Gilbert Financial Corp. v. Steelform Contracting Co

In Gilbert Financial Corp. v. Steelform Contracting Co. (1978) 82 Cal.App.3d 65, the court resolved a third party beneficiary contract dispute by analyzing a subcontract and its relationship to the underlying obligation between the two original contracting parties (general contract). The plaintiff was an owner (Gilbert) which contracted with a general contractor (Appel), to construct the building in question. The general contractor hired a subcontractor for roofing (Steelform), but Steelform did a defective job. The court said: "Clearly, Steelform (the promisor) realized it was assuming Appel's (the promisee) duties for this phase of the construction, and that Gilbert was the ultimate beneficiary of its performance as the owner of the building. Under the . . . Lucas rules, supra 56 Cal.2d 583, Gilbert would obviously be a creditor beneficiary." (Gilbert, supra, 82 Cal.App.3d 65, 70.) The owner Gilbert was an intended third party beneficiary of the (sub-)contract between Appel and Steelform, and Gilbert could sue Steelform on a third party basis for its breach of the implied warranty of fitness. (Id. at p. 69.) The court noted that "the creditor-donee dichotomy as applied to third-party beneficiaries is beginning to vanish," in favor of a broader application of the doctrine. (Id. at p. 71.)