The Court of Appeal held that, in light of more recent decisions of the Supreme Court, the Greenwood case had been largely over-ruled.In any event, having regard to the enurement clause, the prohibition against third party enforcement of the agreement had little or no application.If the contact has an enurement clause in favour of or binding on successors, then successors are parties to the contract as much as the original parties. But what about a tenant, or subtenant, of that later owner?
Belleville decision answers one of the issues arising from “successor” clauses.
Based on that decision, a person falling within the clause does not have to worry about the old rule that contract law does not recognize the rights of third parties. Belleville, a later owner of the same land that is affected by the agreement is a successor.
The municipality, the Town of Belleville, defended the action on a number of grounds.
It said that the limitation period had expired because the Browns or their predecessors had long ago accepted the municipalities’ repudiation of contract.
If necessary, the court said that it would apply the exceptions to the rule prohibiting third party enforcement of a contract and allow the Browns to enforce the drainage agreement when they so clearly fell within the category of persons who were intended to have its benefit.
The Court of Appeal considered one further objection of Belleville, namely, that the Browns were using the 1953 agreement as a sword – to bring an action and positively enforce rights – rather than as a shield – or as a defence.The City asserted that the Browns were third parties to the original agreement and did not fall within any of the accepted category of persons who could enforce the agreement.Court of Appeal Decision The Court of Appeal held that, on its face, the contract created a category of persons who could enforce the contract as parties to the contract, namely, successors of the owner who entered into the agreement.Nonetheless, it is my view that the Browns’ status as the successors of the original covenantee under the Agreement affords them the right to seek to enforce the original covenantor’s contractual obligations, as against the original covenantor. Sills’s successors, the Browns stood ready to comply with the activity required of them under the Agreement- the provision of access to their lands.In all these circumstances, the application of the principled exception to the privity rule advances the interests of justice.” (emphasis added Analysis The Brown v.If the main contract between the owner and the contractor states that it is binding on the “successors” of the contractor, does that word include a subcontractor?What if the owner has given a covenant in the main contract that affects the electrical work and the contractor subcontracts the entire electrical work to an electrical subcontractor?In the modern cases in the Supreme Court recognizing the rights of third parties to rely on contract they had not signed, those third parties were asserting the contract as a defence.The Court of Appeal held that this distinction made no difference in the presence of the enurement clause: “I recognize that London Drugs and Fraser River were cases where the third-party beneficiaries sought to rely, by way of defence, on the benefit of the contractual provisions at issue to resist claims brought against them – they were not seeking to enforce the affirmative benefit of the relevant contractual provisions…..The trial judge and the Court of Appeal rejected that position. Belleville also said that the Browns had no standing to sue because they were third parties to the 1953 agreement, and that contract law does not entitle third parties to enforce agreements.Belleville also said that the Browns were not “successors” of the original farmer who entered into the agreement.