California Landmark Cases on Third Party Beneficiaries in Contracts

A release given in good faith to a tortfeasor does "not discharge any other such party from liability unless its terms so provide." (Code Civ. Proc., 877, subd. (a).) To determine whether the " 'terms so provide,' " we apply the rules governing contract interpretation. (Hess v. Ford Motor Co. (2002) 27 Cal.4th 516, 524 (Hess).) A third party may enforce a contract that is expressly made for his benefit. (Civ. Code, 1559.) The third party need not be named in the contract, but he has the burden to show the contracting parties intended to benefit him. (Garcia v. Truck Ins. Exchange (1984) 36 Cal.3d 426, 436.) Determining this intent is a question of contract interpretation. (Ibid.) "In determining the meaning of a written contract allegedly made, in part, for the benefit of a third party, evidence of the circumstances and negotiations of the parties in making the contract is both relevant and admissible. And, 'in the absence of grounds for estoppel, the contracting parties should be allowed to testify as to their actual intention ... .' ." (Id. at p. 437.) A contract must be interpreted to give effect to the mutual intention of the parties at the time of contracting. (Civ. Code, 1636.) The intention of the parties to a written contract is to be determined from the writing alone, if possible; subject, however, to other statutory rules of contract interpretation. (Id., 1639.) These rules include the following. "A contract may be explained by reference to the circumstances under which it was made, and the matter to which it relates." (Id., 1647.) "However broad may be the terms of a contract, it extends only to those things concerning which it appears that the parties intended to contract." (Id., 1648.) The written provisions of the contract prevail over printed portions. (Id., 1651.) "As has been recognized by our Supreme Court, it is often impossible for the parties to be precise in expressing their intent in a written document. Therefore, even if the trial court personally finds the document not to be ambiguous, it should preliminarily consider all credible evidence to ascertain the intent of the parties. 'The test of whether parol evidence is admissible to construe an ambiguity is not whether the language appears to the court to be unambiguous, but whether the evidence presented is relevant to prove a meaning to which the language is "reasonably susceptible."' ." (Appleton v. Waessil (1994) 27 Cal.App.4th 551, 555 32 Cal. Rptr. 2d 676 (Appleton).)