Chapter 18 - § 18.6 • THIRD-PARTY BENEFICIARY

• Jurisdiction: Colorado

§ 18.6 • THIRD-PARTY BENEFICIARY

"A person not a party to an express contract may bring an action on such contract if the parties to the agreement intended to benefit the non-party, provided that the benefit claimed is a direct and not merely an incidental benefit of the contract."⁹⁶ Although the intent to directly benefit the non-party does not have to be explicitly recited in the contract, the intent to benefit "must be apparent from the terms of the agreement, the surrounding circumstances, or both."⁹⁷ Other than in the area of payment bonds,⁹⁸ there are few reported cases in Colorado that have found third parties to be intended third-party beneficiaries of construction contracts. However, there have been several construction cases addressing this issue that are instructive.

In E.B. Roberts Construction Co. v. Concrete Contractors, Inc.,⁹⁹ a subcontract was amended to substitute one subcontractor for another. The substitution was necessary because the original subcontractor could not comply with the contract requirement that a performance bond be provided, while the substituted subcontractor could.¹⁰⁰ All of the parties understood, however, that the original subcontractor would complete the work and would receive the compensation under the subcontract. Thus, the original subcontractor was an intended third-party beneficiary of the amended subcontract.¹⁰¹

The acceptance of a general contractor's bid does not make a subcontractor who was listed by the contractor on the bid documents as one of its subcontractors a third-party beneficiary of the construction contract.¹⁰² Therefore, the subcontractor in Heritage Pools, Inc. v. Foothills Metropolitan Recreation & Park District did not have a cognizable claim against the public owner who had encouraged the bidding general contractors to consider other pool subcontractors for the project.¹⁰³

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Notes:

^[96] E.B. Roberts Constr. Co. v. Concrete Contractors, Inc., 704 P.2d 859, 865 (Colo. 1985).

^[97] Id.

^[98] See, e.g., Autocon Indus., Inc. v. Western States Constr. Co., 728 P.2d 374, 376 (Colo. App. 1986) (equipment supplier was third-party beneficiary of general contractor's bond); Montezuma Plumbing & Heating, Inc. v. Housing Auth. of Montezuma Cnty, 651 P.2d 426, 429 (Colo. App. 1982) (unpaid supplier was intended beneficiary under labor and material bond); see also Chapter 12, "Construction Sureties"; Pat's Constr. Serv., Inc. v. Ins. Co. of the West, 141 P.3d 885, 888 (Colo. App. 2005) (statute of...