Opinion ID: 2570772
Heading Depth: 4
Heading Rank: 2

Heading: Third Party Beneficiary Theory of Contract

Text: In addition to a negligence theory, a third party beneficiary theory is commonly advanced to establish liability to a non-client who is not in strict privity with an attorney. See generally, 4 Legal Malpractice § 31.4. This approach focuses upon whether the primary purpose of the client-attorney relationship was to benefit the non-client. Donahue, 900 S.W.2d at 628 (holding, inter alia, that, as an exception to the general rule that an attorney is only liable to his client for negligence, a non-client may maintain a legal malpractice action based upon a third party beneficiary claim) (citations omitted). The essence of a third-party beneficiary's claim is that others have agreed between themselves to bestow a benefit upon the third party but one of the parties to the agreement fails to uphold his portion of the bargain. Copenhaver v. Rogers, 238 Va. 361, 384 S.E.2d 593, 596 (1989). Thus, [t]he third party beneficiary approach focuses the existence of a duty entirely on whether the plaintiff was the person intended to be benefitted by the legal services and does not extend to those incidentally deriving an indirect benefit. Donahue, 900 S.W.2d at 628. In other words, the non-client must have been an intended beneficiary, not merely an incidental beneficiary. In Guy v. Liederbach, 501 Pa. 47, 459 A.2d 744 (1983), the Pennsylvania Supreme Court articulated a two-part test for determining whether a person is an intended third party beneficiary under the Restatement (Second) of Contracts § 302. In part one of the test, the trial court possesses the discretion to confer standing under a third party beneficiary theory by determining whether the recognition of the beneficiary's right [is] `appropriate to effectuate the intention of the parties[.]' Id. at 751. Under part two, the performance must `satisfy an obligation of the promisee to pay money to the beneficiary' or `the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.' Id. The court in Guy applied this test to beneficiaries under a will as follows: The underlying contract is that between the testator and the attorney for the drafting of a will. The will, providing for one or more named beneficiaries, clearly manifests the intent of the testator to benefit the legatee. Under Restatement (Second) § 302(1), the recognition of the right to performance in the beneficiary would be appropriate to effectuate the intention of the parties since the estate either cannot or will not bring suit. Since only named beneficiaries can bring suit, they meet the first step standing requirement of § 302. Being named beneficiaries of the will, the legatees are intended, rather than incidental, beneficiaries who would be § 302(1)(b) beneficiaries for whom the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance. In the case of a testator-attorney contract, the attorney is the promisor, promising to draft a will which carries out the testator's intention to benefit the legatees. The testator is the promisee, who intends that the named beneficiaries have the benefit of the attorney's promised performance. The circumstances which clearly indicate the testator's intent to benefit a named legatee are his arrangements with the attorney and the text of his will. 459 A.2d at 751-52 (footnote omitted). [7]