On certification to the Superior Court, Appellate Division, whose opinion is reported at 180 N.J. Super. 350 (1981).
For affirmance -- Justices Pashman, Clifford, Schreiber, Handler and O'Hern. For reversal -- None. The opinion of the Court was delivered by Schreiber, J.
[90 NJ Page 256] Two contractors engaged in the construction of the Rutgers Medical School in Piscataway Township sought to recover damages from Rutgers, The State University (Rutgers), for its failure to coordinate the project and to compel timely performance by a third contractor. Rutgers asserts that it allocated the
sole duty to coordinate the work of the prime contractors on the project and ensure their timely performance to Frank Briscoe Co., Inc. (Briscoe), its general contractor. Plaintiffs deny their right to sue Briscoe as third party beneficiaries of Briscoe's contract with Rutgers. We must determine first, whether plaintiffs were intended to be beneficiaries of that contract. Even if they were, we must determine whether Rutgers, as owner, retained any duty to coordinate or supervise which could give rise to a cause of action in plaintiffs. Finally, we must determine whether Rutgers is excused from any such liability by an exculpatory clause in the contract.
On October 31, 1966, Rutgers signed contracts for general construction work with Briscoe for $7,392,000, electrical work with plaintiff, Broadway Maintenance Corp. (Broadway), for $2,508,650, and plumbing and fire protection with plaintiff, Edwin J. Dobson, Jr., Inc. (Dobson), for $998,413. Six other contracts, also entered into, covered precast concrete; structural steel; elevators; heating, ventilating and air conditioning; laboratory furniture and independent inspection and testing.*fn1 In contrast with construction projects in which the owner contracts with a general contractor who undertakes the entire project and coordinates operations of subcontractors, Rutgers entered into contracts with each of several prime contractors. In Rutgers' agreement with Briscoe, Briscoe agreed to act as the supervisor on the job and coordinator of all the contractors.
After the work was finished, at a date well beyond the scheduled time for completion, Dobson and Broadway filed separate complaints against Rutgers in the Superior Court, Law Division, asserting a variety of claims, including damages due to delays and disruptions caused by Rutgers' failure to coordinate
the activities of the various contractors on the site. Rutgers filed third party complaints seeking indemnification from Briscoe and its surety. The two actions were consolidated for trial with a pending third suit brought by Briscoe against Rutgers for money due under the Rutgers-Briscoe contract. Dobson and Broadway never added Briscoe as a party defendant in their actions. The suit between Rutgers and Briscoe was settled before trial, except for two claims for indemnification.*fn2 Briscoe is not a party to this appeal.
The non-jury trial proceeded for 43 days. Rutgers produced no evidence and rested at the end of plaintiffs' case. The trial court in an extensive written opinion granted plaintiffs judgments for some of their claims, but denied recovery against Rutgers for failure to coordinate the activities of the prime contractors, including Briscoe. 157 N.J. Super. 357 (Law Div.1978). Dobson and Broadway appealed to the Appellate Division, which affirmed. 180 N.J. Super. 350 (App.Div.1981).
Each plaintiff petitioned for certification. We granted both petitions to consider three questions: (1) in a multi-prime contract, is each prime contractor liable to the other, (2) in such a contract, does the owner have a duty to coordinate the work of the contractors, and (3) does the exculpatory clause in the prime contracts at issue here shield Rutgers from liability for damages due to delay.*fn3 The Mechanical Contractors Association of New Jersey, Inc. and the Building Contractors Association of New Jersey were granted leave to file briefs as amici curiae.
Dobson and Broadway contend that they were not third party beneficiaries of the contract between Rutgers and Briscoe so as to entitle them to sue Briscoe.*fn4 The principle that determines the existence of a third party beneficiary status focuses on whether the parties to the contract intended others to benefit from the existence of the contract, or whether the benefit so derived arises merely as an unintended incident of the agreement.*fn5
In Brooklawn v. Brooklawn Housing Corp., 124 N.J.L. 73 (E. & A. 1940), the Court of Errors and Appeals stated the proposition:
The determining factor as to the rights of a third party beneficiary is the intention of the parties who actually made the contract. They are the persons who agree upon the promises, the covenants, the guarantees; they are the persons who create the rights and obligations which flow from the contract. . . . Thus, the real test is whether the contracting parties intended that a third party should receive a benefit which might be enforced in the courts; and the fact that such a benefit exists, or that the third party is named, is merely evidence of this intention. [ Id. at 76-77]
The contractual intent to recognize a right to performance in the third person is the key. If that intent does not exist, then the third person is only an incidental beneficiary, having no contractual standing. Standard Gas Power Corp. v. New England Casualty Co., 90 N.J.L. 570, 573-74 (E. & A. 1917). This is
the view espoused in Restatement (Second) of Contracts § 302 (1979). See also 4 A. Corbin, Contracts, §§ 772-81 (1951 & Supp.1980). Whether the third person is a creditor or donee of the contractual promisee is relevant only in ascertaining the intent of the contracting parties. The parties of course may expressly negate any legally enforceable right in a third party. Likewise they may expressly provide for that right. When the contract is silent, it is necessary to examine the pertinent provisions in the agreement and the surrounding circumstances to ascertain that intent. Talcott v. H. Corenzwit & Co., 76 N.J. 305, 312 (1978).
Courts have reached different results in determining whether multi-prime construction contracts afford a third party a right to sue. The result depends on an analysis of the facts in each case. Compare, e.g., Buchman Plumbing Co. v. Regents of University of Minnesota, 298 Minn. 328, 215 N.W. 2d 479 (1974) (suit not maintainable) and Snyder Plumbing & Heating Corp. v. Purcell, 9 A.D. 2d 505, 195 N.Y.S. 2d 780 (App.Div.1960) (suit not maintainable) with J. Louis Crum Corp. v. Alfred Lindgren, Inc., 564 S.W. 2d 544 (Mo.App.1978) (suit maintainable) and KEC Corp. v. N.Y. State Environmental Facilities Corp., 76 Misc. 2d 170, 350 N.Y.S. 2d 331 (Sup.Ct.1973) (suit maintainable).
We are satisfied that the record supports the findings of the trial court that the respective parties agreed that prime contractors may have valid causes of action against each other for damages due to unjustifiable delay. The Instructions to Bidders alerted each prime contractor that Rutgers proposed to enter into nine separate prime contracts. The Contract Forms and General Conditions, which were delivered with the Instructions and incorporated by reference in the executed agreements with each prime contractor, contained the same provisions.
Each contract stressed that time was of the essence and that each contractor was to perform expeditiously in accordance with the schedule and under the general supervision of the general contractor. The ...