, it is assumed in the first instance that no part of it 

is superfluous.” Restatement (Second) of Contracts § 203 cmt. (b), at 93. 

The comment, however, also recognizes that “[e]ven agreements tailored to 

particular transactions sometimes include overlapping or redundant or 

meaningless provisions.” Id.; see also Hubbard v. Marsh, 241 Iowa 163, 

168, 40 N.W.2d 488, 491 (1950) (“ ‘[I]t is presumed that no words were used 
 14 

aimlessly and that no provision is superfluous unless plainly repetitious.’ ” 

(Citation omitted.)). 

 We think the district court’s reasoning takes what is harmless 

redundancy and uses it to render what went before it meaningless. See Am. 

Soil Processing, Inc. v. Iowa Comprehensive Petroleum Underground Storage 

Tank Fund Bd., 586 N.W.2d 325, 334 (Iowa 1998) (holding that district 

court’s construction of an agreement that rendered part of an agreement a 

nullity violated the rule against construing a contract so that part of it is 

unreasonable, unlawful, or of no effect). Moreover, as the IDOT makes 

clear, it makes no sense to deny third-party beneficiary status to a 

subcontractor but not to the materials supplier. The subcontractor is more 

deserving of protection because the subcontractor has closer ties to the 

contract than the materials supplier. 

 For all of these reasons we conclude as a matter of law that RPC is 

not a third-party beneficiary to the contracts. 

V. Disposition. 

Because we find the district court erred as a matter of law in 

interpreting the contracts as conferring third-party beneficiary status to 

RPC, we vacate the court of appeals decision, reverse the district court 

judgment, and remand the case for an order dismissing RPC’s petition. 

DECISION OF COURT OF APPEALS VACATED; DISTRICT COURT 

JUDGMENT REVERSED AND CASE REMANDED WITH DIRECTIONS.