Excuse Me Sir, But Your Ferrari Is On Fire!

Posted by William J. Piercy on

What can a burned out Ferrari teach us about Georgia contract law and the limits of the third party beneficiary doctrine? You might be surprised. In Dominic v. Eurocar Classics, Mr. Dominic bought a used Ferrari. Unsurprisingly, the 2000 Modena 360 soon developed a propensity to overheat. Therefore, Mr. Dominic took the car to Eurocar Classics for repair. During the course of its work, Eurocar Classics brought the car to Ferrari of Atlanta so that the dealership could “bleed” the cooling system (i.e., extract all air pockets to ensure a continuous flow). When the work was complete, Mr. Dominic retrieved his car from Eurocar Classic.

A few weeks later, the Ferrari again overheated while Mr. Dominic was cruising along I-20. Mr. Dominic pulled over, got out of the car and phoned Eurocar Classics. While Mr. Dominic was voicing his displeasure to his mechanic, the Ferrari burst into flames and was completely destroyed.

Mr. Dominic later sued both Eurocar Classics and Ferrari of Atlanta for breach of contract. Although he had no direct contractual relationship with Ferrari of Atlanta, Mr. Dominic alleged that he was a third party beneficiary of the contract between Eurocar Classics and Ferrari of Atlanta because it was for work performed on his car.

As a general rule, one who is not a party to a contract lacks “standing” to sue for the breach of the contract. The third party beneficiary doctrine provides an exception to this rule whereby a third party may have standing to enforce a contract if it is clear that the contract was intended for the third party’s benefit.

Ferrari of Atlanta moved to be dismissed from the lawsuit, arguing that its contract was with Eurocar Classics, not with Mr. Dominic and, therefore, it owed no duties to him, contractual or otherwise. In support of its motion, Ferrari of Atlanta introduced its repair invoice to Eurocar Classics, which identified only the work to be done and not the owner of the car. With this evidence, Ferrari of Atlanta demonstrated that it had no idea Mr. Dominic owned the Modena 360; only that it had been asked to bleed the cooling system. Convinced by this argument, the Georgia Court of Appeals dismissed Ferrari of Atlanta from the lawsuit. The Court found that any benefit that may have flowed to Mr. Dominic from the agreement between Eurocar Classics and Ferrari of Atlanta was merely incidental and not intentional. Therefore, Mr. Dominic did not have standing to sue Ferrari of Atlanta.

What are the takeaways? First, think twice before buying a second hand Ferrari. Second, the mere fact that someone may ultimately benefit from the performance of a contract between others, in and of itself, is insufficient to grant that third party standing to sue for breach of contract. To take advantage of the third party beneficiary doctrine, the express terms of the contract must clearly identify any non-party who is expected to benefit from the performance of the contract.