College Woods Homeowners Association sought to compel Trappe Borough (the “Borough”) to accept the dedication of two streets, along with emergency access ways (collectively, the Streets) within the College Woods residential development (the Development). College Woods is an intended third party beneficiary with standing to enforce a Subdivision and Development Agreement (Agreement) between the Borough and the developer of the Property, and the Agreement imposes a duty on Borough to accept dedication of the Streets.
The Development is a planned community organized pursuant to the Uniform Planned Community Act, 68 Pa. C.S. §§ 5101 – 5414. Borough Council approved, by resolution (the Resolution), final plans for the Development. Subsequently, the Developer and Borough entered into the Agreement in which the Developer agreed, among other things, to construct certain public amenities and improvements within the Development. The Agreement provided that public improvements would be constructed in compliance with the Borough’s standards and such improvements would be offered for dedication.
- Generally, in order for a third party beneficiary of a contract to have standing to enforce a claim based on that contract, “both contracting parties must have expressed an intention that the third party be a beneficiary, and that intention must have affirmatively appeared in the contract itself.”
- Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and either (a) the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary; or (b) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance (the “Two-Pronged Test”).
- Because the Agreement contains a promise by the Borough to the Developer to accept dedication of the Streets, it is appropriate to effectuate the parties’ intention to recognize College Woods’ right to enforce that promise.
- College Woods is the main beneficiary of such a promise because it is obliged, pursuant to the Resolution, to maintain the Streets itself until their dedication is accepted.
- There was sufficient evidence in the record to show that recognition of College Woods’ right to enforce the Agreement would be appropriate to effectuate the intention of the Borough and the Developer that the Borough be obligated to accept dedication of the Streets.
- The Developer intended to give College Woods the benefit of enforcement of the subdivision restrictions because they were among the limited class of persons who would benefit from such enforcement. Furthermore, the Agreement evidences an intention to benefit not only the Developer and the Borough, but also potential purchasers of properties in the Development, such as College Woods’ members. One of the express purposes of the Agreement is to ensure the Development will be completed in accordance with certain standards.
- While these contractual provisions may offer a benefit to the Borough, they largely benefit potential purchasers in the Development and, therefore, evidence an intention in the Agreement to benefit College Woods and its constituent members. Because both prongs of the Two-Pronged test are met, College Woods can demonstrate that it was an intended third party beneficiary to the Agreement.
- Further, the Agreement shows that it was the intention of the parties that the Developer not only offer the Streets for dedication, but that the Borough accept the dedication once the terms of the Agreement had been met.