Third Party Beneficiary. John Castle and Leonard Harlan, who ...

[skymedlock]

Third Party Beneficiary. John Castle and Leonard Harlan, who headed Castle Harlan, Inc, an investment firm, entered into an agreement with the federal government to buy Western Empire Federal Savings and Loan. Under the agreement, Castle Harlan was to invest a nominal amount in the bank and arrange for others to invest much more, in exchange for, among other things, a promise that for two years, Western Empire would not be subject to certain restrictions in federal regulations. The government's enforcement of other regulations against Western Empire led to its going out of business. Castle, Harlan, and the other investors filed a suit in the U.S. Court of Federal Claims against the government, alleging breach of contract. The government filed a motion to dismiss all of the plaintiffs except Castle and Harlan, on the ground that the others did not sign the contract between the government and Castle and Harlan. Is the government correct? Should the court dismiss the claims brought by the other investors? Why or why not?

Question 2

An agent must perform instructions provided by the principal. If the agent fails to do so, he violates:
 a. the duty of cooperation
  b. the duty of obedience and performance c. the duty to reimburse
  d. the duty of loyalty
  e. the duty of accounting

[flannelavenger]

Answer to Question 1

Third party beneficiary
The court denied the government's motion to dismiss the other plaintiffs. The other investors argued in part that they were intended third-party beneficiaries of the contract. The court recognized that a third party who is an intended beneficiary of a contract may sue to enforce the contract or to obtain an appropriate remedy for breach. Here, the court explained that all of the parties to the contract intended the benefits of the contractual promises to run to the investors in Western Empire to make their investment financially sound. The court reasoned that the very purpose of the contract was to enshrine a modified regulatory regime under which Western Empire would operate that would induce investors to invest in the bank. It was for the investors' benefit, to induce their investments, that the government made its promises. For a party to qualify as a third party beneficiary, a contract must reflect the express or implied intention of the parties to benefit the third party. In this case, t is clear to the court that the implied intention' of the parties was to benefit the investors, and that they fall within the classindeed they comprise the entirety of the classthat was intended to benefit from the government's promises.

Answer to Question 2

b