In Becker v. Crispell-Snyder, Inc., the Court of Appeals of Wisconsin held that developers of a residential subdivision could maintain a breach of contract claim against a town’s engineering firm based upon a public works contract between the engineering firm and the town in which the project was located. After purchasing property and substantially investing in a subdivision, the developers were informed by the town of Somers, Wisconsin, that they had to use the town’s engineering firm or the project would be shut down. Accordingly, the developers entered into a development agreement with the town, making the town’s engineering firm the engineer for the project. As construction continued, the engineering firm billed the town for time spent on the subdivision pursuant to a public works contract with the town. The town approved every invoice, disregarding objections by the developers, and withdrew money from the developers’ line of credit to pay the engineering firm. When the engineering bills became sufficiently high that the town withdrew the developers’ line of credit, the developers sued the engineering firm, claiming that they were third-party beneficiaries to the engineering firm’s public works contract with the town.
Although “[t]he scope of potential third-party beneficiaries to public works contracts is more restrictive than other contracts because the primary purpose of a public works contract is to benefit the public,” the court held the developers were third-party beneficiaries to the public works contract based upon a three-part test. First, the public works contract specifically conferred a direct benefit, engineering services, to the developers. Second, this benefit was limited to a well-defined group of third parties because the plaintiffs and a neighboring developer were the only third parties receiving engineering services under the public works contract. Third, the public works contract created a creditor-debtor relationship between the engineering firm and the thirdparty developers because the public works contract, in concert with the developer’s agreement, implicated the developers as a debtor to the engineering firm. Based on these factors, the developers had standing to sue the engineering firm for breach of the public works contract between the engineering firm and the town.
Becker v. Crispell-Snyder, Inc., No. 2008AP53, 2009 WL 80243 (Wis. Ct. App. Jan. 14, 2009)