Plaintiff That Did Not Sign Contract Lacked Standing to Bring Breach of Contract Claim

On August 12, 2019, Justice Cohen of the New York County Commercial Division issued a decision in Spinosa v Interpublick Group of Cos., Inc., 2019 NY Slip Op. 32406(U), holding that a plaintiff that did not sign a contract lacked standing to bring a claim for breach of that contract, explaining:

Here, it is undisputed that Spin and Mccann are the parties to the Vendor Agreement. Spinosa is not. It is well settled that in order to have standing to challenge a contract, a non-party to the contract must either suffer direct harm flowing from the contract or be a third party beneficiary thereof.

As a non-party to the agreement, Spinosa can maintain a claim only if her allegations, if true, show that she is a third-party beneficiary of the agreement. A third party may sue as a beneficiary on a contract made for its benefit. However, an intent to benefit the third party must be shown, and, absent such intent, the third party is merely an incidental beneficiary with no right to enforce the particular contracts.

To allege a viable claim as a third party beneficiary, Spinosa would have to show: (1) the existence of a valid and binding contract between other parties, (2) that the contract was intended for her benefit, and (3) that the benefit to her is sufficiently immediate to indicate the assumption by the contracting parties of a duty to compensate it if the benefit is lost. She has made no such showing.

In short, there is no indication that Spin's agreement with Mccann was created for Spinosa's individual benefit. The Complaint asserts that Spin suffered substantial economic damages as well as future losses and irreparable harm to its business and reputation. In her second cause of action, Spinosa claims that Mccann breached Section 2 of the Agreement by failing to compensate Spin for its actual hours providing the Procurement Services and out-of-pocket expenses, and that, as a result, Spinosa herself is entitled to recover economic damages. Throughout her complaint, Spinosa alleges wrongs committed against Spin, not against herself directly. The complaint fails to allege how Spinosa was damaged by McCann's alleged acts, other than perhaps indirectly through her ownership interest in Spin. Such a claim belongs to the Company (Spin), not to the shareholder (Spinosa).

(Internal quotations and citation omitted).

Usually, the only parties who have rights or obligations under a contract are the parties to the contract. Here, a party tried--but failed--to sue for breach of a contract she did not sign. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client face a situation where you are unsure whether you have rights or obligations under a contract.