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Gold Mills Inc. v. Orbit Processing Corp.

Decided: November 15, 1972.

GOLD MILLS, INC., A DELAWARE CORPORATION, PLAINTIFF,
v.
ORBIT PROCESSING CORPORATION, A NEW JERSEY CORPORATION, AND D'ELIA DETECTIVE AGENCY, DEFENDANTS



Larner, A.j.s.c.

Larner

Plaintiff Gold Mills, Inc. had delivered to defendant Orbit Processing Corporation certain textile goods for processing. On December 20, 1970 these goods were stolen from the premises of Orbit, together with the tractor-trailer in which they were contained. Plaintiff brought suit against Orbit, as bailee, and against D'Elia Detective Agency. The latter was brought into the litigation on the allegation that it was liable to plaintiff because of its failure to exercise due care to protect the tractor-trailer and its contents pursuant to a duty undertaken by virtue of a written contract with Orbit to furnish security guards.

Defendant D'Elia Detective Agency moved for summary judgment on the legal theory that its only duty was to its contracting party, Orbit, and that neither duty nor liability exists in favor of Gold Mills, a stranger to the contract. Gold Mills counters that liability may exist on a factual exploration at trial based on (1) its right as a third-party

beneficiary under the contract; or (2) the liability of D'Elia for negligence in failing to carry out its contractual undertaking with due care.

The depositions establish a minimal factual basis for negligent performance by D'Elia in order to withstand a motion for summary judgment. It therefore becomes necessary to decide whether plaintiff is entitled to redress in view of its status as a stranger to D'Elia's contract with Orbit.

For plaintiff to succeed on a contract theory it must qualify as a third-party beneficiary under the common law rules as codified by N.J.S.A. 2A:15-2. This statute provides:

A person for whose benefit a contract is made, either simple or sealed, may sue thereon in any court and may use such contract as a matter of defense in an action against him although the consideration of the contract did not move from him.

The essence of contract liability to a third party is that the contract be made for the benefit of said third party within the intent and contemplation of the contracting parties. Unless such a conclusion can be derived from the contract or surrounding facts, a third party has no right of action under that contract despite the fact that he may derive an incidental benefit from its performance. Crown Fabrics Corp. v. Northern Assur. Co., Ltd. , 124 N.J.L. 27 (E. & A. 1939); Brooklawn v. Brooklawn Housing Corp. , 124 N.J.L. 73 (E. & A. 1939) and Moorestown Management, Inc. v. Moorestown Center, Inc. , 104 N.J. Super. 250 (Ch. Div. 1969). Under such circumstances, he is neither a creditor beneficiary nor a donee beneficiary but is merely an incidental beneficiary who acquires no enforceable rights under the contract.

The contract between Orbit and D'Elia provided that D'Elia would provide a certain number of uniformed guards on the Orbit premises to guard the plant and to protect Orbit's property. Plaintiff Gold Mills is not mentioned in the contract

nor referred to therein as an intended beneficiary of the contract or services to be rendered by D'Elia. At best, Gold Mills was but an incidental beneficiary of the contract stemming from the obvious benefit derived from the additional security for its goods by virtue of the guard service. Such benefit, however, is insufficient to qualify it as a creditor beneficiary entitled to bring suit arising out of the breach of contract. Plaintiff's action against D'Elia is not maintainable on that theory.

The remaining issue, therefore, is whether plaintiff's claim can be sustained on a theory of negligence arising out of alleged failure of defendant to exercise due care in the performance of its undertaking. Does the absence of privity bar an action by plaintiff for damages to its goods which allegedly resulted from defendant's negligence in the performance of its contractual undertaking? Such liability, if any, is not bottomed upon the contractual ...


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