Chapter 4 - Constitutional Authority to Regulate Business s13

BLTC-9e Case Problem with Sample Answer Chapter 17: Third Party Rights

17–5 Case Problem with Sample Answer

National Association ing, Inc. (NASCAR), sanctions stock car races. NASCAR and Sprint Nextel Corp. agreed that Sprint would become the Official Series Sponsor of the NASCAR NEXTEL Cup Series in 2004. The agreement granted sponsorship exclusivity to Sprint and contained a list of “Competitors” who were barred from sponsoring Series’s events. Excepted were existing sponsorships: in “Driver and Car Owner Agreements” between NASCAR and the cars’ owners, NASCAR promised to “preserve and protect” those sponsorships, which could continue and be renewed despite Sprint’s exclusivity. RCR Team #31, LLC, owns the #31 Car in the Series. Cingular Wireless, LLC, a Sprint competitor, had been #31 Car’s primary sponsor since 2001. In 2007, Cingular changed its name to AT&T Mobility, LLC, and proposed a new paint scheme for the #31 Car that called for the Cingular logo to remain on the hood while the AT&T logo would be added on the rear quarter panel. NASCAR rejected the proposal. AT&T filed a suit in a federal district court against NASCAR, claiming, in part, that NASCAR was in breach of its “Driver and Car Owner Agreement” with RCR. Can AT&T maintain an action against NASCAR based on this agreement? Explain. [AT&T Mobility, LLC v. National Association for Stock Car Auto Racing, Inc., 487 F.Supp.2d 1370 (N.D.Ga. 2007)]

Sample Answer:

The beneficiary of a contract made between other parties for the beneficiary’s benefit can maintain an action, as an intended third party beneficiary, against the promisor on the contract. The third party beneficiary does not need to be named in the contract, but the parties' intention to benefit the third party must be evident from the contract. A third party who otherwise benefits from a contract between two other parties is an incidental beneficiary and is not entitled to enforce the contract. In this case, the agreement between NASCAR and RCR did not require RCR to renew its arrangements with any of its sponsors, including Cingular, or AT & T. RCR could seek the sponsorship of any company not excluded by Sprint’s agreement with NASCAR. The promises of NASCAR to RCR under their agreement were intended to benefit RCR, not its sponsors. Any benefit to AT & T under NASCAR's agreement with RCR was incidental to NASCAR's intended purpose of preserving RCR's choice of sponsorship. In other words, AT & T was only an incidental beneficiary of the contract between NASCAR and RCR. Any benefit to AT&T under NASCAR's agreement with Sprint was similarly incidental. The court enjoined NASCAR from interfering with AT & T’s proposal for RCR’s car, but on NASCAR’s appeal to the U.S. Court of Appeals for the Eleventh Circuit, the appellate court vacated this order and remanded the suit for dismissal.