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Reidy v. Macauley

Filed: May 4, 1982.


Appeal by plaintiff from Gaines, Judge. Judgment entered 24 March 1981 in Superior Court, Mecklenburg County. Heard in the Court of Appeals 2 April 1982.

Becton, Judge. Judge Wells and Judge Hill concur.


Plaintiff states her sole argument thusly: "The Court erred by granting the defendant's [sic] motion for directed verdict at the close of all the evidence on the grounds that there was ample

record evidence of every element of the plaintiff's claims sufficient to take the case to the jury." Believing, first, that plaintiff is, at best, an incidental beneficiary under the Contract between the Meyers and defendants and, therefore, not entitled to maintain an action for breach of contract against the defendants; and, second, that the broker's commission provision inserted into the Contract is unsupported by consideration and, therefore, unenforceable against defendants, we reject plaintiff's argument.

Since Vogel v. Supply Co. and Supply Co. v. Developers, Inc., 277 N.C. 119, 177 S.E.2d 273 (1970), our courts have consistently held that one may not maintain an action for breach of contract unless the contract was entered into for his or her direct benefit. Matternes v. City of Winston-Salem, 286 N.C. 1, 209 S.E.2d 481 (1974); Alva v. Cloninger, 51 N.C. App. 602, 277 S.E.2d 535 (1981); Howell v. Fisher, 49 N.C. App. 488, 272 S.E.2d 19 (1980), disc. rev. denied 302 N.C. 218, 277 S.E.2d 69 (1981); Johnson v. Wall, 38 N.C. App. 406, 248 S.E.2d 571 (1978). See also 30 A.L.R. 3d Annot. 1395 (1970). The Vogel Court expressly adopted the "framework for analysis" of third party beneficiary claims set forth in the American Law Institute's 1932 Restatement of Contracts, requiring the promisee to either confer a gift on the beneficiary (the beneficiary being designated a "donee-beneficiary") or act to satisfy a duty owed to the beneficiary (the beneficiary being designated a "creditor-beneficiary"). Under the 1932 Restatement, other beneficiaries were deemed "incidental-beneficiaries" and were not allowed to maintain suits as third party beneficiaries. See Restatement of Contracts § 133 (1932).

Although the 1979 Restatement eliminates the "donee" and "creditor" categories in favor of a new designation -- "intended beneficiaries" -- it nevertheless classifies all other beneficiaries as "incidental beneficiaries." Restatement (2d) of Contracts, § 302 (1979). Thus, the 1932 Restatement test for determining third party beneficiaries remains the same under the 1979 Restatement. Moreover, the Vogel test for determining if one other than the contracting parties has legally enforceable rights has not been changed by our courts.

Plaintiff relies on Chipley v. Morrell, 228 N.C. 240, 45 S.E.2d 129 (1947), a case brought by a real estate broker to recover a

commission allegedly lost because the defendant-purchaser failed to perform the real estate contract. Suggesting that the plaintiffs in Chipley were incidental beneficiaries, the Court held that they could maintain an action to recover their commissions from the defendant. Significantly, the Vogel Court, while noting the Chipley decision, stated "[e]ven so, the law in this State as to direct third party beneficiaries is synonomous with the Restatement categories of donee and creditor beneficiaries." 277 N.C. at 127, 177 S.E.2d at 278 (emphasis in original).

We believe Chipley has been overruled sub silentio by Vogel and its progeny. Applying the Vogel analytical framework to the case sub judice, plaintiff cannot qualify as an intended (donee or creditor) beneficiary. The contractual provision under which plaintiff claims a right of action against defendants states that "sellers agree to pay Mary Reidy Realty 6% commission." Thus the Meyers are the promissors and the plaintiff is the promisee. The Meyers' promise to pay the plaintiff's commission arose out of the pre-existing exclusive listing contract between plaintiff and the Meyers. The record does not suggest that the defendants intended to, or otherwise secured, a benefit from the Meyers to the plaintiff.

Separate and apart from our analysis under Vogel, we are convinced that plaintiff cannot enforce the broker's commission provision in sub-paragraph 5(b) of the Contract between the defendants and the Meyers because that provision is not supported by valid consideration.

It is axiomatic that a contract, to be enforceable, must be supported by consideration and that failure of consideration constitutes legal excuse for non-performance of the contract. Investment Properties v. Norburn, 281 N.C. 191, 188 S.E.2d 342 (1972); Coleman v. Whisnant, 255 N.C. 494, 35 S.E.2d 647 (1945). In this case, plaintiff's right to receive a commission from the Meyers was already established in her exclusive listing contract, to which the defendants were not a party. Plaintiff's unilateral insertion of sub-paragraph 5(b) into the Contract does not obligate defendants to pay ...

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