Merit Decision: When Can a Third Party Be an Intended Beneficiary under a Contract? Huff v. FirstEnergy Corp.

As a torts professor, I enjoy teaching cases where the law of torts and contracts intersect. One such area is when a tort duty arises in favor of the intended beneficiary of a contract. The Supreme Court of Ohio has just released an opinion in one such case – Huff v. FirstEnergy Corp., 2011-Ohio-5083.

 Lisa Huff was seriously injured when a large tree limb fell on her during a sudden storm when she was out taking a walk with a friend along a rural road. The limb fell from an old maple tree on property owned by the Braho family.  This tree was also located twenty feet from utility lines owned by Ohio Edison Company, a subsidiary of FirstEnergy Corporation.  Ohio Edison had an easement near the tree, but the tree was outside the easement.

 Ohio Edison contracted with the Asplundh Tree Expert Company to inspect trees and vegetation along its power lines and to remedy any problems affecting the lines. Asplundh had last inspected the area about three years before Mrs. Huff’s injury.  Lisa Huff and her family sued Ohio Edison and Asplundh for failure to inspect, maintain, and remove the tree or warn the landowner and the public of the tree’s dangers. (FirstEnergy and the Brahos were originally sued as well, but were dismissed along the way.)

 The trial court granted summary judgment to Ohio Edison and Asplundh, finding neither defendant owed any duty to the plaintiffs.  The Eleventh District Court of Appeals reversed, finding that there was a genuine issue of material fact over whether Huff had enforceable rights as an intended third-party beneficiary under the contract between Ohio Edison and Asplundh. 

 The Supreme Court of Ohio reversed the court of appeals in a unanimous decision written by Justice Lanzinger.  The high court held that the contract between Huff and Asplundh created no duty to the Huffs, because they were not intended beneficiaries of the contract between Ohio Edison and Aspundh.

 The Court’s analysis in this case turns on the Restatement of the Law 2d of Contracts (1981), Section 302, which the Court adopted in 1988 in Hill v. Sonitrol of Southwestern Ohio, Inc. , 36 Ohio St.2d 36, 521 N.E.2d 780.   That section draws a distinction between and intended and an incidental beneficiary.  A beneficiary is an intended beneficiary if “recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties…and the circumstances indicate that the promise intends to give the beneficiary the benefit of the promised performance.” In the Hill case, the employee of an adult book store sued the alarm company for a criminal beating she endured inside the store after hours when the alarm company failed to respond. The Court held that she was not an intended beneficiary of the contract between the employer and the security company, which was to protect property, not people.

 In the Huff case,  the Court held that under Ohio law, in order for a third party to be an intended beneficiary under a contract, that intent must be clear from the language of the contract itself.  The contract provision on which the Huffs and the court of appeals relied—“[t]he Contractor shall plan and conduct the work to adequately safeguard all persons and property from injury”—when placed in context did not create a duty to members of the general public walking along public roads. It was simply to be sure that vegetation did not interfere with Ohio Edison’s power lines, and detailed how that would be ensured between Ohio Edison and Ansplundh.

 As an afterword, Justice Lanzinger wrote that the holding in this case based on a third-party beneficiary theory would not preclude the Huffs from establishing that the appellants owed them a duty under general tort principles, but had not done so in the case.

 Justice O’Donnell, joined by Justice Pfeifer, concurred in judgment only.  He agreed that the Huffs did not prove they were intended beneficiaries of the contract in this case. But he disagreed with the court’s syllabus, because he does not believe that Ohio law or the Restatement  require that the intent to benefit a third part must come from the contract itself.  He would find that such intent can also be inferred from the circumstances surrounding the formulation of the contract.

 A tort afterword.

A landowner can be held liable in negligence for injuries caused by his or her trees if the  landowner knows or should have known the tree is defective or diseased and fails to take reasonable precautions. Under the Restatement of Torts, there is less of a duty placed on rural landowners than urban ones.  In this case, though, the Huffs dismissed their suit against the property owners.

 

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2 Responses to Merit Decision: When Can a Third Party Be an Intended Beneficiary under a Contract? Huff v. FirstEnergy Corp.

  1. augustin f. o'neil says:

    how about a contractor does fire damage repair for homeownwer. is, or can he be, a 3rd pb of the contract between insurance co and homeowner?

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