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Third-Party Beneficiaries of Municipal Contracts–More on Drury Co. v. Jackson R-2 School District

There does not appear to be an inherent inability at common law for an intended beneficiary to maintain a claim as a third-party beneficiary under a local government contract:

Whenever local law permits third-party beneficiaries to sue on contracts between others, they can sue on comparable local government contracts.

Chester James Antieau, Antieau on Local Government Law, § 32.12  (Sandra M. Stevenson, ed.) (2d ed., Lexis database, through December 2013; Release No. 126).  Were one to review 10A Eugene McQuillen, The Law of Municipal Corporations § 29:136 (3d ed. 2009 rev. vol), one would see, “The right of a third person to sue on a municipal contract has been denied in several decisions. However, in some circumstances such an action may be maintained ….”  McQuillen’s footnotes have such authority as referencing no recovery by an “incidental beneficiary” or “ordinarily, under New Mexico law, the obligations arising out of a contract are due only to those with whom it was made”.  So, without attempting to read each case cited by McQuillen, it would appear that Antieau has better-expressed the view.

Law Mo. Stat. 432.070 states:

No county, city, town, village, school township, school district or other municipal corporation shall make any contract, unless the same shall be within the scope of its powers or be expressly authorized by law, nor unless such contract be made upon a consideration wholly to be performed or executed subsequent to the making of the contract; and such contract, including the consideration, shall be in writing and dated when made, and shall be subscribed by the parties thereto, or their agents authorized by law and duly appointed and authorized in writing.

The school district in Drury Co. v. Jackson R-2 School District, 2014 WL 462916 (Mo. Ct. App., E.D. 2014), takes the position that the statute prevents third-party beneficiary claims against counties, etc.

An initial step in construing a provision, a statute as well as a contract, is ascertainment of the evident sense of the provision as a whole.  Let’s see if the argument is persuasive, particularly in regards to:

  • What particular language in the statute does the school district identify as the basis for holding third-party beneficiaries cannot enforce a written contract?
  • What statutory purposes does the school district identify that would be inhibited by allowing third-party beneficiaries to maintain actions?

More after the break …

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