One of the more common questions asked in the construction contracting arena is whether an owner of a construction project can enforce the terms of a subcontract or its architect’s consulting agreement with engineers directly against the subcontractor or engineers as a third-party beneficiary. The answer is “yes,” but (as with all things legal), with some caveats.
Subcontractors
In most cases, the owner of a construction project is a third-party beneficiary of any subcontracts formed to carry out the construction work. Logan-Baldwin v. L.S.M. General Contractors, 94 A.D.3d 1466, 1469 (4th Dept. 2012). Under contract law, claimants may assert third-party beneficiary rights if they can demonstrate: (1) a valid contract exists; (2) the contract was intended to benefit them; and (3) the benefit they were to receive was more than incidental. Id. The second prong of the third-party beneficiary test is what often raises a factual issue and, in the context of construction, New York courts have been inconsistent on this issue.
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